Edited version of private advice

Authorisation Number: 1052265880448

Date of advice: 4 July 2024

Ruling

Subject: Residency

Question

Are you residents of Australia for taxation purposes from 1 July XXXX?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June XXXX

Year ending 30 June XXXX

Year ending 30 June XXXX

Year ending 30 June XXXX

Year ending 30 June XXXX

The scheme commenced on:

1 July XXXX

Relevant facts and circumstances

Person C and D were both born in Australia and are Australian citizens.

You have both lived in country A since XXXX.

You were both in country A on an XXXX working visa which will be cancelled from XXXX.

You both will be returning to Australia permanently with your children on XXXX.

Both of you intend to permanently reside in Australia from your return on XXXX.

Person C will have regular short stay (under one week) business trips overseas.

You both will potentially have short stay (approximately 2 week) holidays outside of Australia.

From XXXX Person C and D will no longer have any ties in country A (no housing or employment).

Your children will be enrolled in an Australian school when you return from country A.

Arrangements have been made for your pets to be relocated from country A to Australia in XXXX.

You both have a driver's licence in Australia and country A.

You both own 2 properties in Australia which have been rented out.

You both will be residing in one of your rental properties, with your children, when you return to Australia as your tenants are leaving the property on XXXX.

The lease for the house you leased in country A ends on XXXX.

Person C will continue to work for the same company on a remote basis when he returns to Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

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 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'.

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 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 both relocated from Australia on an employment visa to country A with your family in XXXX for employment reasons. You and your family are now relocating back to Australia with the intention to remain in Australia. You have two homes which have been rented out and you will be living in one of those homes when you return to Australia. Your children will be attending school in Australia. You have made arrangements for your pets to be relocated to Australia in XXXX. Person C will work for the same company on a remote basis when he returns to Australia and will make minimal visits for business overseas after your return to Australia. You both will make minimal visits overseas on holidays once you return to Australia.

Therefore, you are both residents of Australia under the resides test.

The 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 are both born in and citizens of Australia and relocated to country A on employment visas. Both of you will be returning to Australia on XXXX. Neither of you acquired a domicile of choice in country A.

Therefore, both of your domiciles remain in 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

In your case, neither Person C or D have actively applied for, or been issued, a visa that would allow you to remain in country A indefinitely. You and your family are relocating back to Australia and do not have a permanent place of abode outside Australia as your lease in country A was terminated on XXXX.

You will be living in one of the two homes you own in Australia. You have an Australian driver's licence and bank accounts in Australia.

Consequently, the Commissioner is not satisfied that Person C or D will have a permanent place of abode outside Australia.

Therefore, Person C and D are residents of Australia under the domicile test.

The 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

Person C and D terminated their residential lease in country A on XXXX.

With an assumption you will both be in Australia for at least 183 days and your intention is to take up residency in Australia from XXXX, the Commissioner is not satisfied your usual place of abode is outside Australia.

Person C and D are both residents 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

Person C and D 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.

Person C and D are not residents under the superannuation test.

Residency Conclusion

As you both satisfy some of the four tests of residency, you are both residents of Australia for income tax purposes from XXXX to the XXXX.

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