Edited version of private advice

Authorisation Number: 1052370507270

Date of advice: 06 March 2025

Ruling

Subject: Residency

Question 1

Are you residents of Australia for tax purposes for the 20XX income year?

Answer 1

Yes.

This ruling applies for the following period:

Year ended 20XX

The scheme commenced on:

XX 20XX

Relevant facts and circumstances

Both of you, X and Y were born in Country Z.

Both of you migrated to Australia in XX 20XX with children. You all received Australian citizenship on XX 20XX.

In 20XX, both of you travelled to Country Z with sole intention of caring for X's parents. X also assisted to manage their parent's farm and received wage.

You have a farm in Australia with a fully furnished house, workshop, equipment/tools and a ute.

You have been leasing out your farm/home generating business income for your partnership.

You have stored your personal belongings, records and other paperwork in a shipping container at your child's property in Australia.

During the stay in Country Z, Y's parent's health has been declining with age, so Y also needs assist their parent with everyday duties.

In 20XX and 20XX, X's parent passed away, resulting in the formation of an Estate to distribute X's parent's assets.

X has been requested to continue managing the farm until the Estate can be finalised. The Will is being contested which is holding up the Estate proceedings.

Both of you have always intended to return to Australia when all legal proceedings in Country Z are resolved.

In Country Z, you stay at X's parent's farm. You do not own any substantial property or assets in Country Z.

You both have drivers' licenses in Australia and Country Z.

You have directed your mail to be sent to your child's address.

You have not returned to Australia since relocating to Country Z in 20XX.

Your children and grandchildren all reside in Australia.

You have not advised your Australia financial institution that you are foreign resident because you consider yourself as Australian residents for tax purposes.

You have lodged annual Australia income tax returns as a resident for the period you have been away up to and including the income year ended 30 June 20XX.

Neither of you are members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(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 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 both residents of Australia under the resides test for the 20XX income year period based on the following:

•                You have always intended to return to Australia to live.

•                You have strong connections to Australia where your children and grandchildren reside, and you have your major assets such as your farm and house.

•                Your business operations are in Australia.

•                Your personal belongings are stored in Australia.

•                You have directed your mail to your child's address in Australia.

•                You have not notified your financial institution that you are foreign resident.

•                You have lodged your income tax returns as residents up until the 20XX income year.

It is considered that you have retained a continuity of association with a place in Australia, together with an intention to return to that place and an attitude that that place remains 'home'.

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, you were born in Country Z and your domicile of origin is Country Z. You immigrated to Australia in XX 20XX and became Australian citizens on XX 20XX.

It is considered that you abandoned your domicile of origin in Country Z and acquired a domicile of choice in Australia as evidenced by relocating to Australia in 20XX and becoming citizens in 20XX. Although you have stayed in Country Z since 20XX assisting your elderly parents, this does not mean that your domicile has reverted back to Country Z.

Therefore, your domicile is still Australia.

Permanent place of abode

'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 not satisfied that your permanent place of abode is outside Australia because you have maintained connections with Australia that are not consistent with abandoning Australia as your place of residence:

•                Although you have been outside Australia since 20XX, you have always intended to return to Australia to live.

•                You have strong connections to Australia where your children and grandchildren reside, and you have your major assets such as your farm and house.

•                Your business operations are in Australia.

•                Your personal belongings are stored in Australia.

•                You have directed your mail to your children's address in Australia.

•                You have not notified your financial institution that you are foreign resident.

•                You have lodged your income tax returns as residents up until 20XX income year.

Therefore, you are residents 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 not been present in Australia for 183 days or more during the 20XX income year. Therefore, you are not a resident under this 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 and domicile tests of residency and so are residents of Australia for income tax purposes for the year ended 30 June 20XX.

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