Edited version of private advice

Authorisation Number: 1051815582994

Date of advice: 15 March 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes in the 2021 financial year?

Answer

Yes

This ruling applies for the following period:

Year ending 30 June 2021

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

You are an Australian citizen who was born in Country B and who departed Australia in 20XX with your spouse and children to live and work in Country A. You and your family have lived there since departure.

Since then you have entered or left Australia as a visitor or temporary entrant. You return to Australia to visit relatives and check your investment property.

You are a permanent resident of Country A.

You are employed in Country A and have a full-time position. You are employed by Company A, a Country A company. You contribute to a superannuation account with Company B in Country A. Your salary is approximately $XXX in Australian currency.

Your employment contract was signed in Country A and the services you provide under this contract are performed in Country A. You are temporarily working from Australia during the current Covid pandemic by remote working.

You rent an apartment in Country A which has a two-year lease agreement.

You opened a bank account in Country A which acts as your regular transactional account and received your employment income. You meet everyday expenses from this account as well as utility costs such as water, electricity and internet charges.

You have joined various local social, sporting and professional clubs and associations based in Country A.

You have an established routine and lifestyle in Country A and have joined a local recreation club which provides a gym and swimming facilities.

You have a joint bank account in Australia with your spouse and a jointly owned investment property in Australia which has been held as an investment property. You have no other Australian assets.

Due to local difficulties in Country A in 20XX you elected to temporarily relocate your children to Australia to attend school. Your spouse and children returned to Australia at the start of 20XX to enable the children to be enrolled in Australian schools.

Under normal circumstances your spouse would have returned to Country A to live with you if they had been successful in arranging a boarding school arrangement or full-time nanny. However, given the current situation, your spouse is likely to remain in Australia with the children for the foreseeable future.

Your spouse has rented an apartment in Australia where you and your family currently reside.

You perform your employment duties in Country A. However, during the Covid pandemic your employer allowed all employees to work remotely from any location they found to be safe.

At present Country A imposes a quarantine lockdown for arriving travellers so you have been obliged to quarantine for XX days in Country A in recent months. As you suffer from a medical condition, you find such quarantine aggravates your condition, so you are reluctant to re-enter quarantine unless necessary.

For this and other reasons you elected not to return to Country A after arriving in Australia in late-20YY. You are well able to work remotely, wish to avoid unnecessary quarantine and hence have stayed in Australia during the Covid pandemic.

Your current plans are to return to Country A shortly. After this you do not plan to return to Australia for at least X months. You do not intend to return to Australia to reside permanently.

If Covid travel restrictions continue to apply in the 2021/2022 financial year you plan to travel to Australia on X occasions, each time for a period of four weeks, of which two weeks will be spent in quarantine and two weeks will be with your family. You estimate that under this scenario, you might spend approximately YY days in Australia.

If Covid travel restrictions are lifted or relaxed somewhat, you are required to be physically present in Country A so you will ask your family to travel to Country A to be with you during school holidays. If the Covid situation improves in Country A, your spouse may return to be with you while the children will board at school in Australia. You estimate that under this scenario, you might spend approximately ZZ days in Australia as you will still travel to Australia on X occasions but for reduced time in Australia.

You lodge local Country A tax returns.

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 Australia who departed Australia with your family in 20XX to live and work in Country A.

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 departure was to work in Country A on a permanent and indefinite basis. You have established a permanent presence there where you stay in rental accommodation but have become a permanent resident.

You have also established professional, social or sporting connections in Country A and have withdrawn from those in Australia - apart from your family relationships. Your living arrangements in Country A are rental accommodation with personal effects.

However, since your family moved back to Australia, you have maintained strong family ties with Australia. Your spouse maintains a rented home in Australia where you stay when in Australia.

During the ruling year, you have re-established a strong association with Australia since the start of the Covid pandemic by electing to stay in Australia and not returning to Country A as soon as you were able to do so.

•   Your family are in Australia and you have stayed with them during your time there in the ruling year.

•   Your family intend to remain in Australia for the foreseeable future with no current plans to join you permanently in country A.

•   Your pattern of travel shows you have been visiting Australia for family reunions and checking on your investment property until recently. However, with the unexpected Covid pandemic travel restrictions you have elected to remain in Australia longer than anticipated for health reasons and because you are able to work remotely.

•   You have been in Australia for more than 183 days in the 2021 year which is a considerable period of time in the year.

•   You have elected to stay in Australia due to the inconvenience of quarantine and your medical concerns. In doing so you have established a new pattern of travel where you have effectively relocated your life to Australia during the ruling year.

Taken together, the facts show that you are residing in Australia under ordinary concepts during the ruling year.

Therefore, you are a resident for taxation purposes under this test.

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 Australia. You have left Australia and have chosen to live in Country A. You are a permanent resident of that country. However, you have come back to Australia during to Australia during the ruling year and re-established a connection to Australia.

This would appear to indicate that your domicile is Australia in ruling year as you were already a citizen. However, the Commissioner is satisfied during the ruling year that you have a permanent place of abode in Country A.

You usually reside in Country A in an apartment you lease on a 2-year lease. You are a permanent resident of that country. Your employment is in Country A however during the Covid pandemic your employer has allowed you to work remotely. You state you have no intention of residing in Australian permanently and have been in Country A since 20XX. These factors indicate that you have a permanent place of abode overseas.

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 have been in Australia for 183 or more days in this financial year however, the Commissioner accepts that your usual place of abode is outside Australia and you have no intention of returning to Australia to take up residence.

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

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 one 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 2021 financial year.

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