Edited version of private advice

Authorisation Number: 1051757435323

Date of advice: 06 November 2020

Ruling

Subject: Residency

Question

Are you considered a resident of Australia for taxation purposes for the 2020 financial year?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are an Australian citizen.

You were born in the Country Y.

You relocated to Country Z in 19XX.

In 20XY you married a Country Z national in Country Z and you have a child together.

You have been living in Country Z on long term visas.

You live in a residence owned by your spouse in Country Z. Your spouse has ownership of most assets in Country Z and you only have a bank account with a small sum in your own name in Country Z.

Your parent and your adult children live in Australia. From 19XX to late 20XX, you spent a short amount of time in Australia each year to visit your children and spend some time with your parent and extended family.

Your Australian sourced income comprises of dividends from shares in an Australian private company and rental income from investment properties.

You sold an investment property in Australia in the financial year ended 30 June 20XX, leaving only one commercial property that is deriving income.

In early 20XX, you were diagnosed with a serious illness.

Due to the better medical infrastructure in Australia, you relocated to Australia for the purpose of your medical treatment. Your spouse and child remained in Country Z.

While in Australia for your medical treatment, you stayed with your parent and spent time with your adult children and grandchildren.

You were present in Australia for over 183 days during the financial year ended 30 June 20XX, due to ongoing treatment in Australia.

You have remained in Australia on your doctor's advice, as your immune system is compromised and it is considered too dangerous for you to travel during the COVID-19 outbreak.

You have lived in rental accommodation since you entered Australia in early 20XX.

Your spouse and dependent child came to Australia to be with you during the COVID-19 outbreak and have not returned to Country Z due to the global situation.

Neither you nor your spouse is a member of an Australian Commonwealth government superannuation fund.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

•   the resides test,

•   the domicile (and permanent place of abode) test,

•   the 183 day test, and

•   the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i)            Physical presence in Australia

(ii)           Nationality

(iii)          History of residence and movements

(iv)          Habits and "mode of life"

(v)           Frequency, regularity and duration of visits to Australia

(vi)          Purpose of visits to or absences from Australia

(vii)        Family and business ties to different countries

(viii)       Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruing IT 2650 - Income tax: residency - permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In your case, you have been residing in Country Z for approximately XX years and have been living with your spouse and child in Country Z. However, you returned to Australia for the purposes of seeking medical treatment for a serious illness.

Although you have a significant connection to Australia through your extended family and your income producing assets, it is considered that you only returned to Australia for a temporary period of time which was not enough to establish that you had resumed residing in Australia.

Consequently, you remained a non-resident under the resides test of residency. To apply these rules in your case, based on the facts of you have provided, you were not a resident of Australia for income tax purposes.

The domicile and permanent place of abode test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case, in the period before you relocated to Country Z, you had an Australian domicile because of your Australian citizenship. Since that time, you have been living in Country Z using long term renewable visas which is not the same as legally changing your domicile.

Consequently, you have not legally changed your domicile to Country Z and have retained your Australian domicile.

Permanent place of abode

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

In your case, you have been living in Country Z for approximately XX years and have established a permanent place of abode in that country.

Although you returned to Australia for a temporary period of time to seek medical treatment, this was of not enough significance to change the fact that your permanent place of abode was still in Country Z.

Consequently, the Commissioner is satisfied that your permanent place of abode remained outside Australia and you remained a non-resident under the domicile and permanent place of abode test.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not a resident of Australia for income tax purposes under this test as the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia during this period.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You did not meet the requirements to be a resident under this test.

Your residency status

You were not an Australian resident for taxation purposes during the income year ended 30 June 2020.

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