Private ruling: Residency for tax purposes
Date of advice: 11 September 2018
Published: October 2018
Ruling period: Period ending 30 June 2018 | Period ending 30 June 2019 | Period ending 30 June 2020 | Period ending 30 June 2021 | Period ending 30 June 2022
Date scheme commenced: 1 April 2018

Ruling: Q1: Are you a resident of Australia within the ordinary meaning of the word for the purpose of section 6 (1) ITAA 1936 from the DDMMYY? | A1: No

Relevant facts and circumstances: You were born in Country Z. You moved to Australia in 2011. You became an Australian citizen in 2016. In September 2017 you accepted an open ended contract with an International company. The company expected that you would relocate to country Y in 2018. In April 2018 your employment was transferred the companies base in country Y. In April 2018 you moved permanently to country Y. Your two children remained in Australia to complete their schooling. Your spouse and family will relocate to country Y permanently when that has occurred. Your spouse is the sole owner of a property in Australia. Your family will visit you in country Y for holidays. You will be required to make visits to Australia for business purposes. Your trips to Australia will not extend beyond 100 days per year. You will stay with your spouse and children when your business trips require you to be in city A. You will stay in hotels when your business trips require you to be elsewhere in Australia. You have leased a home in country Y for two years with an option to extend the lease. The home is a 3 bedroom/3 bathroom home to accommodate your family. You have invested a considerable amount of money for fit out and to furnish the property to a standard the family is accustomed to. You have a personal trainer that you have signed up with for the maximum time you are able (12 months). You are also a member of the company’s staff social club. You are in the process of transferring care for an ongoing medical issue to country Y specialists. After that time you will cancel Medicare and Private Health registration in Australia. Your salary continuance policy has been cancelled in Australia. You have advised your insurers, banks, ASIC and the AICD that you have relocated to country Y. All your personal mail is redirected to country Y. You have transferred all your personal possessions to country Y You have a bank account and credit cards in country Y. You have an Australian bank account because staff securities trading policies require a transactional account to remain open for Australian equity market investments. You sold your car, motor yacht and other small assets in anticipation of moving to country Y. Neither you nor your spouse is eligible for Commonwealth Superannuation.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Summary: Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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 subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: ● the resides test, ● the domicile (and permanent place of abode) test, ● the 183 day test, and ● the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the ‘resides’ test: (i) physical presence in Australia (ii) nationality (iii) history of residence and movements (iv) habits and "mode of life" (v) frequency, regularity and duration of visits to Australia (vi) purpose of visits to or absences from Australia (vii) family and business ties to different countries (viii) 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 Taxation Ruling IT 2650 Income tax: residency – permanent place of abode outside Australia 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. Case 9/2014 was an anomaly among case authority on the topic until the Federal Court decision of Harding v FC of T 2018 ATC 20-660 was handed down. In Harding , the taxpayer was found not to be a resident under the ordinary concepts test despite his strong family ties in Australia. After noting that each case must be determined on its own circumstances, Justice Derrington found that the objective facts surrounding the taxpayer’s circumstances supported his oral evidence that in 2009 he left Australia for the Middle East with the intention of staying there indefinitely and with no intention to return to Australia and to continue to treat it as “home “. While the taxpayer ' s circumstances may have been considered " unusual " in that he was acutely focused on his employment and placed his personal work satisfaction ahead of his personal relationships, they warranted a finding that the taxpayer terminated his residency in Australia under the ordinary concepts test. In the determination of where a person resided their subjective intention had a role to play and could be significant. However, it was neither sufficient nor vital or decisive. Each case must be determined on its own circumstances. In this case, the taxpayer's circumstances were unusual in that he was acutely focused on his employment and placed his personal work satisfaction ahead of his personal relationships. The Commissioner's submission that the taxpayer's departure was conditional upon his family joining him in Bahrain was to be rejected. The objective facts surrounding the taxpayer's circumstances supported his oral evidence that in 2009 he left Australia for the Middle East with the intention of staying there indefinitely and with no intention to return to Australia and to continue to treat it as "home". His absence from Australia and his formed intention not to return was sufficient to terminate his residency to the extent determined by the ordinary concepts test of residency. In your case, from DDMMYY, your intention was to reside in country Y for an indefinite period; your employment commenced in September 201X and you moved to country Y permanently in April 201Y. You intend to never return to work in Australia and you will remain employed and living overseas for the foreseeable future. Your spouse and children do not accompany you to country Y, your relationship with your spouse is such that on occasion when you have or will visit city A you make arrangements to stay with your spouse at their residence, which they own, occupy, maintain and have sole control of access to that residence. From DDMMYY until the present time, you have only been physically present in Australia for less than 30 days (these were for business purposes) and you have not intended to live in Australia and have maintained strong employment ties with country Y. Based on the facts provided, you are not a resident of Australia for taxation purposes under this test. | Detailed Reasoning - The domicile (and permanent place of abode) test: Under this test, a person whose domicile is Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. You were born in country Z and your domicile of origin is country Z. Your domicile of choice is Australia as you have obtained citizenship of Australia The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not necessarily prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. The Commissioner is satisfied that you set up a permanent place of abode outside Australia for the following reasons: ● You were asked to move to country Y by your employer to further your career. ● You intend to stay in country Y indefinitely. ● You will not spend longer than 100 days in Australia in a year and mainly for business purposes. ● you have secured and established lasting accommodation facilities for yourself at premises which you consider your home; ● you have set up your home in country Y to accommodate your children and spouse when they move to country Y by spending a considerable amount of money to modify the home to suit your families’ purposes. ● you have established sporting and social connections in country Y. ● you do not own a permanent home in Australia. ● you do not own any other assets in Australia except a single bank account. The Commissioner is satisfied that you have a permanent place of abode outside Australia and you are, therefore, not a resident under the domicile test of residency during the period you are working in country Y. | Detailed Reasoning - The 183-day test: Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person’s usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You are not a resident of Australia for taxation purposes under this test as you will not be in Australia for 183 days or more while you are in country Y. | Detailed Reasoning - Superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees. Based on the information you have provided, you are not a resident of Australia for taxation purposes under this test.