Residency

Are you a "resident" or "resident of Australia" as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the income years ended 30 June wwww, 30 June xxxx, 30 June yyyy and 30 June zzzz?

No. This ruling applies for the following periods: 30 June wwww 30 June xxxx 30 June yyyy 30 June zzzz The scheme commences on: 30 June wwww

1.         You were born in Australia, are an Australian citizen who is and continues to be domiciled in Australia. 2.         You are neither an eligible employee for the purposes of the Superannuation Act 1976 nor a member of the superannuation scheme established by deed under the Superannuation Act 1990 . You are also not the spouse of such a person. 3.         You have relocated overseas with your spouse as they have an employment agreement. 4.         You departed Australia with the intention to move overseas at least for a number of years. 5.         Before your departure from Australia, you rented out a property that was your primary residence to an unrelated party for a period that was stated in the lease agreement. Also, you made arrangements to enter into a lease agreement for a property that is located overseas for a number of years. This overseas property is your current residence. 6.         Further, you gifted or transferred certain assets to family members, notified various organisations and authorities of your change in residence. 7.         Your spouse lives with you in your overseas property.

8.         Now that you have established yourself in an overseas environment you have obtained more ties with your new residence and have had less connection with Australia.

Section 6 Income Tax Assessment Act 1936

9.         The expressions "resident" or "resident of Australia" for tax purposes are defined in section 6 of the Income Tax Assessment Act 1936 . As per Taxation Ruling 2023/1 (TR 2023/1) the definitions contain 4 alternative tests for residency of individuals. A 'resident' or 'resident of Australia' is: (a) a person, other than a company, who resides in Australia [ordinary concepts test] and includes a person: (i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia; [domicile test]; (ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residency in Australia; [183-day test]; or (iii) who is: (A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or (B) an eligible employee for the purposes of the Superannuation Act 1976; or (C) the spouse, or a child under 16, of a person covered by sub-paragraph (A) or (B)... [Commonwealth superannuation fund test] .

11.      As it is taken as an assumption that you will not be in Australia for more than one-half of the year of income, the 183-day test does not apply to you. As you are not a member of a Commonwealth Superannuation Scheme, the Commonwealth superannuation fund test does not apply to you. 12.      The following paragraphs consider the first 2 tests: the ordinary concepts test and the domicile test. Ordinary concepts test 13.      The first test of residency is the "ordinary concepts" or "ordinarily resides" test. This means you are a resident if you reside in Australia. 14.      As there is no definition of the word 'reside' in Australian income tax law, the ordinary meaning of the word must be considered. The Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time', and the Shorter Oxford English Dictionary defines it 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'. 15.      Paragraph 20 of TR 2023/1 states that:

"...the ordinary concepts test is asking whether your presence in Australia is usual and settled in contrast to temporary and casual. This is informed by both the nature, duration and quality of the person's physical presence and an intention to treat Australia as home. The factors that commonly inform the relevant association with Australia are: • period of physical presence in Australia • intention or purpose of presence • behaviour while in Australia • family, and business or employment ties • maintenance and location of assets, and • social and living arrangements. Case law 15.       In Hafza v Director-General of Social Security (1985) 6 FCR 444 ( Hafza ) at 449-450, Wilcox J discussed the concept of residency in relation to legislation which had incorporated the 'residency' definition from ITAA 1936:

"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] VR 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 236. It is important to observe firstly, that a person may simultaneously be a resident in more than one place - see the facts of Lysaght (supra) and the reference by Williams J to "a home or homes" - and, secondly, that the application of the general concept of residence to any particular case must depend upon the wording, and underlying purposes, of the particular statute in relation to which the question arises. But, where 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."

16.       In Hafza, Wilcox J stated that a lack of physical presence in a particular place does not necessarily lead to a conclusion that a person has ceased to be resident there. Rather, His Honour stated that the relevant test is whether the person has retained a 'continuity of association', an intention to return, and an attitude that the place remains 'home'. 17.       In Harding v FCT [2018] FCA 837 ( Harding ), Derrington J discussed the use of a 'checklist' of relevant factors that had been developed in the AAT through analysis of various residency decisions, such as in Re Iyengar v FCT (2011) 85 ATR 924 and Re Sneddon v FCT (2012) 89 ATR 739, and stated at [46] that:

"Those decisions identified a number of topics relevant to the ascertaining of a person's residence in Australia such as the person's physical presence in Australia, their nationality, the history of their past residence and movements, their mode of life and habits, the frequency, regularity and duration of visits to Australia, their purpose for visiting or leaving Australia, the remaining family and business ties with Australia in comparison to any other foreign country and the maintenance of the place of abode. 18.       His Honour noted at [46] that: However, these factors do not constitute some kind of rigid formula for the determination of whether a person is a resident . They do not each invariably apply in all cases. They are merely the constitutive indicators or objective facts which are frequently relevant to the determination of the nature and quality of a person's presence in or association with a particular location . A consideration of those objective matters will also reflect the actual state of mind of the person in question concerning their intention to treat a place as their home. [Emphasis added.]" 19.       Further, in Harding, on appeal(2019 ATC 21445 ) ,

the Full Federal Court discussed the taxpayer's connections retained in Australia. Their honours Logan J and Davies J in a joint judgement said at pages 21464-21465: "(d) The Commissioner also relied on the financial connections Mr Harding retained in Australia, such as the maintenance of his bank account, the purchase of an investment property, the investments with IOOF and the keeping of his financial affairs substantially in Australia. Again, the primary judge took these connections into account in reaching his conclusion concerning the residence of Mr Harding in the year in dispute. His Honour said at [84]-[85] as follows: 2019 ATC 21465

... I have accepted that, at this point in his life, his decision was to leave Australia permanently come what may and regardless of whether his family followed him at a later date. In those circumstances, the financial arrangements which remained in place, or which were put in place subsequent to his departure, are more properly regarded as the remnants of his prior residency and the fact that he retained ongoing responsibilities to Mrs Tracy Harding and her children for whom Mr Harding provided. They should not be seen as indicators of a continuing intention to maintain residency in Australia. It should be added that the factor of where a person maintains investments may, in these days, have little bearing on where a person resides. In the past quarter of a century there has been a growing internationalisation of investment markets which has increased the ability of people in one country to make investments in businesses in other countries [emphasis added]. In this case it is, perhaps, not surprising that Mr Harding maintained significant investments in the relatively stable financial markets in Australia despite having abandoned his residency here.

Once again, there is no reason to doubt the accuracy of the foregoing findings of fact and the conclusions reached by his Honour." 20.       Although the decision in Harding was the subject of a successful appeal in Harding v FCT [2019] FCAFC 29 ( Harding Full Court ), the majority of the Full Federal Court accepted Derrington J's conclusion in respect of the 'ordinarily resides' test. 21.       In assessing the question of residence, it is therefore useful to consider the factors that have been identified as relevant by case law, and which have been set out by the Commissioner in paragraph 20 of TR 2023/1. 22.       Residency is a matter to be determined on a year by year basis, events that occurred outside the period in question are also relevant in determining the nature and quality of a person's association with Australia. Period of physical presence in Australia 23.       Paragraph 26 of TR 2023/1 states that:

"The period of physical presence or length of time in Australia is an important factor when considering whether you reside here, but it is not a determinative factor. Importantly, there is a distinction between 'staying' in Australia and residing in it. Merely staying in Australia is normally insufficient. You must have some connection to Australia that characterises your presence as 'residing' in it. This will be informed by the other factors set out in paragraph 20 of this Ruling." Intention or purpose of presence 24.       Paragraph 31 of TR 2023/1 states that: "Your intention, purpose or reason for being in Australia helps to determine whether you reside here. While you may have multiple reasons, there is usually a main purpose to your presence." 25.       Further, paragraph 34 of TR 2023/1 states that:

"Staying for the purpose of a short period of work is normally insufficient to establish that you are a resident of Australia. This would not normally demonstrate a connection to Australia that is consistent with residing here. Likewise, coming to Australia for a holiday would not normally demonstrate a connection to Australia that is consistent with residing here, even when supplemented by casual or short-term employment, and even when you spend considerable time in Australia." Behaviour in Australia 26.       Paragraph 42 of TR 2023/1 states that: "Your behaviour relevantly includes the way you live as part of the regular order of your life. If the way you live reflects a degree of continuity, routine or habit, coupled with other factors such as intention, it may be consistent with residing in Australia." Family and business / employment ties 27.       Paragraphs 46-50 of TR 2023/1 state that:

"46. The presence (or absence) of your family also informs the nature of your connection to Australia. The presence of immediate family in Australia is often accompanied by increased connections to Australia (including period of physical presence, assets such as a family home and motor vehicles, and an intention to return to a place you consider to be your home) and a settled routine consistent with residing in Australia. 47. The term and type of employment or business association you may have will also be relevant, particularly as these will usually be accompanied by other factors such as physical presence and assets in Australia. For example, entering Australia to take up an employment contract or to set up a business often results in behaviour that indicates you reside here. 48. While the test is about whether you reside in Australia, the presence or absence of family, and the extent of business or employment ties in the overseas country will be relevant in giving context to your connection to Australia. Business or employment ties overseas may be less significant if they can be, and are, performed from anywhere in the world.

49. Generally speaking, working overseas but returning to Australia at intervals to an established family and social life will often mean you are still residing in Australia. This is the case even if you spend more time overseas than in Australia in any given income year. Usually, such an arrangement indicates you are residing in Australia and another country. Having an ongoing, deliberate connection to Australia even though you have a connection to another country through your work does not make you a mere visitor to Australia. In such a case, Australia is your home and you are properly regarded as residing here. 50. This can be contrasted with a situation where you leave Australia to work overseas and shift your life overseas. For example, if you, and your family (if you have one), relocate overseas for work for some years establishing a permanent base and a routine overseas consistent with 'living' there, returning only occasionally for short stays while taking leave from work, then, depending on other facts and circumstances, you might not be a resident under the ordinary concepts test." Maintenance and location of assets 28.       Paragraph 51-52 of TR 2023/1 states that:

"51. Living in a property in Australia that you own or are purchasing suggests establishment of a home in Australia consistent with residing here. Other assets in Australia, such as motor vehicles, superannuation investments and bank accounts, add further weight to you having established behaviour consistent with residing here. 52. The relevance and weight given to assets must be considered in your individual context. Both the significance of the assets to you and the reasons why they were acquired or maintained will be relevant. For example, opening a bank account in Australia may be no more than a mere convenience in which to deposit locally acquired earnings to fund a holiday. Australian bank accounts held open while you are located overseas could be consistent with maintaining a continuity of association with Australia, but could also be the result of there being no pressing reason to close them." Social and living arrangements 29.       Paragraph 53-54 of TR 2023/1 states that:

"53. Your social and living arrangements may indicate you are a resident, particularly when coupled with other factors. Social and living arrangements are the way you interact with your surroundings during your stay in Australia. These arrangements may include joining sporting or community organisations, enrolling children in school, redirecting mail to Australia or committing to a residential lease. 54. It is the routine and habit associated with the social and living arrangements that is indicative of residency rather than the existence of hobbies and recreational pursuits themselves." Conclusion: ordinary concepts test 30.       On the basis of the above factors, and taking into account the facts and circumstances in this case, the Commissioner considers you are not a resident of Australia for the purposes of the ordinary concepts test for the period from 1 July wwww to 30 June zzzz. Domicile test 31.       The second test of residency is prescribed in subsection 6(1) of the ITAA 1936 (the 'domicile test') as follows: "...includes a person :

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia; ..." 32.       Paragraphs 56 - 58 of TR 2023/1 states that: "56. In Australia, the concept of domicile is governed by common law as modified by the Domicile Act 1982 (DA 1982). 57. Domicile considers whether there is a legal relationship between a person and Australia. There are 3 types of 'domicile': • A 'domicile of origin', which is attributed to each individual at birth. • A 'domicile of dependence', which is relevant where a person (such as a minor) lacks capacity to acquire their own domicile and their domicile is determined by reference to someone else's domicile (such as a parent). • A 'domicile of choice', which is the domicile a person, with the capacity to do so, acquires voluntarily. 58. You always have a domicile and you can only have one domicile at any point in time. Your particular domicile continues until you acquire a different one, either by choice or operation of the law. You cannot abandon a domicile of origin without replacement."

33.       The Commissioner's view on the implications of the domicile test pursuant to the decision in Harding Full Court has been set out in the Decision Impact Statement on Harding v FCT [2019] FCAFC 29 (the Harding DIS), which relevantly states that: "Regarding the domicile test, the Commissioner will apply the Full Federal Court's construction and, in determining whether the Commissioner is satisfied that a person's permanent place of abode is outside Australia, will consider whether the person has: • definitely abandoned residence in Australia, and • commenced living permanently in a specific country overseas. In deciding whether the person's permanent place of abode is outside Australia, the Commissioner will consider the facts and circumstances surrounding the person's departure from Australia, their arrangements in relation to the overseas country and nature of their presence there. Each case will turn on its facts. The facts in this case provide an illustration of where a person's permanent place of abode is outside Australia and are an application of the law to the specific facts of that case." 34.       Relevantly, Davies and Steward JJ in Harding [Full Court]

considered the meaning of 'place' in the phrase 'permanent place of abode', and concluded at [40] that: "...the rationale of the exception...is that a person domiciled in Australia is not to be made subject to federal income tax when they have abandoned in a permanent way their Australian residence. For the promotion of that rationale, it is unnecessary for the taxpayer to live outside of Australia in any particular way. It follows that the word 'place' should accordingly be read as including a reference to a country or state." 35.       However, Their Honours continued at [40]: "Having said that, we do not favour the proposition that it does not matter if the taxpayer is not permanently in one country but moves between foreign countries. In our view, the words 'permanent place' require the identification of a country in which the taxpayer is living permanently."

36.       Relevantly, Mr Harding had been dwelling in a serviced apartment building in Bahrain and commuting to work in Saudi Arabia. Notwithstanding the amount of time Mr Harding physically spent outside Bahrain, he was nonetheless considered to be living permanently in Bahrain, and therefore to have his permanent place of abode outside Australia. Permanent place of abode 37.       As the existence of a permanent place of abode is a question of fact, it is useful to consider each of the factors in paragraph 71 of TR 2023/1, being: •         Length of overseas stay •         Nature of accommodation •         Durability of association Length of overseas stay 38.       Paragraphs 73-78 of TR 2023/1 state that: "73. The longer you stay in any one particular place, the more permanent it is likely to be. This is because of the practical reality that extended periods will usually and naturally lead to the formation of durable connections overseas and loosening of connections with Australia.

74. Generally, a departure from Australia with an intention to return to Australia after a finite period would not result in you having your permanent place of abode overseas. This is consistent with the legislative intent of the definition. However, if some time through the period overseas your intentions changed, all the factors would need to be reconsidered at that point to determine whether your permanent place of abode is overseas. 75. Similarly, if you take up an employment opportunity overseas or commence living overseas with no fixed timeframe in mind but as a tentative venture, you are unlikely to have your permanent place of abode overseas. This is because you are likely to retain Australia as your home, for a time at least, maintaining connections that are not consistent with an abandonment of Australia as your place of residency. Again, as intentions and situations evolve, the circumstances may later point to you having your permanent place of abode overseas.

76. On the other hand, if you depart for an unspecified or substantial period, pack up your home in Australia, set up a home in a foreign country and live there with your family returning only occasionally such as for cultural events, special celebrations or annual leave, you are likely to meet the description of someone who has abandoned Australia as a place of residency and commenced living permanently overseas. This is despite the fact that you may at some point intend to return to Australia. 77. For practical purposes, it is convenient to set some 'rule of thumb' on what substantial means. Broadly, 2 years is considered to be a substantial period of time. What this means is that if your intended length of stay is less than 2 years, you are unlikely to be able to establish that your permanent place of abode is outside of Australia. Whether a stay of precisely 2 years or longer means you fall within the proviso will depend on the circumstances. The critical question is whether a person has in fact abandoned Australian residency and commenced to live in a permanent way overseas.

78. In each case there must be a careful consideration of the facts and circumstances surrounding the stay to assess the durability of the connection overseas, acknowledging that 'permanent' does not mean forever and few people depart Australia with the intention of never returning." Nature of accommodation 39.       Paragraphs 79-80 of TR 2023/1 states that: "79. The type of accommodation and conditions upon which it is occupied will be relevant in ascertaining whether any place of abode overseas is your permanent place of abode. While it is not necessary to live in a particular dwelling in a permanent way, the accommodation provides a relevant indication of whether your presence overseas is permanent. Staying in temporary accommodation such as hotels, campsites, barracks, dongas, a ship cabin, or accommodation arranged or owned by an employer on a non-exclusive basis for the duration of your overseas stay usually indicates the presence overseas is not permanent. 80. Retaining your dwelling in Australia does not necessarily mean that you remain a resident. It will depend on the circumstances and reasons for its retention. To illustrate: •

where you retain your home but lease it out to an arm's length party, its retention will assume less significance • where you retain your home but only so your family can remain living in it while they make arrangements to join you overseas shortly, it will also assume less significance • however, the home in Australia will assume more significance where it is kept available for your use, you do in fact return to it and the accommodation overseas is consistent with a transitory stay." Durability of association 40.       Paragraphs 81-82 of TR 2023/1 states that: " 81. The relative strength of the connections established and maintained overseas and of those retained in Australia will be relevant. As noted in this Ruling, the retention of the family home and a consistent return to it may indicate behaviour inconsistent with abandoning Australia and commencing to live permanently overseas. The location of family and social ties and their significance to you will also be relevant.

82. Other factors, such as the location and maintenance of bank accounts, location of other assets, maintenance of professional registrations and licences, and recreational activities, will be relevant as forming part of the matrix of circumstances to be considered. Conclusion: domicile and permanent place of abode 41.       In consideration of the above factors, and taking into consideration the facts and circumstances in this case, the Commissioner is satisfied that your permanent place of abode was outside Australia for the period from 1 July wwww to 30 June zzzz. 42.       For the reasons expressed above, you will not be a "resident" or "resident of Australia" as defined in subsection 6(1) of the ITAA 1936 for the income years ended 30 June wwww, 30 June xxxx, 30 June yyyy and 30 June zzzz.