Private ruling: Income tax - residency
Date of advice: 21 July 2023
Published: 11 September 2023
Ruling period: For the year ending 30 June 20XX | For the year ending 30 June 20XX
Date scheme commenced: DD MM 20XX

Ruling: Q1: Are you an Australian resident for tax purposes after you departed Australia on DD MM 20XX? | A1: No.

Relevant facts and circumstances: You were born in Australia in 19XX and are an Australian citizen. You departed Australia on DD MM 20XX and made a permanent move to a foreign country (Country B) to live with your spouse. Your spouse is a citizen of Country B and lives there permanently. Your entry visa to Country B expires on DD MM 20YY can be renewed periodically and there is no maximum on the number of renewals. Your visa allows you to apply for permanent residency in Country B after a specified period of time. You do not intend on returning to Australia to live and you do not hold a return airline ticket. If you do visit Australia, it will be in a temporary capacity for business purposes only. You do not have a spouse or any dependants living in Australia. Your furniture, whitegoods and motor vehicle were sold prior to your departure from Australia. You vacated your Australian residence where you were previously living and no longer hold a lease on the property. You are still temporarily employed by your Australian employer however you are currently on long term leave without pay pending receipt of your employee shares which will vest on DD MM 20XX. You maintain one Australian bank account. You advised your Australian financial institution that you are a foreign resident for tax purposes so that non-resident withholding tax can be deducted on any interest income you receive. You advised Medicare to have your name removed from their records. You advised the Australian Electoral Commission to have your name removed from the electoral roll. Your personal possessions and effects are located in Country B. Your intention is to purchase a property with your spouse in Country B. You are currently in the process of securing a new long term residential lease with your spouse in Country B. You are a consultant and in MM 20XX you registered a company in Country B to provide those services in your new location. You intend to lodge tax returns in Country B for all future years of residence. You will obtain a driver's licence in Country B. You attend church, exercise in the gym, and intend on participating in team sports in Country B. You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990 . You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976 . You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

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

Reasons for decision: Detailed Reasoning - Overview of the law: Section 995-1 of the Income Tax Assessment Act 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: | Detailed Reasoning - 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... [W]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 ordinary concepts test is 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: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity. | Detailed Reasoning - Application to your situation: We have taken the following into consideration when determining whether you meet the resides test: • You departed Australia and made a permanent move to Country B to live with your spouse. • You do not intend on returning to Australia to live and you do not hold a return airline ticket. • You do not have a spouse or any dependants living in Australia. • Your furniture, whitegoods and motor vehicle were sold prior to your departure from Australia. • You vacated your Australian residence where you were previously living and no longer hold a lease on the property. • You are currently in the process of securing a new long term residential lease with your spouse in Country B. • Your personal possessions and effects are located in Country B. • You maintain one Australian bank account. • You advised your Australian financial institution that you are a foreign resident for tax purposes so they can deduct any non-resident withholding tax can be deducted on any interest income you receive. • You advised Australian Government departments such as Medicare and the Australian Electoral Commission that you departed permanently. You are not a resident of Australia under the resides test for the period DD MM 20XX to DD MM 20XX. 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). | Detailed Reasoning - 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. | Detailed Reasoning - 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. | Detailed Reasoning - Application to your situation: In your case, you were born in Australia and your domicile of origin is Australia. Based on the facts and circumstances provided in this private ruling, it is considered that you have not abandoned your domicile of origin (Australia) and acquired a domicile of choice overseas. You currently remain a citizen of Australia. Therefore, your domicile is Australia. | Detailed Reasoning - 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 considering 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 ( Harding ) 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; and • 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. | Detailed Reasoning - Application to your situation: As mentioned above in relation to the Harding case, one of the two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia is whether the taxpayer has 'definitely abandoned, in a permanent way, living in Australia'. We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia: • You departed Australia on DD MM 20YY and made a permanent move to Country B to live with your spouse. • You intend on applying for permanent residency in Country B after (X) period of time. • You do not intend on returning to Australia to live and you do not hold a return airline ticket. • You do not have a spouse or any dependants living in Australia. • Your furniture, whitegoods and motor vehicle were sold prior to your departure from Australia. • You vacated your Australian residence where you were previously living and no longer hold a lease on the property. • You are currently in the process of securing a new long term residential lease with your spouse in Country B. • Your personal possessions and effects are located in Country B. • Your intention is to purchase a property with your spouse in Country B in the next (X) years. • You advised your Australian financial institution that you are a foreign resident for tax purposes so they can deduct any non-resident withholding tax can be deducted on any interest income you receive. • You advised Australian Government departments such as Medicare and the Australian Electoral Commission that you departed permanently. The Commissioner is satisfied that your permanent place of abode is outside Australia from DD MM 20XX. Therefore, you are not a resident of Australia under the domicile test from DD MM 20XX. | Detailed Reasoning - 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. | Detailed Reasoning - Application to your situation: You have not been present in Australia for 183 days or more in the income year ended DD MM 20XX as you now live in Country B. Therefore, you are not a resident under this test. However, you were present in Australia for 183 days or more in the income year ended DD MM 20XX. Therefore, you will be a resident under this test for 20XX unless the Commissioner is satisfied that your usual place of abode was outside Australia, and you do not have an intention to take up residence in Australia. | Detailed Reasoning - Usual place of abode: In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections. If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836. | Detailed Reasoning - Application to your situation: We have taken the following into consideration when deciding whether your usual place of abode is in Australia for the income year ended DD MM 20XX: • Your country of origin is Australia, and you are an Australian citizen. • You were living in leased Australian accommodation in a permanent way prior to your departure for Country B. • You maintained assets in Australia such as furniture, whitegoods and a motor vehicle prior to departing. • You were employed in Australia. • You departed Australia on DD MM 20XX and made a permanent move to live in Country B. • You intend on applying for permanent residency in Country B. • You do not intend on returning to Australia to live and you do not hold a return airline ticket. Based on your circumstances, the Commissioner is satisfied that your usual place of abode was in Australia, prior to your departure on DD MM 20XX. Following this date, however, the Commissioner is satisfied that your usual place of abode was outside of Australia. | Detailed Reasoning - Intention to take up residency: To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here. | Detailed Reasoning - Application to your situation: We have taken the following into consideration when deciding whether you intend to take up residence in Australia: • You departed Australia and made a permanent move to Country B to live with your spouse. • You intend on applying for permanent residency in Country B after (X) period of time. • Your intention is to purchase a property with your spouse in Country B in the next (X) years. • You are currently in the process of securing a new long term residential lease with your spouse in Country B. • Your personal possessions and effects are located in Country B. • You do not intend on returning to Australia to live and you do not hold a return airline ticket. • You do not have a spouse or any dependants living in Australia. Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia following your departure on DD MM 20XX. | Detailed Reasoning - 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. | Detailed Reasoning - 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. | Detailed Reasoning - Conclusion: As you do not satisfy any of the four tests of residency, you are not a resident of Australia for tax purposes from DD MM 20XX until DD MM 20XX.