Edited version of private advice

Authorisation Number: 1051890253727

Date of advice: 24 August 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia on X XX 19XX

You are a dual citizen of both Australia and Country B

You are a permanent resident of Australia

Your 20XX, 20XX and 20XX income tax returns have all been lodged as an Australian Resident for tax purposes, including your salary and wages earned while on a working holiday in Country B as part of your world-wide income.

You went to Country B on X XX 20XX, for a working holiday and found work in the hospitality sector.

You state your primary place of residence as your parent's home. You have stated this as your residence on all travel documents and passenger cards.

Your living arrangements in Country B has been as a tenant in rented accommodation or stayed with your friends.

You were made redundant from your job in October 20XX during the COVID pandemic. You were put on 'furlough', a government job retention scheme in XX 20XX.

You were due to come back to Australia in XX 20XX as part of your parent's birthday but, were unable to due to Country B being in lockdown as well as other government restrictions.

You were unable to secure work until XX XX 20XX

You were intending to come back to Australia in XX 20XX, but this is increasingly unlikely due to the COVID restrictions both in Australia and Country B.

You now intending to come back to Australia permanently in 20XX conditions permitting

The property you owned in Australia was your residence prior to leaving for Country B and was purchased in XX 20XX.

You were forced to sell this property XX XX 20XX due to Covid and financial strain.

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997).

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. These tests are:

1. the resides test

2. the domicile tests

3. the 183-day test

4. the superannuation tests

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.

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, 2001, rev. 3^rd 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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant:

•         physical presence

•         intention and purpose

•         your family and business/employment ties family

•         maintenance and location of assets

•         social and living arrangements.

Your social life and living arrangements may include:

•         playing social sport in a local competition

•         being a member of a local community club

•         redirecting mail to Australia, or

•         enrolling your children at the local school.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

Convention between the Government of Australia and the Government of Country B for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains(Canberra, 21 August 2003) outlines in Article 4 under part 3(a) states the following:

'that individual shall be deemed to be a resident only of the Contracting State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests);

You are a dual citizen of both Australia and Country B and therefore enjoy the rights and responsibilities attached to citizenship in Country B.

You have been in Country B since XX XX 20XX, currently more than X years.

You did not have any immediate family in Australia and did not have any business or employment ties here in Australia.

While you state that you went to Country B on a working holiday, we are unable to determine if you had moved to Country B on a working holiday visa or a permanent XX visa. In any circumstances you held a Country B citizenship while your stay in Country B.

While you had an asset (property) in Australia, you sold this in XX 20XX.

You are not a resident of Australia under the resides test.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia and your domicile of choice we believe to be Country B, based on your taking up of citizenship of Country B and moving there in 20XX.

Since 20XX you have resided in Country B, taking up employment, building social and living arrangements there and did not have any travel arrangements within the two years of your departure from Australia, therefore, your new domicile of choice is Country B.

Permanent place of abode

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly when you are physically in a country.

Your place of abode does not have to be fixed but must have the attributes of a place of residence or a place to live. Since XX 20XX, your usual place of abode is Country B.

The 183-day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in 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 in Australia for more than 183 days in the 20XX income year.

You worked in Country B for more than 183 days in the 20XX income year.

You are not a resident under this test.

The superannuation tests

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

You are not a resident under this test.

Your residency status

For the period you were in Country B, you were working and living as a resident and citizen of Country B, therefore you were not a resident of Australia for taxation purposes.