Edited version of private advice

Authorisation Number: 1052322305057

Date of advice: 11 November 2024

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes from XX XX 20XX as defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

No.

This private ruling applies for the following periods:

Period ending 30 June 20XX

Period ending 30 June 20XX

The scheme commenced on:

X XX 20XX

Relevant facts and circumstances

You were born in Australia on XX XX XXXX.

You have no dependent children.

You made the decision to leave Australia and commence a new life in Country A.

You removed yourself from the Australian Electoral Role.

You sold your car that you had in Australia.

You have informed your bank and other financial institutions of your overseas address stating that you are no longer a resident of Australia for tax purposes, and non-resident tax withholding rate would apply to the interest income earned in your Australian bank accounts.

You have shipped your family pets to Country A.

You are no longer a member of any Australian associations.

You have sold off all your furniture and household items in Australia before departing.

You have not renewed your Australian driver's licence.

You own a property in Australia jointly with your spouse and it is currently tenanted.

You own a block of land in Australia.

You are not a member of a Commonwealth Government of Australia superannuation fund and are not eligible to contribute to the superannuation fund.

You and your spouse do not hold a position with the Commonwealth Government of Australia.

You have no intention of returning to reside in Australia.

You have attained your Country A residency visa on XX XX XXXX.

You are living at a villa in Country A, you renewed a tenancy contract at this address for 12 months from XX XX 20XX.

You have a 2-year employment contract dated XX XX 20XX working for a company in Country A.

You and your spouse have set up a bank account in Country A.

You have a car loan with a bank for approximately X years in Country A.

You have obtained your driver's licence in Country A.

You have joined a gym in Country A with an annual subscription.

You have obtained International Private health cover.

You are looking at purchasing property in Country A once your rental agreement expires in XX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 955-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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

In your case you were present in Australia up to XX 20XX when you left to reside in Country A. Prior to XX XX 20XX you were a resident of Australia for tax purposes. You own property in Australia.

You are not a resident under the resides test from XX XX 20XX for the income years ended 30 June 20XX and 30 June 20XX, based on the following:

• you removed yourself from the Australian Electoral Roll and finalised your affairs in Australia
• you are no longer a member of any Australian associations
• you have sold off all your furniture and household items in Australia before departing
• you sold your car
• you have rented out your home in Australia
• you are no longer involved in any social activities in Australia
• you have informed your bank and other financial institutions of your overseas address stating that you are no longer a resident of Australia for tax purposes, and non-resident tax withholding rate would apply to the interest income earned in your Australian bank accounts
• you arrived in Country A on XX XX 20XX You have attained your Country A residency visa on XX XX 20XX
• you have no intention of returning to reside in Australia
• you have secured permanent accommodation in Country A with a 12-month lease which is renewable in XX 20XX
• you have secured a 2 year contract of employment with a company in Country A
• you have also shipped your family pets to Country A
• you have a bank account set up in Country A
• you have obtained your driver's licence in Country A
• you have joined a gym with an annual subscription in Country A
• you have obtained International Private health cover
• you are looking at purchasing property in Country A once the rental agreement expires in XX 20XX.

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

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.

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

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

It is considered that you did not abandon your domicile of origin since X XX 20XX and acquire a domicile of choice in Country A.

You were not entitled to reside in Country A indefinitely and while living there, you only have held a resident permit as a visitor which is valid until XX XX 20XX.

You have not obtained permanent residency or citizenship in Country A.

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

Paragraphs 76 and 77 of TR 2023/1 state that if you leave Australia for an unspecified or substantial period, pack up your home here, set up a home in a foreign country and live there with your family returning only occasionally such as for cultural events, special celebrations or annual leave, you are likely to meet the description of someone who has abandoned Australia as a place of residency and commenced living permanently overseas. This is despite the fact that you may at some point intend to return to Australia.

For practical purposes, it is convenient to set some 'rule of thumb' on what substantial means. Broadly, 2 years is considered to be a substantial period of time. What this means is that if your intended length of stay is less than 2 years, you are unlikely to be able to establish that your permanent place of abode is outside of Australia. Whether a stay of precisely 2 years or longer means you fall within the proviso will depend on the circumstances. The critical question is whether a person has in fact abandoned Australian residency and commenced to live in a permanent way overseas.

The Commissioner is satisfied that your permanent place of abode is outside of Australia because:

• you sold all furniture and household items in Australia before departure
• you have definitively abandoned living in Australia in a permanent way leasing out your home in Australia
• you have been living in Country A since XX XX 20XX
• you have established a home in Country A under a 12-month lease in your name which was renewed on XX XX 20XX
• you have shipped your family pets to Country A
• you intend to look to purchase a home Country A once your 12 months lease ends in XX 20XX.

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 not been present in Australia for 183 days or more during the 20XX income year. Furthermore, you do not intend to be present in Australia for 183 days or more in the income year ended XX XX 20XX. Therefore, you are not a resident 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

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 for the income years ended XX XX 20XX and the income year ended XX XX 20XX.