Edited version of private advice

Authorisation Number: 1051872306172

Date of advice: 20 August 2021

Ruling

Subject: Residency

Question 1

Are you a tax resident of Australia for the relevant income years?

Answer

Yes.

Question 2

Can you use the carry-forward concessional contribution rules to make a concessional contribution of over $25,000 to your superannuation fund under section 291-20 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes.

Question 3

Are you entitled to claim a deduction for the personal superannuation contributions you made to your superannuation fund under section 290-150 of the ITAA 1997?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2020

Year ended 30 June 2021

The scheme commences on:

1 July 2019

Relevant facts and circumstances

Residency

You are a citizen of Country X.

You and your spouse have been living in Australia for a period of time as residents for tax purposes.

You live with one of your children's family in their home in Australia.

Both your children have been residing in Australia for many years.

You applied for a permanent resident visa and were living in Australia with a bridging visa with full working rights.

You and your spouse applied for a different visa which allowed you to visit Country X to attend some family related wedding ceremonies.

Although your visa allowed you to stay in Country X for around 12 months, you intended to return to Australia within 6 or 7 months.

You and your spouse are staying with relatives in Country X.

Your understanding is that when you are able to return to Australia, you will return on a temporary visa and your original visa will resume once you arrive here.

Although you still plan to return to Australia as soon as you are able, you do not know when this will happen as this depends on when the COVID-19 related travel ban is lifted by the Australian government.

You are not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), and you are not the the spouse or child under 16 of such a person.

Superannuation contribution and deduction

You made a personal concessional contribution to your superannuation fund during the relevant income year which exceeded your concessional contributions cap of $25,000.

You had not made any concessional contributions to the superannuation fund for the three income years prior to the income year you made the contribution.

The balance of your superannuation fund at the end of the previous income year was less than $500,000.

Your superannuation fund is not:

•                 a Commonwealth public sector super scheme in which you have a defined benefit interest

•                 a Constitutionally protected fund (CPF) or other untaxed fund that would not include your contribution in its assessable income

•                 a Super fund that notified us before the start of the income year that they elected to either treat all member contributions to the:

o       super fund as non-deductible

o       defined benefit interest within the fund as non-deductible

You were under 67 years of age at the end of the contribution year.

In making the contribution to your superannuation fund, you gave the fund a Notice of intent to claim or vary a deduction for personal contributions form (NAT 71121) at the end of June.

Your superannuation fund acknowledged receipt of the notice of intent in writing one week later.

The contribution you made to the fund was not a downsizer contribution, a re-contribution under the first home super saver scheme or a COVID-19 re-contribution.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 290-150

Income Tax Assessment Act 1997 section 290-155

Income Tax Assessment Act 1997 section 290-165

Income Tax Assessment Act 1997 section 290-167

Income Tax Assessment Act 1997 section 290-168

Income Tax Assessment Act 1997 section 290-169

Income Tax Assessment Act 1997 section 290-170

Income Tax Assessment Act 1997 section 291-20

Reasons for decision

Question 1 - Residency for tax purposes

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

•                 The domicile test

•                 The 183 day test, and

•                 The superannuation test

The primary test for deciding the residency status of an individual is whether they reside 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 resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, 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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

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 ... [W]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.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

•                 Physical presence

•                 Intention or purpose of presence

•                 Family and business/employment ties

•                 Maintenance and location of assets, and

•                 Social and living arrangements

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia. It is important to note that not one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

In your case, you are a tax resident of Australia who is overseas temporarily and will return to Australia as soon as you are able.

Therefore, you remain a resident of Australia under the resides test for the relevant income years.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Whether your domicile is 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 acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must 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.

In your case, you are a citizen of Country X and your domicile of origin is Country X. Further, you do not have a permanent right to reside in Australia as you are neither a citizen of Australia or the holder of a permanent resident visa. Consequently, there is insufficient evidence to demonstrate that you have acquired a domicile of choice in Australia.

Therefore, your domicile is still in Country X and you are not a resident of Australia under the domicile test.

The 183 day test

Under this test, a person is a resident of Australia if they are physically present in Australia for over half an income year, unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.

You were not present in Australia for over half the income year in the relevant income years so you are not a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service 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 resident under this test.

Conclusion

You are a resident of Australia for the relevant income years as you meet the resides test of residency.

Question 2 - Carry-forward unused concessional superannuation contributions

From the 2020 income year, the carry-forward rules allow you to make extra concessional contributions above the general concessional contributions cap without having to pay extra tax (section 291-20 of the ITAA 1997).

The carry-forward arrangements involve accessing unused concessional cap amounts for one or more of the previous five years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.

To use your unused cap amounts you need to meet two conditions:

•                 Your total superannuation balance at the end of 30 June of the previous financial year is less than $500,000.

•                 You made concessional contributions in the financial year that exceeded your general concessional contributions cap (the cap for the relevant income year is $25,000).

The amount of unused cap amounts you will be able to carry-forward will depend on the amount you have contributed in previous years.

In your case, you made a personal concessional contribution of over $25,000 to your superannuation fund in the relevant income year and did not make any contributions in any of the three previous income years.

Therefore, you are eligible to make the contribution in the relevant income year.

Question 3 - Deduction for personal superannuation contributions

You are eligible to claim a deduction for personal superannuation contributions under section 290-150 of the ITAA 1997 if you meet the criteria laid out in sections 290-155, 290-165, 290-167, 290-168, 290-169 and 290-170 of the ITAA 1997. These conditions are summarised as follows:

•                 for contributions made on or after 1 July 2017, you made the contributions to your fund that was not a:

o       Commonwealth public sector super scheme in which you have a defined benefit interest

o       Constitutionally protected fund (CPF) or other untaxed fund that would not include your contribution in its assessable income

o       super fund that notified us before the start of the income year that they elected to either treat all member contributions to the:

§     super fund as non-deductible

§     defined benefit interest within the fund as non-deductible.

•                 you meet the age restrictions (including the work test or satisfy the work test exemption criteria, if applicable)

•                 you have given your fund a Notice of intent to claim or vary a deduction for personal contributions form.

•                 your fund has validated your notice of intent form and sent you an acknowledgement.

In your case, you meet the age restrictions and do not have to satisfy the work test or satisfy the work test exemption criteria. It is also evident that you meet the other criteria.

Therefore, you are entitled to a deduction for the contribution as you meet the criteria laid out in sections 290-155, 290-165, 290-167, 290-168, 290-169 and 290-170 of the ITAA 1997.