Edited version of your private ruling

Authorisation Number: 1052204257638

Date of advice: 14 December 2023

Ruling

Subject: Individual residency

Question 1

Is the taxpayer a resident of Australia in respect of the period to which this ruling applies for the purposes of section 6(1) of the ITAA 1936?

Answer

No

Question 2

If the answer to question 1 is Yes, is the taxpayer resident of the overseas country in accordance with the DTA for the period to which this ruling applies?

Answer

N/A

This ruling applies for the following period:

XX June YYYY to XX June ZZZZ

The scheme commenced on:

XX June YYYY

Relevant facts and circumstances

1.     XYZ's (Taxpayer) employment is based overseas and is on an open-ended contract that commenced on XX February YYYY. Taxpayer has obtained an employer sponsored five-year visa to take up residence overseas and begin this employment.

2.     On XX June YYYY, they began to live at a permanent residence in a house overseas (the overseas property). Taxpayer has a multi-year lease over the overseas property which commenced on XX May YYYY with a break clause after 12 months requiring two months notice. Prior to taking up this residence Taxpayer stayed in employer provided temporary accommodation while overseas.

3.     Taxpayer is married to ABC (Spouse) and has two children. Spouse and Child 2 have now relocated overseas, departing Australia on XX December ZZZZ arriving on XX December ZZZZ.

4.     Taxpayer and Spouse jointly own property in Australia that the family previously resided in. They will now seek to rent out that property. Taxpayer and Spouse will keep the Australia property as an investment and do not intend to utilise it again as a family home. Spouse owns an additional investment property that is rented out.

5.     Spouse sold their two motor vehicles prior to relocating overseas.

6.     During the income year ending XX June YYYY, Taxpayer was present in Australia for at least 183 days. Between XX June YYYY and XX December ZZZZ, Taxpayer has had to make various work-related trips totalling XX weeks. After each trip, Taxpayer will return overseas unless there are work requirements dictating otherwise.

7.     Some of these trips are to Australia in order to attend board and other work-related meetings. During these trips Taxpayer visited Child 2 to provide support for their HSC studies and to see Spouse. Taxpayer has never, and will not, travel to Australia purely for reasons unrelated to their employment, nor have they extended, or will they, extend a work-related trip to Australia reasons unrelated to their employment.

8.     Taxpayer now intends to spend very limited time in Australia other than that which is required for their overseas employment and to visit extended family. From XX January ZZZZ, Taxpayer will spend more than 50% of their time in the overseas country, with the balance of their time outside of the overseas country being business travel associated with their employment and family holidays.

9.     Taxpayer has:

•         Advised their private health insurance fund to suspend their policy once their family has relocated (the policy has not been cancelled only on the basis that it will be easier to restart the policy should it be needed by Taxpayer or one of their family members)

•         Enrolled in their employer provided health insurance policy covering them, their husband and son

•         Submitted a mail redirection application

•         Been removed from the Australian electoral roll on the basis that they are moving overseas indefinitely

•         Instructed their tax agent to update ATO addresses

•         Advised Medicare of their relocation overseas

•         Has entered into utilities contracts overseas

•         Opened overseas bank accounts (Taxpayer's salary will be paid into an overseas bank account).

10.  The majority of Taxpayer's personal and household contents will be relocated overseas. Some of Child 1's personal effects, and some sentimental items will remain in long term storage. Those items will remain in Australia until a decision is made about what to do with them.

11.  To date, Taxpayer has relocated all of their clothing, jewellery, shoes, other apparel items, some books, and other important personal effects such as certificates to overseas.

12.  Taxpayer has purchased new furniture and appliances for their residence overseas. The household goods in Australia will either be:

•         Sold

•         Donated

•         Kept in the Australia property for use by renters of the property

•         Placed into storage for use by Child 1 or Child 2 if they return to Australia

•         Otherwise disposed of.

13.  Because they are relevant to their new employment, Taxpayer will maintain their memberships/fellowships in a number of professional institutes.

14.  Taxpayer did not otherwise have any active memberships of clubs or societies in Australia prior to their departure.

15.  Taxpayer will retain some Australian bank accounts, Australian shares and superannuation.

16.  Throughout the period to which this ruling applies, Taxpayer will be considered a resident of the overseas country and will lodge tax returns in the overseas country.

17.  Taxpayer and Spouse are not members of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976.

18.  Taxpayer's intention is to not return to reside in Australia.

Assumption

•         The relevant facts and circumstances on which this ruling is made, will continue to be correct throughout the period to which this ruling applies.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Domicile Act 1982 subsection 3(2)

Domicile Act 1982 section 10

Reasons for decision

Question 1

Is the taxpayer a resident of Australia in respect of the period to which this ruling applies for the purposes of section 6(1) of the ITAA 1936?

Detailed reasoning

19.  Subsection 6(1) of the Income Tax Assessment Act 1936 provides:

"resident or resident of Australia" means:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

(iii) who is:

                                                  (A)        a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

                                                  (B)        an eligible employee for the purposes of the Superannuation Act 1976; or

                                                  (C)        the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and

...

20.  From this provision, we derive four tests of residency:

•         Ordinary concepts test

•         Domicile test

•         183-day test

•         Commonwealth superannuation fund test.

21.  Taxation Ruling TR 2023/1 Income tax: residency tests for individuals (TR 2023/1) provides at paragraph 15:

You are a resident if you meet any one of the tests. It does not matter if you do not meet any of the other tests. You are not a resident if you do not meet any of the tests. This means that you must consider all applicable tests before concluding you are a non-resident.

Ordinary concepts test

22.  TR 2023/1 provides at paragraphs 17 to 20:

17. Under the ordinary concepts test, you are a resident if you reside in Australia.

18. The term 'reside' is not defined in the Australian income tax law and has its ordinary meaning.

19. The ordinary meaning has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place'.

20. The ordinary concepts test is asking whether your presence in Australia is usual and settled in contrast to temporary and casual. This is informed by both the nature, duration and quality of the person's physical presence and an intention to treat Australia as home. Factors that commonly inform the relevant association with Australia are:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family, and business or employment ties

•         maintenance and location of assets, and

•         social and living arrangements.

21. No single factor is necessarily decisive. The weight given to each factor varies depending on individual circumstances.

23.  On consideration of the relevant facts and circumstances surrounding Taxpayer's presence overseas against the relevant factors, it is considered that Taxpayer does not reside in Australia during the period to which this ruling applies, and consequently they will not meet the ordinary concepts test.

Domicile test

24.  TR 2023/1 provides at paragraph 55:

Under the domicile test, you are an Australian resident when your domicile is in Australia, unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

25.  TR 2023/1 provides at paragraphs 57 and 58:

57. Domicile considers whether there is a legal relationship between a person and Australia. There are 3 types of 'domicile':

•         A 'domicile of origin', which is attributed to each individual at birth.

•         A 'domicile of dependence', which is relevant where a person (such as a minor) lacks capacity to acquire their own domicile and their domicile is determined by reference to someone else's domicile (such as a parent).

•         A 'domicile of choice', which is the domicile a person, with the capacity to do so, acquires voluntarily.

58. You always have a domicile and you can only have one domicile at any point in time. Your particular domicile continues until you acquire a different one, either by choice or operation of the law. You cannot abandon a domicile of origin without replacement.

26.  Taxpayer's domicile of origin will be Australia.

27.  Subsection 3(2) of the Domicile Act 1982 (Cth) provides:

For the purposes of the application of this Act in relation to the laws of the Commonwealth, this Act has effect to the exclusion of the laws of any State, any Territory or any other country relating to any matters dealt with by this Act.

28.  Section 10 of the Domicile Act 1982 (Cth) provides:

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

29.  TR 2023/1 provides at paragraph 59:

To acquire a domicile of choice you must have both lawful physical presence in a foreign country and an intention to make your home indefinitely in that country.

30.  TR 2023/1 provides at paragraph 61:

Obtaining a visa to migrate to a particular country would be consistent with an intention to make your home indefinitely in that country. A working visa, even for a substantial period of time, would usually not be sufficient evidence of an intention to acquire a new domicile of choice.

31.  While Taxpayer will maintain a lawful physical presence overseas, they do not yet have an intention to make their home there indefinitely. For completeness, this may change during the period to which the ruling applies.

32.  TR 2023/1 provides at paragraphs 63 to 65:

63. An Australian-domiciled person is not a resident where the Commissioner is satisfied that the person's 'permanent place of abode' is outside Australia. A person will have their permanent place of abode overseas where they have retained their Australian identity (as reflected in their Australian domicile), but:

•         have definitely abandoned their residency in Australia, and

•         commenced living permanently overseas.

64. It is not sufficient to have a place of abode outside of Australia; the relevant test is whether your permanent place of abode is outside Australia.

65. The word 'permanent' does not have the meaning of everlasting or forever, but is used in the sense of being contrasted with temporary or transitory.

33.  TR 2023/1 provides at paragraphs 70 to 72:

70. Working out your permanent place of abode is a question of fact determined in light of all your circumstances. It does not involve the application of any 'hard and fast' rules.

71. Relevant factors as to whether your permanent place of abode is overseas include:

•         length of overseas stay

•         nature of accommodation, and

•         durability of association.

72. These factors should be considered together. As with the ordinary concepts test, the entire collection of facts and circumstances, including intention, conduct, actions and objective connections, must be considered holistically.

34.  On consideration of the relevant facts and circumstances surrounding Taxpayer's presence overseas against the relevant factors, it is considered that Taxpayer's permanent place of abode will be overseas during the period to which this ruling applies, and consequently they will not meet the domicile test.

183-day test

35.  TR 2023/1 provides at paragraphs 83:

Under the 183-day test, you are a resident if you have been present in Australia for 183 days or more in an income year, unless the Commissioner is satisfied that both:

•         your usual place of abode is overseas, and

•         you do not have an intention to take up residency in Australia.

36.  Taxpayer will not be present in Australia for 183 days for the income years ending:

•         30 June ZZZZ

•         30 June ZZZZ

•         30 June ZZZZ

•         30 June ZZZZ.

37.  During the income year ended XX June YYYY, Taxpayer was present in Australia for at least 183 days. Prior to taking up residence overseas, Taxpayer's usual place of abode was in Australia.

38.  In Commissioner of Taxation v Addy [2020] FCAFC 135 (Addy), Derrington and Steward JJ affirmed Logan J's position in Stockton v Commissioner of Taxation [2019] FCA 1679 that the 183-test did not deem an individual resident for the entire income year, providing respectively that:

243        With respect, there is nothing in the text of the 183 day test to suggest that it operated to deem a person to be a resident for the whole year. Indeed the construction would, for example, have the perverse result that a person who first entered Australia on 1 December of any income year and satisfied the 183 day test, would be deemed to be a resident for 5 months prior to setting foot in the country and, thereupon incur all of the taxation obligations of a resident for the whole year. With respect that would be a most unusual result and one to be avoided.

...

322        ...In my view, a person who is a resident of Australia by reason of an application of the 183 day test is eligible to be a person who is capable of "ceasing to be a resident" part-way through a year of income, to use the language of s. 18 of the Rates Act. That provision makes no distinction between the different ways in which an individual can be a resident, and assumes in each case that all types of residency can be brought to an end. Once it is accepted that s. 18 is capable of applying to the taxpayer here, it is self-evident that when they finished her holiday and returned home to England, they "ceased to be a resident" of Australia for income tax purposes.

39.  We note that while the Full Federal Court's decision in Addy was overturned by the High Court, this finding was not considered by the High Court.

40.  Therefore, Taxpayer meeting the 183-day test for part of the XX June YYYY does not mean they will necessarily meet it for the entirety of the year.

41.  From XX June YYYY, Taxpayer had established their usual place of abode overseas, and they did not intend to return to Australia in order to take up residence.

42.  Consequently, Taxpayer did not meet the 183-day test at any point during the period to which this ruling applies.

Commonwealth superannuation fund test

43.  Taxpayer and Spouse are not members of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976. Therefore Taxpayer does not meet this test.

Conclusion

44.  Taxpayer will not be an Australian resident for tax purposes during the period to which this ruling applies.

Question 2

If the answer to question 1 is Yes, is the taxpayer resident of the overseas country in accordance with the DTA for the period to which this ruling applies?

N/A.