Edited version of private advice

Authorisation Number: 1051763634336

Date of advice: 25 November 2020

Ruling

Subject: Residency

Question

Are you a tax resident of Australia for the period you were out of Australia?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 2020

The scheme commenced on:

1 July 2019

Relevant facts and circumstances

You are a citizen of Country A who departed Australia for Country A in late 2019. You travelled on a Country A passport.

Since departing it has been difficult to arrange return travel to Australia due to travel restrictions imposed due to the COVID-19 pandemic. You finally returned in late 2020.

You lived in Australia for some years and have lodged Australian tax returns in that time as a resident.

You had been living in Australia on an visa which allows you to stay in Australia for up to Y years. You have not been granted permanent residency in Australia or any other country.

You own a residential home in Australia and, because you were only departing for a brief holiday, on departure you left the keys to this house with your neighbour. You gave permission for your neighbour to occupy the home, rent-free, during your anticipated brief holiday.

On departure you intended to have a vacation and visit relatives during a local cultural festival. You had a return flight booked to return to Australia, but you were not able to travel on that flight.

On departure you did not advise Medicare or the Australian Electoral Commission of your departure. Nor did you alter your private health insurance upon departure. However, you recently suspended the private health policy as you could not return to Australia. Similarly, you completed your departure immigration card as a resident.

You do not have an overseas employer.

While overseas you stayed with your mother-in-law in Country A.

You owned this property in Country A. This property was occupied by your parent-in-law and your spouse while you were living in Australia.

Your Australian assets include a residential house, local bank accounts, Australian shares and a vehicle. You have advised your bank of your residential status.

Your children accompanied you when you travelled overseas and when you returned to Australia.

Your spouse has been working in Country A, occupying your property with your parent-in-law. You, and your children, joined them in this property.

When you departed this property recently to travel back to Australia, your spouse and the children travelled with you.

You have not established professional, social or sporting connections in Country A since you departed Australia. You did however maintain a connection with your local church in Australia.

You continue to hold your Country A driver's license as you have for many years.

In the 2020 financial year you were onshore in Australia for less than 183 days.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The terms 'resident' and 'resident of Australia', regarding an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

•         the resides test,

•         the domicile test,

•         the 183-day test, and

•         the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

When considering the resides test the following factors are normally considered:

•         physical presence

•         intention or purpose

•         family or business ties

•         maintenance and location of assets

•         social and living arrangements

In your case, you are a citizen of Country A who departed Australia in late 20XX for Country A and returned recently.

This subject is addressed in Taxation Ruling 98/17 (TR98/17) Income tax: residency status of individuals entering Australia. At paragraphs 20 and 21 it states -

20. All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

•        intention or purpose of presence;

•        family and business/employment ties;

•        maintenance and location of assets; and

•        social and living arrangements.

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

You lived in Australia for several years before departure and have lodged Australian tax returns in that time as a resident. You also own a residential home in Australia where you have lived with your children before departing. You have registered an Australian tax file number and lodged Australian returns.

Your intention upon departure was to have a holiday and visit family on a brief return visit. Your intention was not to depart Australia permanently and re-establish a life in Country A.

You maintain strong ties with Australia and have not been able to return solely because of pandemic related travel restrictions.

You maintained a home and most of your assets in Australian and have established a home for yourself and your children in Australia.

You have not re-established professional, social or sporting connections in Country A, but you have maintained those which exist in Australia. Your living arrangements in Country A are that you were living with family in your property you own however, you only remained there so long because of travel restrictions.

You are a resident for tax purposes under the resides test before your departure in late 2019. Departing for an overseas holiday would not change that status. The fact that your holiday was extended through no action of your own, again makes no change to this status.

You have maintained your association with Australia, and you have established a family home here which you have not abandoned.

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person's domicile is their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are a citizen of Country A. You departed Australia and have been unable to return. You have not been granted, nor have you actively sought, permanent residency in any country.

You have not abandoned your domicile of birth in Country A as you have the right to reside permanently in that country as a citizen. This is because you have the normal rights of any Country A citizen.

In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307:

"......The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence."

Your domicile has not changed to Australia.

As your domicile is not Australia you are not a resident under the domicile test.

The 183 days 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 the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

In your circumstances you were offshore for less than 183 days in the 2020 financial year.

You are therefore not a resident for tax purposes under this test.

The superannuation test

An individual is still a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You are not a resident for tax purposes under this test.

Residency status

As you satisfy one of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for income tax purposes.