Residency

Are you an Australian resident for taxation purposes for the 20YY tax year?

No. This ruling applies for the following period : Year ended DD/MM/20YY The scheme commenced on: DD/MM/20YY

You were born in Country A. You are a citizen of Australia. In mid- 200Y, you came to Australia to study. In late 20YY, you purchased an apartment and resided there until leaving Australia. In mid-to-late 20YY, you became an Australian citizen. Your spouse is a citizen of Country B. In early to mid 20YY, you left Australia to join your spouse in Country B who was undertaking a X year employer sponsored education program there. The course was offered by your spouse's employer in early 20YY. It commenced in mid-to-late 20YY and was completed in mid-20YY. Your spouse has held a permanent position with this company since 20YY. You state, that at the time of departure, you did not have any intention to leave your Australian home indefinitely and that you and your spouse planned to live in Country B for a couple of years before returning to Australia to raise a family. You rent a property in Country B and state it is standard practice under Country B tenancy law that leases do not have a fixed term. You have rented the same property throughout your stay. In mid-to-late 20YY, you married your spouse in Country B. In early 20YY, you returned to Australia for a short x-week visit.

In mid-20YY, whilst COVID restrictions prevented travel from Country B to Australia, you commenced some medical treatment. In mid-20YY, your child was born in Country B. Your child attends daycare in Country B a couple of mornings a week. You have remained in Country B for further medical treatment due to some complexities. Your most recent treatment being in early-to-mid 20XX. In early 20YY, you returned to Australia for X weeks (as short period). Your spouse was in Australia for less time (X weeks) as they could not be absent from work for an extended period of time. The purpose of this trip was to plan for the relocation of the family to Australia. You state your spouse was actively seeking job opportunities whilst they were in Australia including making connections with recruitment firms, submitting job applications and interviews. You require a permit to stay in Country B. This permit allows foreign nationals to live and work in Country B and you renew this biennially. You have not applied for citizenship or permanent residency in Country B. You have not worked since arriving in Country B.

You state that other than the social connections formed with your spouse's family, you have very few social interactions with others in Country B. You own two properties in Australia. The property you resided in before leaving Australia has been vacant since leaving, and you rent your other property. Your personal belongings and household effects remain in your vacant property. You state you maintain a close connection with your neighbours and building manager for the upkeep of your vacant Australian apartment. Your only overseas asset is the family car in Country B. You hold a valid driver's licence for both Australia and Country B. You have a health insurance policy in Country B as foreign nationals who stay in Country B for more than X months are required to have a private health insurance policy. You continue to renew your Australian private health insurance policy annually. You are registered for Medicare. You have not closed your Australian bank accounts. You have not advised any Australian financial institution that you are a foreign resident.

You have not advised the Australian Electoral Office to remove your name from the electoral roll, and you travel to the nearest Australian Embassy to cast your vote, when required. You lodge tax returns in Australia. You are included in the Country B family-based tax filing with your spouse. Your child has Australian citizenship and an Australian passport. You have no family in Australia. You have no fixed date to return to Australia.

Income Tax Assessment Act 1997 section 995-1 Income Tax Assessment Act 1936 subsection 6(1)

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 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: 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... 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 resides test is about 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. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia. Paragraph 50 of Taxation Ruling TR 2023/1- Income tax: residency tests for individuals states that:

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." You have established a place residence in Country B, through physical presence and the continuity of your living arrangements. You are not a resident of Australia under the resides test for the period 1 July 20YY to 30 June 20YYbased on the following: •                 You moved to Country B with your spouse in early-to-mid 20YY. •                 Your spouse is a citizen of Country B. •                 You have resided in Country B since this date, returning to Australia on X occasions since leaving in early-to-mid 20YY. •                 You commenced medical treatment whilst in Country B and your child was born there in mid-20YY.

•                 You are required to hold a Permit to stay in Country B, this permit allows foreign nationals to live and work in Country B and you renew this biennially. •                 Your child attends daycare in Country B a couple of mornings a week. •                 You have not worked since arriving in Country B. •                 Your behaviour while in Country B has been inconsistent with a temporary visit. Upon your move to Country B your physical presence, living arrangements, accommodation, immediate family connections, and the enrolment of your child in daycare all indicate that your actions have been consistent with establishing residence in Country B. You are not a resident according to ordinary concepts from the time you left Australia in early-to-mid 20XX, as you severed your connection to Australia by making a long-term move overseas with your immediate family. You are not a resident of Australia under the resides test for the year ended 30 June 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). 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. 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. Application to your situation In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in 200Y and became an Australian citizen in 20YY. It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia in 20YY.

In early-to-mid 20YY you moved to Country B and have resided there since that date. You require a permit to stay in Country B. This permit allows foreign nationals to live and work in Country B and you renew this biennially. Your domicile of choice remains Australia as you have a property available for use in Australia as well as you continue to hold your Australian citizenship. You have not abandoned your domicile of choice in Australia. 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] FCAFC 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: •                 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 •                 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. Taxation Ruling TR 2023/1 - Income tax: residency tests for individuals states in the following in paragraphs 76 and 77 states:

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. Application to your situation

The Commissioner is satisfied that your permanent place of abode is outside Australia because: •                 You have resided in Country B since early-to-mid 20YY, only returning to Australia twice to visit since this date for a total of X weeks. The return visits have been infrequent and brief in the context of the time spent overseas. •                 You reside with your spouse and child, your immediate family in Country B. •                 Your spouse is a Country B citizen. •                 You have rented the same property throughout your stay in Country B. •                 You have continually renewed your Country B visa biennially since 20YY. The duration and continuity of your presence in Country B supports the argument that you established a long-term place of abode in Country B. While you are a citizen of Australia, this does not outweigh the enduring association and connection you have, and maintain, in Country B.

Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly when you are physically in a country. Your place of abode does not have to be fixed but must have the attributes of a place of residence or a place to live. Since 20YY, your usual place of abode has been Country B. Therefore, while you are a citizen of Australia, the Commissioner considers you have established a permanent place of abode outside Australia for tax purposes in Country B since 20YY. Therefore, you are not a resident of Australia for the year ended 30 June 20YY under the domicile test. 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. You have not been present in Australia for 183 days or more during the 20YY income year. Therefore, you are not a resident under this test. 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. 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 for the year ended 30 June 20YY. Conclusion As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the year ended 30 June 20XX.