Edited version of private advice

Authorisation Number: 1052260118281

Date of advice: 13 June 2024

Ruling

Subject: Residency

Question

Did you cease to be an Australian resident for tax purposes on XX XX 20XX?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

XX XX 20XX

Relevant facts and circumstances

You are a citizen of Australia.

You departed Australia on XX XX 20XX to take up permanent employment and live in XX until the income year ending 30 June 20XX.

You commenced employment as a XX with XX XX on XX XX 20XX.

You were previously employed by XX (XX) from XX XX 19XX to XX XX 20XX. XX ceased operations in Australia in 20XX due to COVID-19 and as a result you were made redundant.

You have permanent resident status in XX since 20XX.

You have leased a flat in XX for 2 years and you are responsible for the rental payments.

You have rented out your house in Australia from XX XX 20XX. You do not use this address on any documentation.

You have relocated your possessions to XX.

You have a mortgage on your Australian property with the XX.

You do not own other property in Australia.

You do not have any utilities, medical insurance or car registration in Australia.

You have advised the Australian Electoral Commission and Medicare that you were departing Australia.

You have taken out medical insurance in XX.

You are divorced from your spouse.

Your ex-spouse and one child reside in Australia. You continue to pay child support for your child.

You intend to return to Australia on occasion for short periods to visit your child. You will stay in hotel accommodation when visiting Australia. Your visits will not exceed 60 days in an income year.

You state you are a resident of XX and include your XX residential address on inbound and outbound passenger travel cards.

You will not maintain any professional or social memberships or associations in Australia.

You have a two-year XX membership in XX.

You are a member of the XXXX, XX.

You are not a contributing member of an Australian superannuation fund.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

You are a contributing member of a XX superannuation account since commencing employment.

You do not intend to return to Australia.

In XX 20XX you advised Australian financial institutions with whom you have investments that you are a foreign resident for tax purposes.

You will lodge tax returns with the XX XX XX as a tax resident for this period. You have lodged tax returns in XX since 19XX.

You will lodge tax returns in Australia as a non-resident for this period.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1

Income Tax Assessment Act 1936 Subsection 6(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

You are not a resident of Australia under the resides test for the period XX XX 20XX to the income year ending 30 June 20XX based on the following:

•         you departed Australia on XX XX 20XX to live and work in XX

•         you have stated your intention is to live in XX and not return to Australia

•         you have permanent employment in XX

•         you have rental accommodation under a 2-year lease in XX

•         you are divorced and have one child, for whom you pay child support, and who lives with your ex-spouse in Australia

•         you will travel to Australia occasionally for short periods to visit your child

•         you will stay in hotel accommodation when visiting Australia.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test 183-day test and Commonwealth superannuation fund test).

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 or 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

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

It is considered that you have not abandoned your domicile of origin (Australia) and acquired a domicile of choice in XX. While you have held permanent residency in XX since 20XX which allows you to visit and stay in that country at any time, you remain a citizen of 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

•         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, i.e., 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 satisfied that your permanent place of abode is outside Australia from XX XX 20XX because:

•         you will be physically present in XX from XX XX 20XX to income year ending 30 June 20XX

•         your purpose is to live in XX while working as a XX for XX

•         you have entered into a rental agreement for a period of 2 years

•         you home in Australia is rented under a 12-month lease

•         you have relocated your possessions to XX

•         you stated you do not intend to return to Australia

•         you will not maintain any professional or social memberships or associations in Australia

•         you have advised the Australian Electoral Commission and Medicare that you were departing Australia.

•         you do not have any utilities, medical insurance or car registration in Australia.

Therefore, you are not 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

You have been present in Australia for 183 days or more in the income year ending 30 June 20XX. Therefore, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia and you do not have an intention to take up residence in Australia.

You will not be present in Australia for 183 days or more during the income years ending 30 June 20XX and 20XX. Therefore, you are not a resident under this test for these income years.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live, and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

Application to your situation

The Commissioner is satisfied that your usual place of abode will be outside of Australia from XX XX 20XX based on the following:

•         your purpose is to live in XX while working as a XX for XX

•         you have entered into a rental agreement in XX for a period of 2 years

•         you stated you do not intend to return to Australia.

Intention to take up residency

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here.

Application to your situation

The Commissioner is satisfied that you did not intend to take up residence in Australia following your departure from XX XX 20XX.

•         your purpose is to live in XX while working as a XX for XX

•         you have entered into a rental agreement in XX for a period of 2 years

•         you stated you do not intend to return to Australia.

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

You are not a member 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, you are not a resident under this test.

Conclusion

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes from XX XX 20XX and for the relevant income years following your Australian departure.