After departing Australia will the taxpayer cease to be a resident for tax purposes under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Yes This ruling applies for the following periods : XX XXXXX 20XX XX XXXXX 20XX XX XXXXX 20XX XX XXXXX 20XX The scheme commenced on: XX XXXXX 20XX
You are an Australian Citizen. In 20XX, you were employed by Company A. Your current role is Position A. You have spent XX months engaged on a Company A project in Country A and have been travelling to Country A regularly. For the last two years you have been sponsored by Company B on a XXXXX Visa, allowing you to spend XXX days per year in Country A, you have spent XX days in Country A over the last XX months. You have been offered a contract of employment through Company A, with Company B one of the Company A's employing companies in Country A. Your role will be Role A in the People and Places Solutions line of the Business. Your contract is a standard expat renewable X year contract, with the project expected to extend to 20XX. There is no probationary period required on this contract as you are an existing employee. Your intention is to permanently relocate to City A, Country A. The XX January 20XX was your expected departure date. On XX January 20XX, you left Australia and arrived in Country A. On XX February 20XX, your employment contract commenced in Country A. You have secured a long-term rental for a XX-month period and paid a deposit for the property.
The address of this property is Property B, City B Country A. You are currently in the process of applying for a Visa A, a Country A residency and identification for foreign nationals, this serves as both a work permit and an official ID. Once your entry permit is issued, you will travel to City A to complete your Visa A application process. Due to the executive nature of your role, Company A have also committed to sponsor you for the newly released Visa B - Country A's Premium Residency, a long term, self-sponsored residency program for eligible nationals, this process will follow a few months after the Visa A issue. You have moved to Country A with your spouse. You will sponsor them as a dependant as part of your Visa A. This will allow your spouse to have the same full residency benefits that you will have under your visa conditions. Your spouse is yet to obtain employment as you are still in the process of visa finalisation. You intend to establish primary social, professional and daily life routines in Country A, for example, local banking, healthcare and community participation. Your main residence in Australia, (the Property) will be offered for long term rental.
On XX XXXXX 20XX, the property was rented. Your property is rented through Real Estate Agent A, under normal commercial lease arrangements, at normal commercial rates. Your property insurance will be converted to landlord insurance. You have one additional investment property currently under long-term tenancy which will remain the same, and therefore you have no residence in Australia. You have sold your XXX cars and cancelled all vehicle insurance. You have disposed of most personal possessions in Australia, which includes selling all household furniture and physical assets. You have taken essential items such as clothing, jewellery and technology to Country A. You have no other worldwide assets apart from your rental properties in Australia. You have purchased furnishings in Country A. You have purchased a long-term public transport pass. You have cancelled all ongoing Australian memberships and subscriptions, including gym memberships, ambulance cover and other recurring service arrangements. Your XX-month rental contract in Country A includes a gym and wellness centre.
Your Australian mobile service will be converted to a minimal prepaid plan with international roaming solely to received one-time passwords from Australian banks during the transition period. You have post-paid phones in Country A with XXX (main provider). You have Wi-Fi router plans in Country A. Your banks have been notified of the overseas relocation for internal transactions until you establish a local bank account in Country A, you will provide your residential address to your bank once settled. Any Australian bank account related to investment properties will be retained for banking continuity. You will transition your personal banking affairs for Salary, investments and day-today banking to Country A. You have established bank accounts in Country A. Your salary is paid into your Country A bank account in Currency A. You have terminated your Australian health insurance. You have established private health insurance in Country A. You have notified the AEC of your intention to relocate overseas indefinitely and to have your name removed from the electoral role. You have received confirmation from the AEC that you and your spouse have been removed from the electoral role.
All utilities connected to your Australian residence, gas, water, electricity and internet will be terminated upon departure. You have a XX-month utility plan with the Country A Electricity Company. Your Australian mail will be redirected to your spouse's parents' property. You have no intention to travel to Australia except in the case of unforeseen and exceptional family circumstances. You have updated official records to your Country A address. You will notify your Australian Superannuation Funds of your non-resident status. You will have non employment arrangements, commitments or obligations in Australia, your sole employment will be based in Country A. You do not receive any government benefits and will not access any whilst overseas. You will be covered by Private Health Insurance provided by Company A whilst in Country A, this is part of your employment contract. You and your spouse are not members of the Commonwealth Superannuation Scheme (CSS). You and your spouse are not members of the Public Sector Superannuation Scheme (PSS). 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.
You have not undertaken any courses of study.
Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1997 subsection 995
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 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. Application to your situation You are not a resident of Australia under the resides test for the period XX XXXXX 20XX - XX XXXXX 20XX based on the following: You moved to Country A in XXXXX 20XX. Your stated purpose to live and work in Country A is evidenced by you obtaining employment with a renewable contract X year contract. The project you are working on is expected to extend until 20XX. You have moved into a rental property with a minimum XX-month lease. You have moved to Country A with your spouse and you both are applying for Visa A, both a work permit and residency identification.
You intend to sell all vehicles in Australia and cancel the insurance policies. You intend to cancel all ongoing memberships in Australia and establish these in Country A. You have rented out your home in Australia. The property will be offered on a long-term lease and will not be available for residing. You have spoken to your bank, the (AEC), and health insurer about your move overseas. You have cancelled all utilities in Australia. You have confirmation that you have been removed from the AEC electoral role. You have health insurance in Country A. You have a bank account in Country A, where your salary is paid in Currency A. In your case, you are still a citizen of Australia and moved to Country A on XX XXXXX 20XX. Based on the information you have provided, the Commissioner is satisfied that you are not residing in Australia according to ordinary concepts from your departure date onwards. This may change if you decide to return to Australia and meet the residency test for tax purposes. 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 Australia, and your domicile of origin is Australia.
You are not entitled to reside in Country A indefinitely and while living in Country A, you currently hold Visa A which entitles you to work and reside in Country A. You will be applying for Visa B, sponsored by your employer, which is a long term self-sponsored residency program for eligible foreign nationals. 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 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. Application to your situation The Commissioner is satisfied that your permanent place of abode is outside Australia because: You are being sponsored by your employer, Company A, to obtain Visa B, a long-term self-sponsored residency program for foreign nationals. You are applying for Visa A, a work permit and residency card. You have moved to Country A with your spouse and you both are applying for Visa A, both a work permit and residency identification. You have a obtained a long-term rental, with your spouse and signed a XX-month lease, this includes access and membership to the gym and wellness centre. You intend on living in Country A indefinitely with your spouse.
You have purchased a long-term public transport pass. You are on a standard XX-month renewable expat contract. Your new role has no probationary period as you are an existing employee of the company. You have updated official records to your Country A address. 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 the 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 XXXXX 20XX, your usual place of abode has been Country A. 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 A since XX XXXXX 20XX. Therefore, you are not a resident of Australia under the domicile test for the ruling period from XX XXXXX 20XX until XX XXXXX 20XX. 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 have been in Australia for 183 days or more in the 20XX income year, from XX XX 20XX - XX XX 20XX. You moved to Country A on the XX XX 20XX with the intention to reside there indefinitely. Therefore, you will be a resident under this test 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. You will not be a resident of Australia under the 183-day test for the 20XX-20XX income years based on the current facts in the private ruling request continuing to apply as presented. 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. 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. Application to your situation The Commissioner is not satisfied that you did intend to take up residence in Australia from XX XXXXX 20XX for the income year ending XX XXXXX 20XX because:
You have been travelling to Country A regularly for the last XX months for your work with Company A. You were offered a contract of employment through Company B in Country A. Your intention is to permanently relocate to Country A. You have obtained a rental property with a XX-month lease and paid a deposit. Your spouse has moved with you, and you are sponsoring their visa. Company A will sponsor you to obtain Visa A, once your XXXX Visa is issued. You will take essential items such as clothes jewellery and technology. You have no intention to travel to Australia only for unforeseen and exceptional family circumstances. You will also not be a resident of Australia under the 183-day test for the 20XX-20XX income years based on the current facts in the private ruling request continuing to apply as presented. 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 On XX XXXXX 20XX, you moved to Country A with your spouse on Visa A type with the intention to live and work there indefinitely. You are sponsoring your spouse to obtain Visa A to enable then the same residency and work benefits that you have. You employer will sponsor you for the newly released Visa B, which is Country A's Premium residency, a long term, self-sponsored residency program for eligible foreign nationals. This process will follow a few months after the Visa A is issued. You have obtained a long-term rental property, established bank accounts, purchased furniture, phone and Wi-Fi plans. You have updated your official records to your Country A address and been removed from the AEC electoral role. 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 years ended XX XXXXX 20XX - XX XXXXX 20XX.
Therefore, you became a non-resident of Australia for tax purposes during the 20XX-XX income year. However, this may change if you decide to return to Australia and meet the residency test for tax purposes at a future date. Additional information: In your case we can rule for this current year and X years more. "The Commissioner does not generally provide rulings for indefinite periods due to potential changes to the facts and circumstances of the case, as well as potential changes to the law in the future. However, this does not mean that you are required to apply for a new ruling every X years. In the absence of any change to the legislation, the interpretation of the law as explained in the ruling will continue to apply." If your circumstances do not change you will still be a non-resident. You do not need a ruling to be a resident or non-resident; it is a matter of fact.