Edited version of private advice

Authorisation Number: 1051587236461

Date of advice: 27 November 2019

Ruling

Subject: Residency

Question

Are you an Australian resident for income tax purposes for the period from September 20XX to 30 June 2019?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX.

Year ended 30 June 2019.

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Your country of origin is Country B.

You obtained your permanent resident visa on in July 20XX. Your spouse was the main applicant of a Business Talent Visa (Subclass 132), you being the spouse of the applicant.

You arrived in Australia with your spouse and children on XX September 20XX.

You departed Australia on XX November 20XX to return to Country B. Your spouse and children remained in Australia.

You run a business in Country B, of which you hold a 90% shareholding.

Your spouse was the chairman and general manager of the business in Country B.

Before your spouse planned to live in Australia, your spouse transferred their shares to you.

You assume the work of financial approval and are responsible for the day to day running of the business.

You brought a large sum of money to Australia with you. The funds were earned by your spouse's previous business (now yours) and investments in Country B. Your spouse also inherited some money.

You advise that you do not intend to live in Australia long term. Your trips to Australia are to visit your children.

You advise that you have not yet made clear plans and arrangements for the future. You need to remain in County B to develop your own career, care for your parent, and provide financial security for your family if necessary.

You advise that you do not have any plans to re-join your family in Australia on a permanent basis.

You do not maintain any professional, social or sporting connections with Country B.

You own a house in Country B. When you return to Country B you live in your house by yourself.

Your parent and sibling live in Country B.

You provide care to your parent while you are living in Country B. When you are in Australia, your sibling cares for your parent.

Your spouse and children reside in Australia.

Your family home in Australia and the family car are both in your spouse's name. There is a home loan for the house.

When you visit Australia you live with them in the family home.

Your children are aged X, Y and Z. They attend school in Australia.

Your spouse now owns and runs a company in Australia.

During the 20XX year you spent approximately 50 percent of total possible days in Australia from the time you arrived with your family.

Your business was very busy during 20XX requiring you to spend a lot of time in Country B.

During the 20XX year you spent approximately 76 percent of total days in Australia.

Your business was much more stable during the 20XX year, allowing you more time to visit your children.

You can manage the business remotely from Australia.

You have spent approximately fifty percent of total days in Australia so far in the current year.

You do not have any Australian bank accounts.

You do not help to support your spouse or children financially. You do not currently help make loan repayments or help to cover their living expenses.

Your spouse's business is not yet profitable; however your spouse does draw a salary from the business.

The loan repayments and living expenses for the family are covered by your spouse's salary and from previous savings that you brought to Australia.

You have a Medicare card and private health insurance in Australia.

You have not developed any professional, social or sporting connections in Australia.

Neither you nor your spouse has been a Commonwealth of Australia Government employee for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 sub-section 6(1)

Income Tax Assessment Act 1997 sub-section 995-1(1

Reasons for decision

Section 6 of the ITAA 1936 provides four tests to determine the residence of individuals. In summary, you will be a resident of Australia for Australian domestic tax purposes if any of the following tests is satisfied:

(1)   you are a resident of Australia according to ordinary concepts (according to the ordinary meaning of the word 'resides');

(2)   you are domiciled in Australia unless the Commissioner is satisfied your permanent place of abode is outside Australia;

(3)   you have been in Australia for more than one-half of the income year (in excess of 183 days) unless you can satisfy the Commissioner that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia; or

(4) you are a member of certain Commonwealth government superannuation schemes or you are a spouse or child under 16 of such an individual.

The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word 'resides'.

The resides test

The 'resides' test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, [Multimedia] version 5.0.0 (2001), is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

The Commissioner's view on the 'resides' test is contained in Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

An individual may be considered a resident under the resides test if their behaviour is such that they exhibit a degree of continuity, routine or habit that is consistent with a person residing in Australia according to the ordinary meaning of the word 'reside'.

When an individual arrives in Australia not intending to reside here permanently, all facts about his or her presence must be considered in determining residency. In particular, the following factors are useful in describing the quality and the character of an individual's behaviour:

·        intention or purpose of presence

·        family and business/employment ties

·        maintenance and location of asset, and

·        social and living arrangements.

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia.

In your circumstances, several factors indicate that you were a resident of Australia during the ruling period.

You obtained a permanent resident visa for Australia on XX July 20XX and accompanied your spouse and children to Australia shortly after. They remained in Australia and you returned to County B. However, you make frequent trips to Australia to visit them and spend a large portion of time in Australia on each trip, living with your family in the family home.

Your stated intention is to not reside permanently with your family in Australia in the near future. However, the following facts regarding your actions and physical presence in Australia provide a somewhat contradictory objective view of this stated intention.

You have an ongoing familial relationship with your spouse and children, who reside in Australia.

You stated that you spent more time in Country B in the first year your family resided in Australia due to the business being quite busy. You spent approximately 76 percent of the total possible days in Australia during the following year when, you advise us the business was much more stable. You have so far spent more than half days in Australia during this income year.

In order to resolve situations where there is contradictory information, the case of Landy v Commissioner of Taxation [2016] AATA 754 provides guidance. In that case, the tribunal stated that objective observable factors have primacy over the taxpayer's subjective evidence of intention to indefinitely leave Australia to work overseas.

Applying that principle to your situation, the objective facts show that you have spent approximately 70 percent of the total days in Australia over a period of 22 months. During this time, you have resided with your family in the family home. You spent a very high proportion of time in Australia despite your business in Country B being busy during the first year your family relocated to Australia, during which year you were nonetheless able to work and live in Australia for a little over fifty percent of the year. In the following year, you spent approximately 76 percent of your time in Australia. In our view, this is a very high proportion of the year (i.e. more than three quarters), and is quite inconsistent with your stated intention of residing in another country. Even more inconsistent with your stated intention is that you have resided in Australia for approximately fifty percent of the current income year.

Therefore although your stated intention is not to leave Country B to reside in Australia in the near future, your actions have shown that you choose to reside in Australia with your family at every opportunity, and we give these objective factors primacy in coming to our decision.

It is significant that in recent decisions in which persons working overseas have been held to be Australian residents, including Beizuidenhout, Case 5/2013, and Iyengar, the taxpayers had family residing permanently in Australia. There is particular emphasis placed in these decisions on the taxpayers' Australian residence being the 'family home'.

Conversely, there are cases where the taxpayer has had family residing in Australia but has nonetheless been found to be a non-resident. However, in these cases, an important factor was that the taxpayer's family relationships had been significantly diminished. For example, in Re Dempsey and the Commissioner of Taxation, the taxpayer was said to be a 'free agent' in terms of family relationships and in The Engineering Manager v The Commissioner of Taxation, the taxpayer was estranged from his wife. These cases can be distinguished from your circumstances, as it is clear from your frequent stays with your family in Australia and your stated desire to provide financial support for them in the future that your family relationships are both ongoing and strong.

The closeness of your family ties is also evidenced by the following. Your family home is in Australia. Despite the fact that it is in your spouse's name, it is the home of the family unit, of which you remain a part. Being in your spouse's name does not diminish this position. Further, although at present you do not contribute to your spouse's and children's living expenses and to loan repayments for the family home, you have stated that one of your intentions for remaining in Country B was to provide financial security for your family if necessary. In this way, you have made your intentions clear, being to continue to provide for your family with regular and ongoing financial support when required. On the facts, your decision to remain in Country B was motivated by your desire to maintain your financial support of your spouse and children, who reside in Australia. Your spouse runs a business in Australia and your children attend school in Australia. In short, your vital interests are closer to Australia than they are to Country B. You do own a home in Country B where you live by yourself when you return. However, the notion of "residence" does not exclude a person having two or more residences.

A further indication of your close family relationships is the fact that you took over ownership and control of your spouse's business prior to your spouse's arrival in Australia - where your spouse is currently in the process of establishing a similar business (i.e. dealing with tractors and related goods). From a family-relationships perspective, it does seem likely that there would be ongoing discussions and knowledge sharing between you and your spouse regarding the management of these two similar operations. Further, it is from this family business now under your control that you have flagged the possibility of providing financial support for your spouse and children in the future.

We note that you have not developed any professional, social or sporting connections in Australia however nor do you maintain any professional, social or sporting connections with Country B.

Based on the information provided, you are a resident of Australia according to ordinary concepts for the period of this ruling.

As you satisfy one of the four tests of residency it is unnecessary to consider further tests, however we believe that there are strong indications that you meet the 183 day test for the 20XX year.

The 183 day test

Under the 183-day test, where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that:

1.     the person's usual place of abode is outside Australia and

2.     the person does not intend to take up residence in Australia.

Applied to your circumstances, in the second income year, you spent approximately 76 percent of the year in Australia. Therefore the first component of this test is met.

Usual place of abode

In essence, a person's "place of abode" is that person's dwelling place or the physical surroundings in which a person lives with one's family and sleeps at night.

On the facts, you reside both in Australia with your spouse and three children, and you also reside in your house in Country B, though apart from your parent and sibling. We note your information that you do not maintain any professional, social or sporting connections with Country B. Therefore, which of these places could be classed as the 'usual' place of abode? Our view is that your family home in Australia is, on balance, the more likely to be your 'usual' abode, both because this is where you have spent the clear majority of your time (thus 'usual' place on the ordinary meaning of that word) and it is where your immediate family, spouse and children reside.

Intention of taking up residence

We have discussed your intention of taking up residence in Australia in the sections above, on subjective and objective measures. Our conclusion here is the same, that is, on observable objective indications such as the time you have spent in Australia, and where you live while in Australia, your intention is to take up residence here. These objective factors, based upon your actions, take primacy over your subjective stated intention to not take up residence.

To conclude this section, as you spent approximately 76 percent of total possible days in Australia in the second income year, you are a resident under this test providing that:

1.     you do not have a usual place of abode outside Australia and providing that

2.     you do not intend to take up residence in Australia.

To avoid any doubt, not meeting one of these conditions would make you a resident. On our analysis, you do not meet both of these conditions.

Therefore, you are an Australian resident under the 183-day test in the 20XX income year.