Edited version of private advice

Authorisation Number: 1052343364816

Date of advice: 17 December 2024

Ruling

Subject: Residency

Question 1

Are you an Australian resident for taxation purposes under subsection 6(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for the 20XX and 20XX income years while living overseas?

Answer 1

Yes

This ruling applies for the following periods:

Year ending XX XXXX 20XX

Year ending XX XXXX 20XX

The scheme commences on:

XX XXXXX 20XX

Relevant facts and circumstances

You were born in Country A.

You are an Australian resident and Citizen.

In XXX 20XX, you commenced working for Company A as permanent full-time employee.

On XX XXXXX 20XX, you will leave Australia to commence working in Country B, City A, with your current employer to perform an International Mobility Assignment.

Your assignment will continue for XX months to XX years.

You will be paid in Country B Dollars not AUD.

Your company will not withhold tax as Country B is a tax-free country.

Your company will not pay you Superannuation while you are working in Country B.

You own Property A in Australia and are the primary resident of this property.

You intend to rent out Property A whilst you are living overseas.

You hold a Driver's Licence.

You hold bank account(s) with Bank A.

You intend to place your appliances and furniture into storage whilst you are overseas.

From your employment contract:

"Your employment in the "Home Country" (Australia) will be dormant for the duration of your assignment and will continue to be bound by the original terms of your employment agreement.

XX XXXXX 20XX is your anticipated start date.

XX XXXXX 20XX is you anticipated end date or approximately XX months - XX years from the commencement of the role.

Any extension of time will be advised in writing at least XX days prior to the end of your initial term.

Your salary is comprised of a Base salary, annual accommodation allowance and annual transport.

You will be paid in Country B Dollars, on a monthly basis, this will be credited to your nominated bank account.

Your contract states that liability for taxation both in Country B and your country of domicile/residence, if different from Country B will be your sole responsibility.

You are responsible for paying all income tax and mandatory Government deductions based on payroll and taxation laws of the Host country, Personal taxation issues are your individual responsibility in your Home and Host Country. Company A will make the appropriate mandatory payroll deductions in accordance with the relevant tax regulations in your Host country".

Your intention once your assignment has concluded is to return to your home, office, and current role.

You are not a member of the Public Sector Superannuation Scheme (PSS).

You are not an eligible employee in respect of the Commonwealth Superannuation scheme (CSS).

You will notify your financial institution of your departure closer to the departure date.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1

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 a resident of Australia under the resides test for the period 20XX and 20XX income yearsbased on the following:

•                You are a Resident and Citizen of Australia.

•                You have purchased Property A and live in that property as the main resident.

•                You hold a Drivers Licence.

•                You have bank accounts with Bank A.

•                You have a full-time job with Company A.

•                Your intention is to return to Australia once your overseas job assignment is completed, this will be within XX months to XX years.

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.

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

It is considered that you did not abandon your domicile of origin in Country A and acquired a domicile of choice in Australia. You obtained permanent residency/citizenship in Australia, and you intend to live here indefinitely.

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

•                You own your main residence in Australia (Property A).

•                You have driver's licence.

•                You hold bank accounts with Bank A.

•                You have a full-time job with Company A which commenced in XXX 20XX and it is this company that you will be working for in Country B.

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

You have not been present in Australia for 183 days or more during the 20XX and 20XX income years. 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

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