Private ruling: Residency
Date of advice: 7 September 2020
Published: October 2020
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for income tax purposes? | A1: No.

Relevant facts and circumstances: You are a citizen of Australia. You left Australia late 20XX. You entered Country Z on a visa. The visa allows you to stay in Country Z for more than three years. You do not intend to return to Australia until the visa expires. You advised the Australian Electoral Commission and Medicare that you were leaving Australia. You are currently in a rental property. Your assets in Australia include a bank account and shares. Your personal items and household goods still in Australia are in storage. The assets you own overseas include a bank account and car. You have lodged tax returns in Country Z as a resident. You have a spouse and child. You have current and ongoing employment in Country Z. Neither you, nor your spouse are eligible to contribute to the PSS or the CSS Commonwealth Government superfunds.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 section 995-1(1) Detailed reasoning | Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian residentfor 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, in regard to an individual, are defined in subsection6(1) of the ITAA 1936. | The definition offers four tests to ascertain whether each individual taxpayer is a resident ofAustralia for income tax purposes. These tests are the: | · the resides test, | · the domicile test, | · the 183 days test, and | · the superannuation test. | The primary test for deciding the residency status of each individual is whether they reside inAustralia according to the ordinary meaning of the word resides. If the primary test is satisfied theremaining three tests do not need to be considered as residency for Australian tax purposes hasbeen established. | Where an individual does not reside in Australia according to ordinary concepts, they may still beconsidered to be an Australian resident if they meet the conditions of one of the other tests. | The resides (ordinary concepts) test | The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. | Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: | a) Physical presence in Australia | b) Nationality | c) History of residence and movements | d) Habits and 'mode of life' | e) Frequency, regularity and duration of visits to Australia | f) Purpose of visits to or absences from Australia | g) Family and business ties to different countries | h) Maintenance of place of abode. | These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . | It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | In your case: | · You have assets in Australia including a bank account and shares. | · You have personal items and household goods stored in Australia. | · You left Australia on late 20XX. | · You intend on remaining living and working in Country Z for the length of your visa. | · You advised the Australian Electoral Commission and Medicare that you were leaving Australia. | · Since moving to Country Z, you have been in living in private accommodation. | · You own assets overseas including a car and bank account. | · You have a spouse and child in Country Z. | · You have lodged tax returns as a resident of Country Z. | · You have current and ongoing employment in Country Z. | As such you are not residing in Australia according to the ordinary meaning of the word as you have made your home in Country Z. Therefore, you do not meet the 'resides test' and you are a non-resident of Australia for tax purposes under this test. | However, you will be an Australian resident if you meet the conditions of any of the remaining tests. | The domicile test | Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Domicile | Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. | A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982 ). As such, in order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country, and this intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned. | In your case you have been a resident and citizen of Australia with a permanent place of abode in Australia. | Therefore, you will be a resident of Australia under this test unless the Commissioner considers you have established a permanent place of abode outside of Australia. | Permanent place of abode | It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. | The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that 'a man's residence, where he lives withhis family and sleeps at night, is always his place of abode in the full sense of that expression.' | A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. | Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state ofsatisfaction as to a taxpayer's permanent place of abode: | a) the intended and actual length of the taxpayer's stay in the overseas country; | b) 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; | c) 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; | d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; | e) the duration and continuity of the taxpayer's presence in the overseas country; and | f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts 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. | If an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another, any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or permanent place of abode outside Australia. This would also include situations where an individual lives and works on a cruising yacht. In such a case, if the person could not be said to have acquired a domicile of choice or permanent place of abode outside Australia, the taxpayer would be considered to be a resident of Australia. | This concept was further explored in Harding v Commissioner of Taxation (2019) FCAFC 29 (Harding), where Davies and Stewart JJ stated at paragraph 40 that in reference to the term 'permanent place of abode', the word 'place' should accordingly be read as only including a reference to a particular country or state. | Further, the Full Court found in Harding at paragraphs 36 and 40 that 'permanent place of abode outside Australia' involves two considerations as follows: | 1) Whether a taxpayer has definitely abandoned, in a permanent way, their Australian | residence, and | 2) Whether the taxpayer is living permanently in a specific country rather than moving | between foreign countries. | In consideration of the factors above, along with your overall circumstances, the Commissioner is satisfied that you have a permanent place of abode outside of Australia based on the following: | · You have been living in Country Z since late 20XX and have not returned to Australia since leaving. | · Whilst you will have a remaining connection with Australia through your personal items and bank account, you do not have a permanent place of abode in Australia, having rented out your previous place of abode after moving overseas. | · Since relocating to Country Z, you have rented private accommodation. | · You own assets overseas including a car and bank account. | · Your intention is to stay in Country Z for the full time allowed by the visa. | · You hold a type of visa which allows you to live in Country Z until 20XX. | Therefore, as the Commissioner is satisfied that you have established a permanent place of abode | outside of Australia, you are not a resident of Australia under the domicile test of residency. | The 183-day test | Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside | Australia and the person does not intend to take up residence in Australia. | You have not been in Australia for more than 183 days since you departed in late 20XX. | As such you are a non-resident under this test. | The superannuation test | An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. | You are not eligible to contribute to the relevant Commonwealth super funds, nor are you the spouse of such a person. | As such you are not a resident under this test. | Your residency status | As you have failed all four tests of residency you are not a resident of Australia for income tax purposes from late 20XX under subsection 6(1) of the ITAA 1936.