Edited version of private advice

Authorisation Number: 1052041209883

Date of advice: 19 October 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes for the income year ending 30 June 20XX?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You migrated to Australia in late 19XX and acquired Australian citizenship mid-19XX. You are also a citizen of Country B.

You regularly travel to Country A and spend time there with the family of your spouse.

Three years prior to leaving Australia, you travelled to Country A a number of times.

You left Australia in early 20XX and were planning to be in Country A for 12 to 18 months.

You sold your dwelling in Australian State A before leaving. You do not own another property.

You have not returned to Australia.

You are staying in your spouse's parent's home. You have been using this dwelling since 20XX for your regular visits. You also purchased furniture for the dwelling.

While in Country A, your father built a dwelling in Australian State B. Once the construction of the dwelling had finished, you intended to travel there to stay in their dwelling while your own dwelling is being built the on same block of land.

The zoning of the land enables you to build a second dwelling on the block. The block has not been subdivided and you do not have any ownership interest in it.

You have not started to build the dwelling and do not intend to do this until you return to Australia. You have not yet selected a builder, finalised the design and costing, or prepared a contract.

Once this dwelling has been built you intend to return to your normal routine of living intermittently between Country A and Australia.

As a result of the Covid-19 pandemic you have remained in Country A.

The Australian Government's website smartraveller.gov.au stated that returning to Australia from overseas was challenging in early 20XX. This included caps on the numbers of passengers coming into Australian airports.

From the start of 20XX the Australian State B's international border opened and some of the travel restrictions and requirements eased.

Australian State A opened its international and state borders in early 20XX.

Covid-19 cases in Country A peaked in mid-20XX not lowering until late 20XX. They then peaked again in mid-20XX.

The outbreaks resulted in limited internal travel in Country A, making it difficult for you to travel to the capital city.

You travelled to the capital city twice in mid-20XX to renew your passport.

You were vaccinated in late 20XX. When the borders opened it was possible to travel to Australia without quarantine, however, flight availability was limited as local lockdowns were imposed. This meant you were unable to travel for most of early 20XX.

On returning to Australia, you will need to travel to Australian State A first. However, interstate travellers into Australian State A were required to be triple vaccinated. You did not receive your booster until mid-20XX.

You are in Country A on a temporary visa. You have had this extended on a number of occasions.

You have active bank accounts, Term Deposits, shareholdings and superannuation in Australia. No bank accounts have been closed since you left.

You made further investments and a contribution to your super while overseas.

You also have bank accounts in Country A.

Your expenses in Country A are paid from your Australian credit card and from your Australian bank accounts.

You earn a small amount of interest in Country A.

Your mail was redirected from an address in Australian State A to an address in Australian State Bas it was your intention to move to Australian State B.

You purchased a motor vehicle to use when you are in Country A.

You have obtained a driver's license in Country A. Your Australian license is due to expire in early 20XX.

You have changed your address with the Australian Electoral Commission and are registered as an overseas voter.

Your health insurance policy in Australia was cancelled mid-20XX.

You don't have any dependents.

You have not established any professional, social or sporting connections in Country A.

You have never been employed by the Commonwealth of Australia. You are not a member of the Public Sector Superannuation Scheme or an eligible employee in respect of the Commonwealth Superannuation Scheme.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 991-5

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Overview of the law

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 Draft Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals. 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.

Application to your situation

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

•         you left Australia for Country A in early 20XX

•         you have not yet returned to Australia

•         you have spent X years living in Country A

•         you are staying at your spouse's parent's dwelling where you regularly stay in Country A and which you have furnished

•         you sold your property in Australia in before leaving

•         you have chosen to stay in Country A even though the borders have reopened, and you can now return to Australia

•         your movements and habits were consistent with having a settled routine in Country A

The Commissioner considers that you are not a resident of Australia under the resides test for the period 1 July 20XX to 30 June 20XX.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

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 Country B and your domicile of origin is Country B. You immigrated to Australia in late 19XX and became an Australian citizen in mid-19XX.

It is considered that you abandoned your domicile of origin in Country B and acquired a domicile of choice in Australia. You were not entitled to reside in Country A indefinitely and you only held a temporary visa which was valid until late 20XX.

Therefore, your domicile is 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 is outside Australia:

•         you left Australia for Country A in early 20XX

•         you have not yet returned to Australia

•         you are staying at your spouse's parent's dwelling where you regularly stay in Country A and which you have furnished

•         you sold your property in Australia in before leaving

•         you have chosen to stay in Country A even though the borders have reopened, and you can now return to Australia

•         your movements and habits were consistent with having a settled routine in Country A

The Commissioner is satisfied that your permanent place of abode is outside Australia.

Therefore, you are not 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 have not been present in Australia for 183 days or more during the 20XX income year. Therefore, you are not a resident under this test.

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

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the year ended 30 June 20XX.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).