Edited version of private advice

Authorisation Number: 1052328774450

Date of advice: 10 December 2024

Ruling

Subject: Residency

Residency

Question

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

Answer

No.

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the 20XX-XX income year.

This ruling applies for the following period:

30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On DD MM 19XX, you were born in Country B.

On DD MM 19XX you became a citizen of Australia.

You lived with your family in Australia on a permanent basis prior to your departure.

On DD MM 20XX, you received an offer of employment from an employer in Country C (employer) as medical professional. The employment contract is limited to a total of 2 years.

Relocation to Country C

On DD MM 20XX, you received a work visa for Country C which is valid for 2 years. The visa allows you to stay as long as you are working in Country C.

On DD MM 20XX, you departed Australia for Country C without a return airline ticket.

On DD MM 20XX, you received a Country C Identity Card with an expiry date of DD MM 20XX.

On DD MM 20XX, you cancelled your working visa as you were approved for different visa (Visa B) which allows for a longer residency period in Country C.

On DD MM 20XX, you were issued Visa B. This visa allows long-term residency providing you the right to live, work and study in Country C without needing a local sponsor. The Visa B expires on DD MM 20XX.

The purpose of moving to Country C is for work with an intention to live there permanently.

You do not have any intention of returning to Australia.

You are renting accommodation in Country C and live alone. Your tenancy contract commenced DD MM 20XX, ending DD MM 20XX.

The accommodation you are renting is not provided by your overseas employer. However, you employer does provide an accommodation allowance in your pay.

Country C assets

Your current overseas assets are as follows:

•         your employment income

•         household effects (e.g. furniture) equating to a value of $XX.

•         Country C bank account.

Australian assets

You do not own any investments, real estate, vehicles, or other assets in Australia.

You have an Australian bank account with no funds.

Other associations with Australia

You are single and have never been married.

You have no social and sporting connections with Australia.

You have cancelled all transactions related to living in Australia (i.e. voting, phone number, roadside assistance, gym membership, paid debt).

You received a letter from the Australian Electoral Commission dated DD MM 20XX following your advice that you are residing overseas indefinitely. The letter mentions your name would be removed from the electoral roll unless you contacted the delegate within 20 days.

Associations with Country C

You have social connections with friends and work colleagues in Country C.

You have signed a 1-year lease contract for an apartment.

Sources of income

You support yourself in Country C as follows:

•         you have established employment in Country C with a letter of offer for two years with a view of extension for another two years

•         you commenced the position on DD MM 20XX

•         you receive regular income from your employer who is based in Country C.

You are not receiving any Australian sourced income.

Dependents

You have no children or dependants.

Return to Australia

On DD MM 20XX to the DD MM 20XX, you returned to Australia to visit family members and for a holiday.

Assumptions

For the purposes of this ruling, it is assumed that the facts of your situation as outline above will not materially change during the ruling period and will continue until 30 June 20XX.

For the purposes of this ruling, it is assumed that you will not return to Australia for more than 183 days in the 20XX income year.

For the purposes of this ruling, it is assumed you will not return to Australia for reasons other than for holidays and to visit family.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1(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

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

•         Physical presence

­   you have been physically present in Country C since MM 20XX

­   on DD MM 20XX, you departed Australia. You did not hold a return airline ticket upon your departure

­   you do not believe you will be in Australia for more than 183 days in the 20XX-XX income year.

•         Intention or purpose

­   your intention upon departure was to work and reside in Country C on an indefinite basis and not to return to Australia

­   you have established professional and social connections in Country C and have withdrawn from those in Australia - apart from your family relationships.

­   you held an employment visa when you departed for Country C which has now been cancelled and upgraded to Visa B.

•         Behaviour

­   since DD MM 20XX, you have been residing in Country C.

­   you have informed the Australian electoral office you are residing overseas permanently

­   you have no day to day routines or habits in Australia.

•         Family and business/employment ties

­   you have no spouse or dependents/children living with you in Country C or Australia

­   you maintain family ties with Australia and anticipate nurturing these ties with regular short visits

­   you do not have employment in Australia

­   you commenced a 2 year employment contract in Country C on DD MM 20XX.

•         Maintenance and location of assets

­   you own no assets in Australia apart from a bank account with no funds.

­   you own the following assets Country C:

(i)      bank account

(ii)     household effects.

•         Social and living arrangements

­   you have severed your social, sporting and professional connections with Australia.

­   you are not maintaining an enduring association with Australia via an abode in Australia.

­   you have commenced and are maintaining social connections with friends and work colleagues in Country C.

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 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 Country B and your domicile of origin is Country B. You immigrated to Australia and became an Australian citizen on DD MM 19XX.

It is considered that you abandoned your domicile of origin in Country B and acquired a domicile of choice in Australia upon citizenship.

It is considered that you did not abandon your domicile of choice in Australia and acquired a domicile of choice in Country C.

While you intend to live in Country C permanently and have been granted a Visa B containing more benefits than Visa A, the Visa B needs to be renewed after a certain period. It is not a permanent visa nor is it a citizenship in Country C.

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 because:

•         you accepted employment contract for 2 years in Country C as a medical professional, commencing DD MM 20XX

•         you intend to permanently live in Country C

•         on DD MM 20XX you were granted Visa A and received an Identity Card on DD MM 20XX, expiring DD MM 20XX

•         you were subsequently granted Visa B on DD MM 20XX enabling you to live, work or study with exclusive benefits

•         you have a residential lease in Country C from DD MM 20XX until DD MM 20XX and lived with family in Australia before leaving

•         you have abandoned living in Australia in a permanent way

•         you have cancelled all transactions related to living in Australia i.e. voting, phone number, roadside assistance, gym membership, and paid debt.

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 will not been present in Australia for 183 days or more during the 20XX-XX income year. 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 for the 20XX-XX income year.