Private ruling: Residency for taxation purposes
Date of advice: 20 January 2023
Published: 6 March 2023
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: XX Month 20YY

Ruling: Q1: Are you an Australian Resident for tax purposes from XX Month 20YY? | A1: No

Relevant facts and circumstances: You are a citizen of Australia. In Month 20YY you commenced working on a large construction project in Country A which will not be completed until the end of 20YY. On XX Month 20YY you departed Australia indefinitely for work and will pursue a career overseas in the future. You have a work visa for Country A which is renewable every XX months. You have secured a lease for XX months on an apartment in Country A. You have formed social and sporting connections in Country A. You are separated from your partner who remains in Australia as do your children who are completing their education. Your only assets that remain in Australia are a bank account and a share portfolio. You have advised your bank that you are a non-resident. You have returned to Australia X times in 20YY for XX days each visit. These visits were for medical procedures and to visit your child. You have been removed from the Australian Electoral Roll. You are not a member of the public sector super scheme or an eligible employee under the CSS.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 995-1

Reasons for decision: Detailed Reasoning - 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 4 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 Draft Taxation Ruling TR 2022/D2 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 on XX Month 20YY to commence work in Country A on a long-term project. • You believed there to be greater opportunities for you overseas and you intended to pursue a career outside of Australia for the indefinite future. • You have long term employment and have secured a lease for XX months on an apartment in Country A. • You attend the gym at your apartment, play sport socially on the weekends and you are a member of a local Australian social community in Country A. • You have a bank account, credit card and 2 investments through a bank in Country A. You intend to purchase a car and additional furnishings. • You are separated from your partner who remains in Australia as do your children who are completing their education. • You have returned to Australia X times in 20YY for XX days each visit. These visits were for medical procedures and to visit your child. • You have not maintained sporting or social connections in Australia. • You have no employment or business income in Australia. • Your only assets that remain in Australia are a bank account and a share portfolio. You have advised your bank that you are a non-resident. • You have been removed from the Australian Electoral Roll. You are not a resident of Australia under the resides test from XX Month 20YY. 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: • You were born in Australia and your domicile of origin is Australia. • You do not intend to apply for Country A citizenship or permanent residency. • You are uncertain about whether you intend to return to Australia in the foreseeable future to live. It is considered that you did not abandon your domicile of origin in Australia. You are not entitled to reside in Country A indefinitely and while living in Country A, you only hold a work permit which is valid until XX Month 20YY. 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 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: (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 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: We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia: • You departed Australia on XX Month 20YY to commence work in Country A. • You have long term employment and have secured a lease for X months on an apartment in Country A. • You attend the gym at your apartment, play sport socially on the weekends and you are a member of a local Australian social community in Country A. • You have a bank account, credit card and 2 investments through a bank in Country A. You intend to purchase a car and additional furnishings. • You are separated from your partner who remains in Australia as do your children who are completing their education. • You have not maintained sporting or social connections in Australia. • You have no employment or business income in Australia. • Your only assets that remain in Australia are a bank account and a share portfolio. You have advised your bank that you are a non-resident. • You have been removed from the Australian Electoral Roll. The Commissioner is satisfied that your permanent place of abode from XX Month 20YY is outside Australia. Therefore, you are not a resident of Australia under the domicile test from XX Month 20YY. | 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 been in Australia for 183 days or more in the 20YY income year. Therefore, you will be a resident under this test for the year ending 20YY 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 2 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 outside of Australia: • You departed Australia on XX Month 20YY to commence work in Country A on a long-term project. • You have long term employment and have secured a lease for XX months on an apartment in Country A. • You attend the gym at your apartment, play sport socially on the weekends and you are a member of a local Australian social community in Country A. • You have a bank account, credit card and 2 investments through a bank in Country A. You intend to purchase a car and additional furnishings. • You are separated from your partner who remains in Australia as do your children who are completing their education. • You have returned to Australia X times in 20YY for XX days each visit. These visits were for medical procedures and to visit your child. • You have not maintained sporting or social connections in Australia. • You have no employment or business income in Australia. • As there are greater opportunities for you overseas and you intend to pursue a career outside of Australia for the indefinite future. Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia from XX Month 20YY. | 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 on XX Month 20YY to commence work in Country A on a long-term project. • You have long term employment and have secured a lease for XX months on an apartment in Country A. You intend to purchase a car and additional furnishings. • You attend the gym at your apartment, play sport socially on the weekends and you are a member of a local Australian social community in Country A. • You have only returned to Australia X times in 20YY for XX days each visit. These visits were for medical procedures and to visit your child. Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia after XX Month 20YY. | 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 4 tests of residency, you are not a resident of Australia for income tax purposes from XX Month 20YY.