Edited version of private advice

Authorisation Number: 1052214583303

Date of advice: 23 January 2024

Ruling

Subject: Residency

Question 1

Is Client 1 an Australian Tax resident?

Answer

Yes

Question 1

Is Client 2 an Australian Tax resident?

Answer

Yes

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

Client 1 and Client 2 left Australia XX July 20XX, moving to Country A to both live and work.

Client 1 and Client 2 have been married since 20XX and have children.

Client 1 and Client 2 are planning to live in Country A for at least the next X years.

The purpose of moving overseas is to spend time with family and friends, provide culture to your children and expand your personal and professional horizons.

Client 1 and Client 2 intend to return to Australia when they leave Country A.

Client 1 and Client 2 have withdrawn their children's enrolment from their Australian school, and they are enrolled and attending school in Country A.

Client 1 and Client 2 owned and lived in their Australian home since 20XX, that house is now being rented.

Client 1 and Client 2 have suspended their health insurance and have not asked to be removed from Medicare.

Client 1 and Client 2 have retained their Australian mobile numbers and frequently receive calls on these numbers.

Client 1 and Client 2 have Australian bank accounts, mortgage on their Australian property, investments in X amount of Australian Exchange Traded Fund's and Australian superannuation and disability insurances.

Client 1 and Client 2 have not advised any Australian financial institutions that they are living in Country A, but they have been removed from the electoral role.

Client 1 and Client 2 do not intend to sell their Australian house unless necessary to do so (such as not being able to find tenants or collect enough rent, or to support your stay in Country A).

Client 1 and Client 2 have a wide circle of friends in both Australia and Country A.

Client 1 and Client 2 have advised government departments of their change of address to Country A. They have redirected their mail to Client 2's relative's residence.

Client 1 and Client 2 purchased an apartment in Country A when they arrived.

Client 1 and Client 2 purchased a car in Country A.

Client 1 and Client2's children are active in sporting activities both in and out of school and carrying on these activities in Country A.

Client 1 and Client 2 have registered as Country A residents.

Individual facts - client 1

Client 1 is a dual citizen of Country A and Australia. They were born in Country A, moved to Australia in MM 20XX and became an Australian Citizen in MM 20XX.

Client 1 is on a career break from their Australian employer until the end of MM 20XX. They have an option to terminate this leave and return to Australia. This break can be extended up to an additional year.

Client 1 has accepted ongoing employment with a Country A employer. This employment can be terminated with XXX months' notice until the end of MM 20XX. After this, a XX-month termination period applies.

Client 1 has not lodged a PAYG variation with the ATO in regard to potential changes in tax residency.

Individual facts - client 2

Client 2 is an Australian citizen by birth and has lived in Australia their whole life.

Client 2 has been granted an XXX-year temporary residency permit in Country A as the spouse of a Country A citizen. When this expires, they have the option to renew this permit or apply for a permanent residency, and after X years citizenship. Client 2 does not hold a permanent residency permit in any country.

Client 2 remains listed as the primary contact for their relative who lives in a nursing home in XXXX.

Client 2 is employed by Company 1 as a XXXX. Client 2 works remotely in Country A for this company. Client 2 is at times required to travel to other countries and at times Australia if requested.

Client 2 does not work for a Country A employer.

Client 2 has lodged a PAYG variation form through online services, however they are willing to correct this if necessary.

Client 2 is with the same bank as Client 1, to enable account sharing and access to funds. Client 2 does not have any Country A investments. Client 2 shares the Australian bank account with Client 1.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Overview of the law

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are:

•                     the resides test (also referred to as the ordinary concepts test)

•                     the domicile test

•                     the 183-day test, and

•                     the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' 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', see Commissioner of Taxation v Miller (1946) 73 CLR 93 at [99], per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at [222], citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                     period of physical presence in Australia

•                     intention or purpose of presence

•                     behaviour while in Australia

•                     family and business/employment ties

•                     maintenance and location of assets

•                     social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the resides test is about whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

Neither you nor your spouse are residents of Australia under the resides test for the period DD MM 20XX to DD MM 20XX.

Client 1's move to Australia

Your behaviour whilst living in Australia indicates that you both had a settled lifestyle, with your children in school, Client 1 and Client 2 were both on the electoral role, had private health insurance and Medicare. Client 1 and Client 2 own property which you have not sold and is currently tenanted. You have maintained Drivers Licences and Australian based employment.

However, you have moved to Country A and intend to stay there for a minimum XXX-year period.

Move to Country A

Client 1, whilst currently on a career break from their Australian employer, has accepted ongoing employment with a Country A employer, this employment can be terminated within XXX months' notice until the end of MM 20XX, with a XXX-month termination period applying after this.

Client 2 is an Australian citizen, has been granted a XXXX-year temporary resident permit in Country A, with the option to renew this when it expires or to apply for permanent residency.

Client 2 has remained employed with their Australian employer and are working remotely with them whilst living in Country A, they are at times required to travel to other countries and Australia.

Your behaviour whilst living in Country A, indicates that you have both settled into this lifestyle. Your children are enrolled in school and playing sport both inside and outside of school. You have purchased an apartment and a car in Country A. You have both obtained drivers licences. You have family and friends which you socialise with. You have both opened bank accounts and have a mortgage on the apartment.

Domicile test

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

Domicile

Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation

Client 1

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia on MM 20XX and became an Australian citizen on MM 20XX, after being here almost XX years.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. You obtained Australian citizenship in MM 20XX and you intend to live there indefinitely.

Therefore, your domicile is Australia.

Client 2

In your case, you were born in Australia and your domicile of origin is Australia.

Therefore, your domicile is Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs [36] and [40] that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•                     whether the taxpayer has definitely abandoned, in a permanent way, living in Australia, and

•                     whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

•                     the intended and actual length of the taxpayer's stay in the overseas country

•                     whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time

•                     whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia

•                     whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

•                     the duration and continuity of the taxpayer's presence in the overseas country

•                     the durability of association that the person has with a particular place in Australia, that is, maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

Application to your situation

The Commissioner is not satisfied that your permanent place of abode is outside Australia because:

•                     Client 1 and Client 2 moved to Country A for XX years to work and be with family and friends and have the intention to return to Australia after this period.

•                     Client 1 and Client 2 still own property jointly in Australia which is currently tenanted.

•                     Client 1 and Client 2 still hold bank accounts, driver licences and Medicare in Australia.

•                     Both you and your spouse still maintain employment connections in Australia.

•                     Client 1 is on a career break from their Australian employer until MM 20XX. They have an option to terminate this leave and return to Australia with XXX months' notice. This break can be extended up to an additional XXXX.

•                     Client 2 is still employed with their Australian based employer. They work remotely in Country A for this company and work on projects in Country A that they were working on in Australia. Client 2 is a times required to travel to other countries and at times Australia. Client 2 does not have a Country A employer.

Therefore, you are a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•                     the person's usual place of abode is outside Australia, and

•                     the person does not intend to take up residence in Australia.

Application to your situation

Neither you nor your spouse will be present in Australia for 183 days or more during the 20XX-20XX income years. Therefore, neither of you are residents under this test.

Superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

Application to your situation

Neither you nor your spouse are members on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, neither of you are residents under this test.

Conclusion

You satisfy the domicile test of residency and so are a resident of Australia for income tax purposes for the years ended 30 June 20XX to 20XX.