Edited version of private advice

Authorisation Number: 1052017195336

Date of advice: 11 August 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes for the relevant period?

Answer

Yes.

This private ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia and are a citizen of Australia.

You are also a citizen of two other countries.

You arrived in Australia on XXXX with your spouse and dependant after previously living in country A.

You left country A as the country was not safe during the COVID19 pandemic.

You were employed by an Australian company and worked for the country A office.

Whilst you were living in country A, you and your family lived in an apartment paid for by your employer.

Whilst in country A you paid taxes and lodged tax returns in country A.

You continued to work for the country A office remotely whilst in Australia and begun paying taxes in Australia.

You rented an apartment in Australia on a month by month basis jointly with your spouse.

Your spouse is not an Australian citizen.

Your employer continued to pay the rent for the property in country A whilst you were in Australia as you intended to return to country A when it was safer.

You did not return to country A as your employment project ceased.

You obtained new employment with contracted to the Australian Embassy in country B.

While in Australia your dependant attended a childcare facility two days a week.

You purchased an investment property jointly with your spouse prior to departing Australia.

You did not live in this property.

The property is being rented for $XXXX a month managed by real estate agency.

You hold an Australian bank account as well as a Superannuation account.

You departed Australia on XXXX to country B where you are currently living and working.

Your spouse and dependant are in country B where you rent a home and the rent is being paid by your employer.

You and your spouse do not own any property outside Australia.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

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 IT 2650 Income tax: residency - permanent place of abode and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

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 ... [W]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 ordinary concepts test is 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: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

TR 98/17 explains that an individual may be considered a resident under the resides test if their behaviour while they are in Australia is such that they exhibit a degree of continuity, routine or habit that is consistent with a person residing in Australia according to the ordinary meaning of the word 'reside'.

As a broad principle, where a person has a settled routine for six months or more (for example, the person has stayed in one place or has been with one employer for six months at the same location) they may satisfy the resides test. The period of time of the settled routine need not be confined to one financial year. As long as the pattern of behaviour is exhibited the individual may be regarded as being a resident from the time of their arrival.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•         Physical presence - you have been physically present in Australia since XXXX until XXXX.

•         Intention or purpose - your stated that your stay in Australia was temporary due to the COVID19 pandemic intending to return to country A..

•         Behaviour - you lived in the same property whilst in Australia and this accommodation was on a month to month lease allowing you to cease the lease at short notice. Your dependant was enrolled into an Australian childcare facility. Your behaviour while in Australia was such that you exhibited a degree of continuity, routine or habit that is consistent with a person residing in Australia.

•         Family and business/employment ties - your relatives live in Australia. Your spouse and dependant arrived in Australia with you on the XXXX and both departed Australia with you on XXXX. Your employment income is from an Australian source.

•         Maintenance of assets - you hold an Australian bank account and a superannuation account. You also purchased a property in Australia to use as an investment property and have never lived in this property. You do not own any other assets outside Australia.

•         Social and living arrangements - You, your spouse and your dependant were not enrolled into sporting or social activities or clubs whilst in Australia.

You are a resident of Australia under the resides test for the relevant period.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

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 are an Australian citizen. You are also a citizen of two other countries.

There is insufficient evidence available for the Commissioner to determine whether you acquired a domicile of choice in any other country.

Therefore, it is considered that your domicile is still 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] FCA 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:

a)    the intended and actual length of the taxpayer's stay in the overseas country;

b)    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;

c)    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;

d)    whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)    the duration and continuity of the taxpayer's presence in the overseas country; and

f)     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

We have taken the following into consideration when deciding whether your permanent place of abode was outside Australia:

•         Although you arrived in Australia with the intention of only being here temporarily and continued to maintain your residence in Country A, you were ultimately unable to return to Country A.

•         You lived with your family in rented accommodation in Australia for over 12 months and also worked in Australia for that period

•         For the period you were in Australia, you had not definitely abandoned, in a permanent way, living in Australia.

The Commissioner is not satisfied that your permanent place of abode was outside Australia for the relevant period.

Therefore, you are a resident of Australia under the domicile test.

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 were not present in Australia for 183 days or more during the XXXX income year. Therefore, you are not a resident under this test for the XXXX income year.

You were in Australia for 183 days or more in the XXXX income year. 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.

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.

Application to your situation

We have taken the following into consideration when deciding whether your usual place of abode was outside of Australia:

•         You arrived in Australia with the intention to be here temporarily and continued to maintain your residence in Country A. However, you ultimately did not return to Country A.

•         You lived with your family in rented accommodation in Australia for over 12 months and also worked in Australia for that period

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia during the 20XX income year.

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

We have taken the following into consideration when deciding whether you intended to take up residence in Australia:

•         You arrived in Australia with the intention to be here temporarily and continued to maintain your residence in Country A.

Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia for the 20XX income year.

You are not a resident under this test for the 20XX income year.

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

You satisfy the resides and domicile tests of residency and so are a resident of Australia for income tax purposes for the relevant period.

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