Edited version of private advice

Authorisation Number: 1052236002056

Date of advice: 10 May 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes from Date one to Date two?

Answer 1

Yes.

Question 2

Are you eligible for a full main residence exemption on disposal of the Property?

Answer 2

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

Date one

Relevant facts and circumstances

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

Prior to arriving in Australia on Date one, you had been in Australia on many occasions over many years.

You first came to Australia in 20XX on a student visa, which allowed you to study full-time in Australia and travel in and out of Australia.

In 20XX, you were granted a temporary work (skilled) visa with a duration of several years.

You purchased a property (the Property) in City A in Australia in 20XX.

You resided at the Property from the time of settlement for several years.

For the periods you were absent from the Property, you continued to treat it as your main residence.

In 20XX, you were granted a student visa. This visa allowed you to study in Australia, travel in and out of Australia and work a certain number of hours per fortnight when your course of study or training was in session.

While you were studying at university, you were selected to study at a university in Country B.

You resided in Country B for several months.

While in Country B, you studied at university for one semester.

While studying, you resided in the town at which the university was located.

It was your intention to return to Australia at the completion of your studies.

Following completion of your studies, you went on to travel to several other cities in Country B.

You then returned to Country A to celebrate a cultural event with your parents.

You then booked flights to travel from Country A to Australia for the following month.

You were intending to complete your last semester of university study in Australia.

However, due to the outbreak of COVID, you were not able to return to Australia as the borders were closed and all international flights were cancelled.

While in Country A, you attended course lectures and online tutorials and completed your master's degree in 20XX.

From that point, you worked full time in Country A for several years.

While in Country A, you lived with your parents.

You left the Property vacant while you were in Country A.

You started the process of obtaining permanent residency of Australia in 20XX.

You passed your skilled migration assessment in XXXX.

You then completed an English language test and submitted your expression of interest for the skilled migration visa.

You received an invitation from the relevant state government to apply for nomination for a skilled migration visa.

You received the invitation to lodge a skilled nominated visa application in 20XX.

Following that, you submitted your application for permanent residency.

Australian borders reopened in 20XX but there were still restrictions in relation to COVID in Country A.

You were also placed under home quarantine several times during 20XX and 20XX.

Country A borders were reopened in 20XX.

You were granted permanent residency of Australia in 20XX.

After you were granted permanent residency, you contacted your friends in City B and told them that you planned to move there shortly.

They had an apartment with a vacant room and advised that you could live there if you were unable to find another place.

You arrived in Australia in 20XX from Country A on a one-way ticket. You had not booked a return ticket to Country A.

Your plan when you arrived was to apply for a research degree and find a part time job in City B.

On arrival in Australia, you started preparing your property in City A for listing.

You also began searching for accommodation in City B.

You had planned to relocate directly from City A to City B after selling the Property. However, you became overwhelmed and physically exhausted from preparing to move. As a result, you decided to travel to Country A to receive family support and rest and recuperate.

You left Australia and travelled to Country A.

You left all household effects including quilts, bed linen, blankets, kitchenware, dinnerware, and home decorations at a friend's house in City A.

Once in Country A, you contracted COVID. As a result of illness due to COVID, your return to Australia was delayed.

You signed a contract for the sale of the Property whilst you were in Country A.

When you returned to Australia, you moved in with your friends in City B.

You had originally planned to return to Australia in the week prior but had to cancel your flight.

Settlement of the Property occurred in 20XX.

An amount of foreign resident capital gains withholding (FRCGW) was withheld by the purchaser at the time of settlement of the Property. You did not provide a clearance certificate to the purchaser prior to settlement.

You own the following assets in Country A:

•         bank accounts

•         a property bought for you by your parents in your name. The property has been sold but not settled. You never lived in the property.

You own the following assets in Australia:

•         a car

•         household effects

•         bank accounts with several banks

You have the following family members in Country A:

•         your parents

•         other relatives

You have no family in Australia but are planning on applying to bring your parents here on a contributory visa.

You have the following social and sporting connections in Australia:

•         schoolmates

•         friends

•         former colleagues based in Australia

You work full time for a XXXX in City B on a fixed-term contract. This contract could be extended after the contract period has ended.

You signed the documentation to start your employment at the XXXX in 20XX.

The employment was not a transfer from Country A.

You currently live in a unit in City B. You are renting this unit with your friends.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 104-10

Income Tax Assessment Act 1997 section 118-110

Income Tax Assessment Act 1997 section 118-145

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

Reasons for decision

Question 1

Summary

You are a resident of Australia for tax purposes from Date one to Date two.

Detailed reasoning

For tax purposes, you are a resident of Australia if you meet at least one of the following tests. You are not a resident of Australia if you do not meet any of the tests.

•         The resides test (otherwise known as the ordinary concepts test)

•         The domicile test

•         The 183-day test

•         The Commonwealth superannuation fund test

We have considered your circumstances, and conclude that you were a resident of Australia for the period from Date one to Date two, as follows:

•         You were a resident of Australia according to the resides test.

•         You meet the domicile test because your domicile is in Australia, and the Commissioner is not satisfied that your permanent place of abode is outside Australia.

•         You do not meet the 183-day test because you were not in Australia for 183 days or more during both the 20XX and 20XX income years

•         You do not fulfil the requirements of the Commonwealth Superannuation test.

More information

For more information about residency, see Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

Question 2

Summary

You are eligible for a full main residence exemption on disposal of the Property.

Detailed reasoning

Section 104-10 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that capital gains tax (CGT) event A1 happens if you dispose of a CGT asset.

Section 118-110 of the ITAA 1997 provides that you can disregard a capital gain or capital loss made from a CGT event that happens to a dwelling that is your main residence if you meet the following conditions:

(a) you are an individual; and

(b) the dwelling was your main residence throughout your ownership period; and

(c) the interest did not pass to you as a beneficiary in, and you did not acquire it as a trustee of the estate of a deceased person

Subsection 118-110(3) of the ITAA 1997 provides that section 118-110 of the ITAA 1997 will not apply if, at the time the CGT event happens, you:

(a) are an excluded foreign resident; or

(b) are a foreign resident who does not satisfy the life events test

Subsection 118-110(4) of the ITAA 1997 provides that you are an excluded foreign resident, at a particular time if:

(a) you are a foreign resident at that time; and

(b) the continuous period ending at that time for which you have been a foreign resident is more than 6 years.

Section 118-145 of the ITAA 1997 provides that if a dwelling ceases to be your main residence, you may choose to continue to treat it as your main residence after you move out of the dwelling. This is sometimes referred to as the absence choice.

If you don't use the dwelling for the purpose of producing assessable income, you can exercise the absence choice indefinitely.

Application to your circumstances

At the time of disposal of the Property, you were an Australian resident for tax purposes. For the periods you were absent from the Property, you continued to treat it as your main residence.

As you have met the conditions in section 118-110 of the ITAA 1997, you are eligible for a full main residence exemption on disposal of the Property.

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