Edited version of private advice

Authorisation Number: 1052101266406

Date of advice: 16 May 2023

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes from XX Month 20YY to XX Month 20YY?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 20YY

The scheme commenced on:

XX July 20YY

Relevant facts and circumstances

You were born in Country A on XX Month 19YY.

You are a citizen of Country A and of Country B. You and Parent A were born in Country A and Parent B was born in Country B.

Prior to XX Month 20YY, you were living in Country A leaving only for holidays.

On XX Month 20YY you travelled to Australia to live and work in a State for X months. You finished your employment on XX Month 20YY. You holidayed in Australia until XX Month 20YY when you returned to Country A.

While living and working in Australia, you are staying in a share house at an address with people you met on flatmates.com, you use this as your mailing address. Your name is not on the lease.

You are employed by a Company. Their office is at an address in Australia. They also have a branch in Country A which is where you were employed before travelling to Australia.

You terminated your contract with the Country A branch when you took up the position in a State, the company is flexible and will allow you to return to your previous position in Country A if you want to.

You returned to Country A for two weeks over Christmas 20YY.

You have not and do not have plans to apply for an extension to the visa that allows you to work in Australia.

Your family did not accompany you to Australia.

In Australia, you maintain social relationships with friends you work with, occasionally play social sport and have a membership at the local swimming pool.

You are working for the same company in Australia that you were in Country A, and you maintain professional connections with colleagues in Country A.

You were living in a share house in Country A, you terminated your lease in Country A before moving to Australia.

You have a Country A drivers license and bank accounts.

You have a bank account in Australia.

You brought a lot of your personal belongings to Australia, including clothes, home decorations, photos and games and left other belongings and clothes at your parent's house in Country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Detailed reasoning

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.

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

•         You lived and worked in Australia for X months, then holidayed for X months before returning to the Country A.

•         You did not travel to Australia in the period before the ruling period, and you will live in the Country A in the preceding period.

•         Your intentions were to stay for the period of your employment contract, with an additional X months of travel. When you arrived in Australia, you did not intend to live here indefinitely

•         You have stayed in one place since arriving in Australia, taking a room in a share house for X months.

•         Your family remains in Country A.

•         You can return to your job in Country A at any time.

•         You have a Country A drivers license and have stored some of your belongings and clothing at your parents house while you are in Australia.

You are not a resident of Australia under the resides test for the period from XX Month 20XX to XX Month 20YY.

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 A and your domicile of origin is Country A.

It is considered that you did not abandon your domicile of origin in Country A and acquire a domicile of choice in Australia. You were not entitled to reside in Australia indefinitely and while living in Australia, you only held a work permit which was valid until you ceased employment.

Therefore, your domicile is Country A and 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 been in Australia for 183 days or more in the 20YY-YY 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 is outside of Australia:

•         You lived and worked in Country A before coming to Australia.

•         Your period of living and working in Australia is temporary, around X months plus X months of travel.

•         You do not intend to live in Australia.

•         You can return to your role in Country A at any time.

•         Your family remains in Country A.

•         You have maintained a Country A drivers license and bank accounts.

•         The belongings you did not bring to Country A you have stored at your parents house.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant 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 intend to take up residence in Australia:

•         Your intentions were to stay for the period of your employment contract, with an additional X months of travel. When you arrived in Australia, you did not intend to live here indefinitely

•         You worked in Australia for X months plus X months of travel.

•         You leased a room in a share house in Australia for approximately X months.

•         Your employment contract is for X months.

•         You have stored your belongings that you didn't bring to Australia at your parent's house in Country A.

•         You returned to Country A over Christmas to visit your family.

Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia for the relevant 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

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 ending 30 June 20YY.

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