Edited version of private advice

Authorisation Number: 1051799755975

Date of advice: 27 January 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes for the 20XX/20XX financial year?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a Country A citizen who visited Australia in late 20XX while you were considering the possibility of migrating to Australia. You initially visited Australia earlier and began to consider the possibility of migration.

You returned to Australia the next year, with your family. During this visit you met with an Australian migration agent who assisted you to apply for an Australian visa. You will be eligible to apply for Australian citizenship after operating an Australian business for 2 years.

You were issued an Australian visa in early 20XX.

You returned to Australia in mid-20XX, departing a few weeks later. During this visit you met with an accounting firm to establish an Australian company.

You returned to Australia later the same year, departing a few weeks later. During this visit you established the Australian company, Company A, a sole director company.

You returned to Australia later the same year with your spouse, departing a few weeks after. During this visit you established business operations for your Australian company.

You returned to Australia later the same year, departing late that year. During this visit you continued to establish the business operations of your Australian company.

You returned to Australia early in the next year, departing a few months later. During this visit you also continued to establish the business operations of your Australian company.

In total you spent over 183 days in Australia in the 20XX financial year and have been offshore since early 20XX. Hence you have not been in Australia in the 20XX financial year.

In between visits to Australia you returned to Country A to raise funds, negotiate with business suppliers and visit family and friends.

You have an intention to live in Australia permanently and to become an Australian citizen.

While living in Australian you have lodged tax returns in Country A as a tax resident of Country A.

You are the Director of a private company in Country A. You receive director's fees from this company.

Your spouse is employed in Country A and has not yet joined you in Australia. Your spouse intends to join you in Australia once a permanent resident's visa is granted for your family.

Your child is now a full-time student who studies in Australia. They joined you in early 20XX. They now live with you in Australia in your leased residence. You leased this property for 1 year.

You enrolled in an Adult Migrant English Program with a local Institute. The course began in late 20XX. It is a very long course. This course has necessarily been suspended due to the Covid-19 pandemic however, you intend to continue your studies when possible and become a fluent English speaker. You are doing this so that you may better establish yourself in the local community and live in Australia without barriers.

After visiting Australian farms, you wish to live on a local farm. Initially you purchased a vacant block of land but then sold after a short time without building a home. You then purchased a farm. You intend to use this farm solely as a personal residence.

You have established Australian bank accounts.

You also have a bank account in Country B and you jointly own a residential home in Country A; which is occupied by your spouse when you are away.

You returned to Country A in early 20XX and have been unable to return due to Covid-19 travel restrictions. You intend to return as soon as this becomes practical given the current travel issues. During this trip your daughter remained in Australia as a boarder at school.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The terms 'resident' and 'resident of Australia', regarding an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

•         the resides test,

•         the domicile test,

•         the 183-day test, and

•         the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

When considering the resides test the following factors are normally considered:

•         physical presence

•         intention or purpose

•         family or business ties

•         maintenance and location of assets

•         social and living arrangements.

In your case, you are a citizen of Country A who has travelled to Australia on several occasions since 20AA. In more recent years you have initiated the process required to immigrate to Australia.

This subject is addressed in Taxation Ruling 98/17 (TR98/17) Income tax: residency status of individuals entering Australia. At paragraphs 20 and 21 it states -

20. All the facts and circumstances that describe an individual's

behaviour in Australia are relevant. In particular, the following factors

are useful in describing the quality and character of an individual's

behaviour:

•         intention or purpose of presence;

•         family and business/employment ties;

•         maintenance and location of assets; and

•         social and living arrangements.

21. No single factor is necessarily decisive and many are

interrelated. The weight given to each factor varies depending on

individual circumstances.

Your intention upon arrival in Australia was to live in Australia permanently. You formalised this by applying for a migration visa during your visit to Australia in 20YY.

You have maintained strong family ties with Country A and nurtured these ties with regular visits to visit family and your wife who remains employed in Country A and unable to join you and your daughter in Australia. You also jointly own a home in Country A where your wife lives.

Your living arrangement in Australia is rental accommodation only. However, you have recently purchased a farm in Australia as a residence.

You are a resident for tax purposes under the resides test since 20YY, after arriving in Australia from Country A, as you are living in Australia with your family.

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are a citizen of Country A. You have travelled to Australia and have initiated the process to apply for permanent residency. Further, you intend to apply for Australian citizenship.

You have not yet been granted permanent residency in Australia.

You have not abandoned your domicile in Country A and acquired a domicile of choice in Australia as you do not yet have the right to reside permanently in Australia. This is because you have not yet actively applied for, nor been issued, a visa that will allow you or to remain there indefinitely.

You are not a resident of Australia under this test.

The 183 days test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You spent XXX days in Australia in the 20ZZ financial year and have been offshore in the 20XX financial year.

You jointly own a residential home in Country A; which is occupied by your wife when you are away. You also own a farm in Australia where you wish to live with your daughter, although this pattern of living has been interrupted recently by the Covid pandemic. You intend to return to this pattern of living in Australian as soon as the current travel restrictions are relaxed.

Your usual place of abode is your farm in Australia as this is where you and your family wish to live once you can return to Australia. It is also where your wife will live when you are granted a permanent resident visa.

Until you applied to migrate to Australia your usual place of abode was your jointly owned residential home in Country A. However, since applying to migrate to Australia your usual place of abode has changed to your farm in Australia where you wish to live with your family, once the current pandemic travel restrictions are lifted.

You have made substantial efforts to establish residency in Australia and have demonstrated that you intend to take up residence by engaging a migration specialist, applying for an immigration visa, bringing your family to live with you in Australia, buying properties, establishing a local business and undertaking substantial study to better fit you for living in Australia.

You are a resident for tax purposes under this test as you intend to take up residence in Australia.

The superannuation test

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

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person.

You are not a resident for tax purposes under this test.

Residency Status

As you satisfy two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for income tax purposes in the 2020 financial year.

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