Edited version of private advice

Authorisation Number: 1052112408867

Date of advice: 28 April 2023

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes?

Answer

Yes.

Question 2

Are you a temporary resident of Australia for tax purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 202X

Year ending 30 June 202X

Year ending 30 June 202X

The scheme commenced on:

1 July 202X

Relevant facts and circumstances

You are a citizen of Country X and you moved to Australia.

You have lived your whole life in Country X except for when you were an exchange student.

You have a 2-year Temporary Skill Shortage visa, subclass 482 Australian visa.

You travelled to Australia to work fulltime.

You will continue to work in Australia until your work contract expires. The contract may be extended if the program you work on gets renewed funding. If your contract is prolonged, you may wish to continue to stay in Australia.

You are joined in Australia by your partner.

You are renting an apartment in Australia. The rental agreement is for one year.

You and your partner own an apartment together in Country X with a joint mortgage. The apartment is rented with the rental agreement running for the duration of your visa.

Your apartment has been rented out fully furnished with your personal effects stored at your parents' house.

You have several bank accounts in Country X. These are income accounts, savings account, and funds account. You also have savings accounts and income/bills accounts in Australia.

You have not applied for permanent residency nor citizenship since arriving in Australia.

You initially had a leave of absence from your job at Country X, but you have resigned and given notice that you will not return.

You do not maintain any professional, social or sporting connections in Country X. You keep in touch with friends, family and old colleagues through phone and social media.

Neither you nor your partner are employees of the Australian Commonwealth Government for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Reasons for decision

Question 1

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 4 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:

• Physical presence - You entered Australia on DD/MM/YYYY and plan to remain in Australia until your work contract expires.
• Intention - You entered Australia on DD/MM/YYYY with the intention of residing here. You have rented an apartment in Australia that covers that first 12 months of your stay.
• Family ties - Your partner moved to Australia with you. Your parents live in Country X.
• Business and employment ties - You came to Australia to take up employment. You initially had a leave of absence from your job in Country X but you have now resigned and given notice you will not return.
• Social arrangements - Your partner moved to Australia with you to live. You do not maintain any social or sporting connections in Country X.
• Living arrangements - You have rented an apartment to live while in Australia. You continue to own your apartment in Country X and it is rented until the expiry of your visa.
• Maintenance and location of assets - You have rented out your apartment in Country X fully furnished. You are storing your personal effects at your parents' house. You currently have bank accounts in both Country X and Australia.

You are a resident of Australia under the resides test.

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, your domicile of origin is Country X. We consider that your domicile remains as Country X 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 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.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income years.

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.

While you have been in Australia for 183 days or more during the income year, the Commissioner is satisfied that you do not intend to take up residency in Australia as your visa does not allow you stay in Australia permanently, you have not applied for citizenship or permanent residency and you have stated that you do not intend to reside in Australia permanently. Therefore, you are not a resident of Australia under the 183-day 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

You satisfy the resides test of residency and so are a resident of Australia for income tax purposes from XX XXX 20XX.

Question 2

Temporary resident of Australia for tax purposes

An individual is a temporary resident for taxation purposes if:

• they hold a temporary visa granted under the Migration Act 1958, and
• they are not an Australian resident within the meaning of the Social Security Act 1991, and
• they do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.

The Social Security Act 1991 defines an Australian resident as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa, or a protected special category visa holder who was in Australia on or before 26 February 2001.

Based on the facts you have provided you are a temporary resident of Australia for taxation purposes because:

• you hold a temporary visa issued under the Migration Act 1958, being Temporary Skills Shortage Visa (subclass 482), and
• neither you nor your spouse are Australian residents within the meaning of the Social Security Act 1991.

As a temporary resident of Australia, you generally only need to declare:

• Income you derived from Australian sources
• any income you earn from employment or services performed overseas while you are a temporary resident of Australia.

Certain capital gains may also be exempt from Australian tax for temporary residents.

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).