Edited version of private advice

Authorisation Number: 1051811638184

Date of advice: 2 June 2021

Ruling

Subject: Residency

Question

Did you become a resident of Australia for taxation purposes on XXXX 20XX when you relocated to Australia from a foreign country?

Answer

Yes

This ruling applies for the following period(s)

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on

1 July 20XX

Relevant facts and circumstances

Citizenship

Your country of origin is Australia and you are an Australian citizen.

Your spouse and children are Australian citizens and have been residing in Australia since 20XX.

Employment arrangements

In 20XX you moved to a foreign country on a permanent assignment with your first employer.

In 20XX, having spent several years working in a foreign country with your first employer, you commenced employment with your second employer, also in a foreign country. In your role at the second employer you supported company projects in Asia.

While you were working in a foreign country, you were paid via a foreign country payroll into your foreign country bank account with no recharge costs back to Australia.

It was your intention at the time of commencing employment with your second employer to continue working in a foreign country on a permanent basis.

You decided to seek a transfer to Australia due to family matters which required your support. You requested a transfer in 20XX for family reasons and there were conversations with your employer through mid-20XX. Your employer agreed to transfer you to Australia in late 20XX. You were transferred to the Australian office and payroll.

Your new role is not likely to include international travel following your transfer to Australia on.

You and your spouse are not members of a Commonwealth Superannuation Fund.

Accommodation

You disposed of your house in Australia in some years ago after moving to a foreign country.

In a foreign country, you had a long-term rental agreement which ended on XX XXXX 20XX. This rental agreement was in your name.

After XXXX 20XX, you moved in with a colleague who was single and had a lease on a two-bedroom apartment in a different location in the same country. While you were not added to the colleague's lease, you contributed to rent and housekeeper costs until you moved back to Australia in XXXX 20XX. At the time, you updated your address with the government of a foreign country, banks and telco.

On relocating to Australia from a foreign country in early 20XX, your spouse and children stayed in moved into rental accommodation. They terminated their temporary rental upon moving into the home you purchased in later in the year.

You purchased a property in Australia. On this date, your spouse and children began residing at this property while you remained residing in a foreign country for employment commitments purposes.

You obtained a mortgage with a Bank who were advised that, although the title of the house was in your name, only your spouse and children would be residing there while you were still living and working in a foreign country.

When you travelled to Australia, you stayed with your spouse and children in their temporary accommodation and occasionally stayed with your parents.

When you travelled to Australia after your family returned, you stayed in the Australian home you purchased. On some occasions, you stayed with your parents.

You began residing in your home in Australia in late 20XX following your work transfer.

Australian connections

You have a spouse and children who lived with you in a foreign country from 20XX to 20XX.

Your spouse and children relocated to Australia in 20XX due to health concerns in your spouse's family and so the children could attend school.

Your family had intended to return to join you in a foreign country after the children completed high school. However, worsening family health required you to seek a transfer to Australia. You requested a transfer in mid 20XX for compassionate reasons and there were conversations with your employer through mid-20XX. Your employer agreed to transfer you to Australia.

Your parents live in Australia.

You began paying private health insurance in late 20XX.

You redirected your mail to your Australian address when you left foreign country to return to live in Australia. Prior to this date, all mail was sent to your home in a foreign country.

Foreign country connections

You relocated from Australia to a foreign country in 20XX on a permanent assignment with your first employer. At this time, you ceased to be a resident of Australian tax purposes.

In 20XX, you ceased employment with your first employer and commenced employment with your second employer.

You had a long-term rental agreement in a foreign country which ended on mid 20XX. This agreement was in your name. After mid 20XX, you moved in with your colleague. You contributed towards the rent and other costs.

While residing in a foreign country, you had a phone that was registered to a foreign country number.

While working in a foreign country, you were paid via a foreign country payroll into your bank account.

Your job prior to your move back to Australia was primarily located in a foreign country.

You lodged your Year of Assessment (YA) 20XX (income year 20XX) tax return as a foreign country tax resident.

You remained a resident of a foreign country up to your date of departure on XXXX 20XX.

Travel movements

Initially your plan was to visit Australia during major holidays and limited visits for birthdays, etc. However, during the year there was a combination of holiday and personal/compassionate visits, which became more frequent for the following reasons:

• During the start of 20XX, your family had difficulty finding rental accommodation and you needed to help them with moving and settling in.
• Your children started school and you had additional visits to support them, prepare and visit them on holidays and major occasions.
• Your relative relapsed with a medical condition and there was a need for an increased number of family visits to help your family.
• Other family members required you to visit them during this time.
• An elderly relative had multiple surgeries.
• A family member was injured in an accident and you had to travel back for the treatment in addition to supporting your spouse who was working throughout.
• All of these situations meant for the health and wellbeing of your family you needed to fly in and out frequently to support them. Many of your trips into Australia were 24-72 hours as you needed to return to work overseas. You made a total of X trips between the time your spouse and children re-located from a foreign country to Australia and mid 20XX (when you re-located from a foreign country to Australia).
• Based on the movement details you have supplied, you spent more than 183 days in Australia during the income year ended 30 June 20XX.
• Although your spouse and children moved from a foreign country to Australia in 20XX, your initial intention was not part of a larger scheme for you to eventually move to Australia.
• You continued to eat, sleep, carry out your employment duties and maintained a lease in a foreign country for more than X years.
• You faced difficulty in obtaining a mortgage in Australia due to your foreign employment contract and so you arranged for the mortgage contract to stipulate that your intention in purchasing a home in Australia was for your spouse and children, not you.
• Your intention only changed (in mid 20XX) due to compassionate reasons (family ill-health and which required your support).
• It was then that you began informal discussions with your foreign country employer in mid-20XX.
• In later 20XX your employer supported your move and transferred you to Australia.
• Your overall intention was to move to Australia, then these discussions with your employer would have been held prior to you family moving to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

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

Reasons for decision

Summary

You became a resident of Australia for taxation purposes from XXXX 20XX.

Detailed reasoning

Residency for tax purposes

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997).

The terms resident and resident of Australia, in regard to 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. These tests are:

1. the resides test
2. the domicile test
3. the 183-day test
4. 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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

1. The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014)the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word:

bears its ordinary English meaning, which is "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place".

When considering whether someone resides in Australia the following factors are usually considered:

• physical presence
• intention or purpose
• family or business ties
• maintenance and location of assets
• social and living arrangements

In your case:

• You continued to live and work in a foreign country when your spouse and children moved back to Australia.
• You decide to seek a transfer to Australia due to family ill health which required your support. You requested a transfer to Australia for compassionate reasons and there were discussions with your employer through mid-20XX. Your employer agreed to transfer you to Australia in XXXX 20XX. You were transferred to the Australian office and payroll on mid 20XX.
• You made numerous short visits to be with your spouse and children as well as with your parents. On these visited you stayed with your spouse and children first in their rented accommodation and then in the home you purchased in 20XX.
• You spent most of the period in a foreign country due to your employment obligations living in the accommodation which had been your home there until mid 20XX when you moved in with your colleague.
• You continued to lodge tax returns in a foreign country.
• Your intention was always to re-join your spouse and children in Australia just as soon as your job was relocated.

In view of the above, the Commissioner accepts that your behaviour in a foreign country reflected a degree of continuity, routine and habit that was consistent with your residing there. Your intention was to remain permanently in a foreign country from the time you left Australia until you were transferred back to Australia.

Accordingly, you were not an Australian resident for taxation purposes under the resides test prior to when you relocated to Australia.

2. The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

The concept of Domicile was discussed in the Marriage of Emson (1980) 5 Fam LR 662:

A person may abandon his domicile of origin and acquire a domicile of choice but in order to establish a change of domicile there must be clear evidence of an intention to abandon the domicile of origin and to make a new permanent home in the country to which the person has removed. In my view a person cannot be said to acquire a new domicile until there has been a firm intention of establishing a permanent residence in another country and also the confirmation of that intention by actual residence in that country.

Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression:

Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster... Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word - as an ancient proverb puts it: "what you do speaks so loudly that I cannot hear what you say."

Further, in Fremlin v Fremlin (1913) 16 CLR 212; [1913] HCA 25 (Fremlin v Fremlin) Per Barton J:

In Winans v. Attorney-General, Lord Halsbury L.C. said:-"Now the law is plain, that where a domicile of origin is proved it lies upon the person who asserts a change of domicile to establish it, and it is necessary to prove that the person who is alleged to have changed his domicile had a fixed and determined purpose to make the place of his new domicile his permanent home." In the much older case of Udny v. Udny Lord Westbury said: -"Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicile, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicile is established." Lord Curriehill in the case of Donaldson v. M'Clure says: -"To abandon one domicile for another means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges and immunities which the law and constitution of the domicile confer on the denizens of the country in their domestic relations, in their business transactions, in their political and municipal status, and in the daily affairs of common life, but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence." Lord Halsbury, in Marchioness of Huntly v. Gaskell, expressed strong approval of Lord Curriehill's judgment, quoting this passage.

You are a citizen of Australia. Your domicile of origin is Australia because you were born here. As you did not adopt another country as your domicile of choice, your domicile remains Australia.

Permanent place of abode

The expression permanent 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 persons dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be everlasting or forever. It does not mean an abode in which the person intends to live for the rest of his or her life. It should be contrasted with a temporary or transitory place of abode outside of Australia.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650) outlines some of the factors considered relevant in determining a person's place of abode. These are summarised at paragraph 23 in the ruling as:

• the intended and actual length of the individuals stay in the overseas country (a period of two years or more in a country would generally be regarded as a substantial period)
• any intention either to return to Australia at some definite point in time or to travel to another country
• the establishment of a home outside of Australia
• the abandonment of any residence of place of abode the individual may have had in Australia
• the duration and continuity of the individual's presence in the overseas country, and
• the durability of association that the individual has with a particular place in Australia.

You lived and worked in a foreign country from 20XX on a permanent assignment you're your first employer.

In 20XX, you commenced employment with your second employer, also in a foreign country. You were transferred to the Australian office and payroll of your second employer in mid 20XX.

In Australia you lived with your spouse and children in a house which you owned. You disposed of this house in 20XX after moving to a foreign country.

In a foreign country, you lived with your family in rented accommodation. You had a long-term rental agreement which ended in 20XX. This rental agreement was in your name.

After that you moved in with your colleague on his existing lease. You were not added to the colleague's lease. You contributed to rent and housekeeper costs until you moved back to Australia.

Your spouse and children relocated from a foreign country to Australia. Initially, they lived in rented accommodation. later you purchased a property in Australia. Your family began residing there while you remained in a foreign country.

You eventually relocated from a foreign country to Australia and moved into the property with your family.

Your intention was to remain permanently in a foreign country from the time you left Australia right up until you were transferred back to Australia. You had a permanent place to live in a foreign country first in the dwelling you rented and then in shared accommodation.

The Commissioner is satisfied that you had a permanent place of abode outside of Australia until you relocated to Australia.

3. The 183-day test

Where a person is present in Australia for 183 days during a 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.

During the income year ended 30 June 20XX you made numerous trips to Australia from a foreign country which totalled more than 183 days. As you were physically present in Australia for more than 183 days in the 20XX income year, you would be considered to be a resident of Australia under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia and you did not intend taking up residence in Australia.

In a foreign country, you had a long-term rental agreement which ended in 20XX. This rental agreement was in your name. Then you moved in with a colleague. Although your name was not on the lease you contributed to rent and housekeeper costs and used it as your mailing address. This arrangement continued until you moved back to Australia to live and work.

The phrase 'usual place of abode' should not be given the same or similar meaning as the phrase 'permanent place of abode'. The terms 'usual' and 'abode' should be given their ordinary and natural meanings.

The Macquarie Dictionary gives the following definitions:

•        usual means habitual, customary

•        abode means a dwelling, habitation.

The shorter Oxford Dictionary gives the following definitions:

•        usual means current, ordinary, customary

•        abode means habitual residence, place of habitation, house or home.

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 used by you when physically present in a country. Your place of abode need not be fixed but must exhibit the attributes of a place of residence or a place to live, as contrasted with an overnight, weekly or monthly accommodation of a traveller.

In your case, during the income year ended 30 June 20XX you were present in Australia for more than 183 days. The amount of time in Australia was due to significant family (health related) circumstances. However, the Commissioner is satisfied that your usual place of abode remained outside Australia. A foreign country remained your habitual or ordinary residence, your place of habitation where you lived. Also, your intention was to remain permanently in a foreign country up until you were transferred back to Australia. You were not a resident under this test for the 20XX income year.

During the income year ended 30 June 20XX, the Commissioner is satisfied that your usual place of abode continued to remain outside Australia until when you were transferred back to Australia and you took up residence with your family into the house you own. From this date until 30 June 20XX you were physically present in Australia for more than 183 days.

You are a resident of Australia for taxation purposes under the 183-day test from your return to live and work in Australia.

4. The superannuation test

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

In your case, you are not a member of the CSS or the PSS or a spouse of such a person, or a child under 16 of such a person.

You are not a resident of Australia under this test either before or after you moved back to Australia from a foreign country.

Your residency status

You have not passed any of the tests of residency for the period prior to when you relocated to Australia from a foreign country.

You became a resident of Australia for taxation purposes when you move back to Australia from a foreign country to live and work.

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