Edited version of private advice

Authorisation Number: 1052244515820

Date of advice: 22 July 2024

Ruling

Subject: Residency

Question 1

Were you a resident of Australia for taxation purposes for the income years ended XX June 20XX and XX June 20XX?

Answer

No.

Question 2

Were you a resident of Australia for taxation purposes for the income year ended XX June 20XX?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

DD/MM/20YY

Relevant facts and circumstances

On DDMM20YY, you migrated from the Country B to Australia.

You are a Country B and Australian dual citizen.

On DDMM20YY, you departed Australia to commence permanent employment in Country A.

You did not purchase a return plane ticket to Australia.

You have X independent children attending university who remained in Australia in your absence.

You own a property at XXX (Australian Property).

The Australian Property was not rented to a private tenant as it was undergoing renovations, though you had intended to rent the property to an unrelated party in MM20YY.

You rented the Australian Property to your child, who had to vacate in MM20YY as the house was uninhabitable due to renovations.

Your household effects were in storage in the garage of the Australian Property or gifted to your children.

You took some personal effects to Country A, but most were in storage in the garage of the Australian Property.

You have a bank account and mortgages in Australia which remained open in your absence.

You gifted your 2 motor vehicles to your 2 youngest children for use at university.

You owned an investment property at XXX (the investment property), which you did not sell.

You had Australian income from the investment property and interest on the bank account.

You updated your residency status with your bank to foreign resident.

You cancelled your Australian gym membership when you left Australia.

You advised the electoral roll of living overseas and voting forms were sent to you in Country A.

You notified the Australian Institute of Company Directors that you moved overseas and signed a declaration for an overseas membership.

You did not advise Medicare to have your name removed from their records.

You cancelled your private health insurance cover in Australia.

Your Employment

Your contract was for full time, permanent employment in Country A with XXX Pty Ltd.

In MM20YY, you entered a new contract (the Country A contract) to work in Country A.

Your contract initially began remotely in Australia due to COVID-19 restrictions preventing you from travelling to Country A.

Your income was sourced in Country A for work completed in Country A.

Your income was deposited in your Country A bank account.

Your circumstances in Country A:

You entered Country A on a 2-year employment pass which was provided by your employer via an agency. This needed to be renewed after each two year period.

The Employment Pass did not allow you to stay in Country A indefinitely.

For the period DDMM20YY to DDMM20YY, you rented a house in Country A on a 2-year agreement with the option to renew for 1 year.

You opened a Bank account in Country A.

You are a resident for taxation purposes in Country A and you lodged tax returns there for the 20YY and 20YY income years.

In MM20YY, you enrolled into a gym membership in Country A.

You joined an association in Country A.

You retained your New South Wales driver's licence.

Your mail was redirected to your Country A address.

Your return to Australia

On DDMM20YY, you returned to Australia temporarily to learn more about your spouses' health condition.. You wanted to be with extended family at a difficult time.

You closed your gym membership in Country A.

You worked remotely from Australia under the contract.

You remained in Australia until DDMM20YY, when you developed the intention to reside in Australia for the foreseeable future due to your spouse's illness.

Until DDMM20YY, you kept the option of returning to Country A open with your employer.

On DDMM20YY, you switched to a permanent Australian employment contract with your employer and re-joined an Australian private health insurance provider.

Since arriving back in Australia, you have limited your travel to short business trips to other countries.

You moved back into the Australian Property.

You maintained the investment property.

Your days spent in Australia for each income year are detailed below:

•         20YY - xxx days

•         20YY - xxx days

•         20YY - xxx days as of DDMM20YY

Relevant legislative provisions

Domicile Act 1982

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

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 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 TR 2023/1 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... 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 resides test is about 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. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

You are not a resident of Australia under the resides test for the period DDMM20YY to DDMM20YY based on the following:

During this period:

•         You departed Australia on DDMM20YY and were permanently located in Country A until DDMM20YY.

•         You remained in Country A, other than short term trips around Country A's greater area for either work or holiday purposes.

•         You rented a property in Country A on a 2-year lease agreement, staying at the same property for the entire duration of your time there.

•         You were in Country A to allow you to engage in full time, permanent employment on location with XXX Pty Ltd.

•         You intended to work on a 2-year employment pass organised by your employer initially and apply for permanent residency or citizenship once you were settled.

•         Your spouse accompanied you to Country A and you both intended to remain there permanently.

•         You stated you were relocating to Country A on your immigration card when leaving Australia.

•         You own a property in Australia which you rented to your child, with the intention of renting to a private tenant in MM 20YY after renovation works were completed.

•         You had an investment property in Australia and 2 cars which you gifted to your independent children.

•         You cancelled your Australian gym membership when you left Australia.

•         You had a bank account in Country A and redirected your mail to your Country A address.

•         You started a new gym membership in Country A and joined an association in Country A.

Your behaviour and routine during the period you were in Country A from DDMM20YY to DDMM20YY supports and is consistent with your intention to live there. You acted in accordance with your employment contract and remained at the same address during your time in Country A. The fact that your children are grown, independent and capable of sustaining themselves, and your property was given to them, indicates you had shifted your life to Country A.

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).

You are a resident of Australia under the resides test for the XX income year based on the following:

During this period:

•         On DDMM20YY, you cancelled your lease agreement in Country A.

•         You have not travelled since arriving back in Australia apart from short business trips to other countries.

•         You moved back into the Property A.

•         You stored all personal and household assets in the garage of the Property A, so they were available to you upon your return.

•         You maintained the investment property.

•         You have superannuation, a bank account, and mortgages in Australia.

Your intention changed on DDMM20YY to remain in Australia. You have returned to living your life in Australia, though, adjusted due to the medical emergency.

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

You were born in the Country B and your domicile of origin is the Country B. You migrated to Australia on DDMM20YY and subsequently became an Australian citizen.

We consider that you abandoned your domicile of origin in the Country B and acquired a domicile of choice in Australia. You obtained dual citizenship in Australia and Country B. This enabled you to remain in either country indefinitely, however you, your spouse and children have made the decision to live in Australia. On DDMM20YY, you migrated to Australia, established your life here and acquired a long term home. Therefore, you have changed to your domicile of choice.

You only stayed in Country A for XX months before returning to Australia. You have no intention of returning to Country A in the near future. Despite previously having the intention of attaining permanent residence or citizenship in Country A, this did not occur. You did not obtain a visa that enabled you to stay in Country A permanently. You obtained a visa which enabled you to work there under your employment agreement, but ultimately, you did not make the decision to migrate permanently. You have not abandoned your domicile of choice in Australia. 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:

•         the intended and actual length of the taxpayer's stay in the overseas country.

•         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.

•         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.

•         whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence.

•         the duration and continuity of the taxpayer's presence in the overseas country.

•         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

The Commissioner is satisfied that your permanent place of abode was outside Australia from DDMM20YY to DDMM20YY because:

•         Your intention was to remain in Country A indefinitely, however you only remained there for XX months and returned to Australia and have no plans to go back.

•         You established a permanent place of residence in Country A on a 2-year rental agreement.

•         You did not abandon your residence in Australia because of your absence, despite plans to rent out Property A. You maintained the Property A within your family.

•         You have returned to Australia and have no plans on resuming your life in Country A.

•         You maintained your assets in Australia. Gifting your vehicles and renting your property to your children to assist with university studies cannot be considered abandoning assets.

•         You remained on the Australian Electoral Roll and got election papers sent to your address in Country A.

•         You did not have your name removed from Medicare records.

The Commissioner is not satisfied that your permanent place of abode is outside Australia between

DDMM20YY to DDMM20YY because:

•         You remained in Australia during this period.

•         You moved back into your own property in Australia.

•         You retained your rental agreement in Country A, however, you did not renew the agreement and decided to cancel it after your decision to remain in Australia on DDMM20YY.

•         You retained your assets and returned to your usual, though adjusted life in Australia.

You have returned to Australia and resumed living in your own established home and maintained all of your Australian assets. Therefore, you are a resident of Australia under the domicile test for the period DDMM20YY to DDMM20YY.

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 XX income year. Therefore, you are not a resident under this test for the 20XX income year.

You have been in Australia for 183 days or more in the XX and XX income years. 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

You had two places of abode during years encompassing your absence from Australia. Property A and the rental in Country A.

The Commissioner is satisfied that your usual place of abode was outside Australia for the XX and XX income year based in the following:

•         From DDMM20YY to DDMM20YY, you had full time, permanent employment in Country A.

•         Prior to leaving for Country A and after returning, you were using the Australian property to work remotely for your company.

•         You rented a property in Country A on a 2-year lease agreement and remained in that property until DDMM20YY.

•         When you returned to Australia, the rental property in Country A was still available for you if you returned.

•         Property A was being renovated, and you had plans to rent this out to a private tenant once this was completed.

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

The Commissioner is satisfied that you did not intend to take up residence in Australia after you left for Country A on DDMM20YY because:

•         You intended to stay in Country A permanently.

•         You did not purchase return tickets to Australia.

•         You secured permanent, full time employment in Country A.

•         You joined a gym, opened a bank account, and joined associations in Country A as a resident there would do.

•         You had an intention to rent out your home in Australia to a private tenant after the renovation work was completed.

These factors indicate you lived in Country A in such a manner that you would reside there.

The Commissioner is satisfied that you did intend to take up residence in Australia for the XX income year after you returned to Australia because:

•         You returned to your residence in Australia on DDMM20YY, delaying the plan to rent out the Australian property and ultimately chose not to rent it out.

•         You made no plans to return to Country A since arriving back in Australia on DDMM20YY.

•         You and your spouse are Australian citizens, and you were accessing medical services in Australia, rather than seeking medical services in Country A.

•         You wanted to be around your children and extended family during this time, who were located in Australia.

•         On DDMM20YY, you decided to stay in Australia for the foreseeable future and cancelled your lease agreement.

•         You have no family in Country A.

These factors indicate you lived in Australia in such a manner that you would reside there.

You were a non-resident of Australia under the 183-day test for the XX income year.

You were in Australia for more than 183 days for the XX income year.

•         From DDMM20YY to DDMM20YY, you had a usual place of abode in Country A.

•         You did not have an intention to take up residency in Australia during this period.

You were a residentof Australia for the period XX income year:

•         You were in Australia for more than 183 days for the XX income year.

•         From DDMM20YY you had a usual place of abode in Australia.

•         You have maintained your rental agreement, thus your usual place of abode in Country A, however, you chose to cancel it after your decision to stay in Australia for the foreseeable future on DDMM20YY.

•         You have no plans to return to Country A.

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

For the DDMM20YY to DDMM20YY period, you satisfy none of the residency tests, so you are not a resident of Australia for income tax purposes.

For the DDMM20YY to DDMM20YY period, you satisfy the resides, domicile and 183 day tests of residency and so are a resident of Australia for income tax purposes.

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