Will you remain a resident of Australia for taxation purposes from the date you leave Australia to go to Country Z?
No. This ruling applies for the following periods : Year ending 30 June 20YY Year ending 30 June 20YY Year ending 30 June 20YY The scheme commenced on: DD MM YYYY
You were born in Country Y. You are a Country Y Citizen. Your parents were born in Country Y but currently live in Country Z and plan on living out their days in Country Z where they have their home. Your wife was born in Country Y and is a Country Y citizen. You and your spouse each have a Country Y passport and no other passport. You and your spouse moved to Australia and became permanent residents. You are the controller of an Australian business and its subsidiary. You have interests in a number of private companies and investments in Australia. All companies and investments are and will remain Australian. You have acquired a domicile of choice in Australia. You and your spouse have an adult child who resides in Australia. You intend to move to Country Z in the current income year prior on an indefinite basis. The primary purpose of the move is to look after your parents. You plan on living in Country Z for as long as you need to care for your parents. Your spouse will move to Country Z with you. You will apply for an Employment Pass which you expect will be approved by Country Z authorities.
You and your spouse plan on moving to Country Z on a date yet to be determined, but on moving to Country Z they will occupy an apartment which they propose to lease for a period of several years with an option to extend the lease (the Apartment). The Apartment will be furnished largely with furniture and effects which you and your wife will acquire in Country Z. You plan to dispose of the furniture they have in Australia. Whilst the move to Country Z is on an indefinite basis, you intend to eventually return to live in Australia. You and your spouse will sell your main residence in Australia prior to moving to Country Z. Following the sale of your home in Australia you and your spouse will not have a permanent home available to you in Australia. Your adult child does not intend to move to Country Z and will continue to reside in Australia in the home they own. You will retain your Australian bank accounts but will also open accounts In Country Z. You will keep your Australian credit cards. You will retain your Australian driver licence. You and your spouse will retain a motor vehicle which will be garaged at a property owned in Australia by your parents.
You will advise your service providers of your move to Country Z but will continue to use the medical practitioners and dentist you currently use In Australia. You and your spouse will continue your private health cover. You will continue to hold a Medicare card if the Commissioner rules that you are and will remain a tax resident of Australia. You will work with a company in Country Z owned by your parents. You will open accounts with banks in Country Z. You will apply for credit cards issued in Country Z. You will enter the Country Z taxation system as a resident. You will return to Australia periodically for both work and personal reasons. Your spouse may return more often so that they can spend time with your child. When in Australia you and your spouse will sometimes stay with your child at their home. At other times you will stay at an apartment owned by your parents' if available or at an apartment owned by your relative if available or short-term rental if nothing is available.
You will be present in Country Z for at least 183 days in each of the relevant calendar years, because of which you will be treated as a Country Z resident for Country Z income tax purposes in both those calendar years. You will be taxed in relation to each calendar year as a Country Z resident.
Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1997 section 995-1
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... [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 everyone'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. Application to your situation The Commissioner is not satisfied that for the period you are in Country Z that you will remain a resident of Australia for taxation purposes under the resides test. You and your spouse intend to move to Country Z in the relevant income year on an indefinite basis to care for your parents. You intend on renting accommodation in Country Z and purchase items for the property in Country Z. You intend on working for your parents' company in Country Z. You intend on returning to Australia for a number of days in each income year for work and personal reasons.
You will stay in accommodation provided by your family or other accommodation depending on the availably of family accommodation. Your adult child will remain living in Australia. You will be in Country Z for 183 days in each Country Z income year and will be a resident of Country Z for income tax purposes. You intend on selling your family home in Australia and disposing of your household items in Australia. Your day-to-day life being work and personal will be in Country Z. You will not be residing in Australia according to ordinary concepts and will visit Australia for work and personal visits. 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 Y, and your domicile of origin is Country Y. You became a permanent resident of Australia when you moved here. Your domicile of choice is Australia. Therefore, your domicile is 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 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] 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 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. Application to your situation The Commissioner is satisfied that your permanent place of abode is outside Australia in Country Z because:
• You intend on going to Country Z for an indefinite period • You intend on going to Country Z to care for your parents and you do not know how long this will be for • You intend on renting accommodation in Country Z for several years with the option to extend the lease • You intend on working for your parents' company in Country Z • You will only return to Australia for work and to visit family You are not a resident of Australia under this 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. Application to your situation you will be a resident of Australia for taxation purposes for the relevant income year as you will have been in Australia for more than 183 days.
For the relevant income years, you will not be a resident of Australia for more than 183 days as it is your intention to be in Australia for less than 183 days in each income year and you do not intend on taking up residency in Australia and your usual place of abode will be in Country Z. 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. Conclusion : You will not remain a resident of Australia for taxation purposes from the date you leave Australia in the relevant income year and move to Country Z.
As you will not be a resident of Australia for taxation purposes, we do not need to consider the tie break test in the Double Tax Agreement between Australia and Country Z.