Edited version of private advice

Authorisation Number: 1051891379680

Date of advice: 9 September 2021

Ruling

Subject: Residency

Question 1

Are you an Australian resident for tax purposes for the income tax year 20XX-20XX?

Answer

Yes

Question 2

Were you an Australian resident for tax purposes in the income tax year 20XX-20XX?

Answer

No

Question 3

Are you an Australian resident for tax purposes in future?

Answer

Yes, until you leave Australia you will be regarded as a resident of Australia for tax purposes.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XX

1 July 20XX to 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You advised that:

You are a citizen of XXXX but only have a valid XXXX passport.

Your country of origin, that is the country you were living in on a permanent basis prior to coming to Australia has been XXXX. You also lived in XXXX.

You left XXXX on XXXX to travel in XXXX and came reached Australia on XXXX.

You extended your stay in Australia after your initial working holiday visa by applying for a Covid visa (temporary activity visa 408). You applied for the visa on XXXX and was granted on XXXX.

You re-applied for a Covid visa on XXXX. Your application is currently still pending, and you are on a bridging visa.

You intend to extend your stay on a long-term/permanent basis as you have an Australian partner, XXXX with whom you intend to apply for a partner visa when you meet the requirements.

This has been your intention from the beginnings of XXXX.

Prior to arriving in Australia, the purpose of your trip was to travel around Australia as much as possible and work to support your travels on the working holiday visa. Recently in XXXX, the purpose has changed, and you intend to stay and continue building your life in Australia on a long-term/permanent basis with your partner.

Prior to entering Australia, you did not intend to reside in Australia permanently. However, when Covid and lockdown started in March 20XX, you decided to stay in Australia indefinitely. You rented a room XXXX and started working as an XXXX on XXXX. You met your Australian partner at the end of XXXX.

You do not plan to leave Australia and wish to apply for a partner visa.

You have not left Australia for any period since you first arrived in Australia on XXXX.

Since XXXX, you and your Australian partner moved in together and rent a house at XXXX, XXXX. At the end of XXXX, you have been added to the current lease with your partner.

You also had short holidays in XXXX with your Australian friends.

You opened a XXXX on XXXX and purchased a car and a third party property insurance with XXXX for a year on 30 January 20XX. You also got XXXX insurance for a year on XXXX.

You opened a joint bank account with your partner with XXXX on X Month 20XX.

Since XXXX, you purchased and hold XXXX shares in Australian company - XXXX.

Prior to your departure to Australia, you rented a furnished room in XXXX. You terminated your lease at the end of XXXX and thereafter stayed with your parent in XXXX as well as your relatives in XXXX when you left XXXX for your travels. You disposed of all your furniture when moving to XXXX.

You do not have a permanent place to live in any other country.

You still hold a bank account in XXXX and insignificant personal belongings at your parent's storage.

You do not receive income from any non-Australian sources since your arrival to Australia.

You are currently employed by XXXX since XXXX. Your contract is casual and has no end date.

You do not have any position or job held for you in your country of origin.

You do not have any family (spouse, children) that accompanied you to Australia. You now have an Australian partner.

To your understanding, XXXX has the right to tax its citizens the year they move abroad and 3 years thereafter.

You have a fixed place, currently lease a house with an Australian partner and prior to that a room in a shared house. You have established close community and family ties (beach volleyball community and Australian partner and friends). You have invested in long term assets (car, household items, shares).

Relevant legislative provisions

Income Tax Assessment Act 1936, subsection 6(1)

Income Tax Assessment Act 1936,section 6-5

Income Tax Assessment Act 1997, section 995-1

Income Tax Assessment Act 1997, section 768-910

International Tax Agreements Act 1953

Reasons for Decision

Summary

Residency for tax purposes

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

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

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.

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 or purpose

•         family or business ties

•         maintenance and location of assets

•         social and living arrangements.

In your case, you are a citizen of XXXX and moved to Australia in XXXX on a working holiday visa. You have resided in Australia since XXXX and have not left the country since your arrival.

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.

Your intention is to remain on a long term/permanent residency in Australia and have an Australian partner that you share your living arrangements with. Therefore, you maintained a relationship with Australian partner, and this is still continuing. You have also satisfied the following conditions for the 20XX-20XX tax year:

•         you and your partner maintain a joint lease on a rental property in XXXX, Australia where you stay together. You have located all your personal belongings in Australia with your partner.

•         you have established an abode in Australia where you stay in rental accommodation with your partner.

•         you have established professional and social connections in Australia with various friends and social organisations.

•         you are considered a resident for tax purposes under the resides test because

•         you are maintaining an enduring association with Australia via an abode in Australia which remains available to you

•         you maintain strong family ties with your partner in Australia

•         you have Australian bank accounts and opened another joint bank account with your partner as well.

•         you purchased a car and taken out insurances

•         you have social living arrangements with various organisations in Australia

•         you continue to jointly lease a residential rental property in Australia.

Your circumstances taken together lead to a conclusion that you are a resident under this test for 20XX-20XX tax year.

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 in 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.

As you are a citizen of XXXX therefore, your domicile of origin will be XXXX. Your intention is to obtain a permanent residency in Australia based on your partner visa application.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that 'permanent' does not mean everlasting or forever, but it is to be contrasted with temporary or transitory.

The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number of factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the intended and actual length of the individual's stay in the overseas country;

(d) any intention either to return to Australia at some definite point in time or to travel to another country;

(e) the establishment of a home outside Australia;

(f) the abandonment of any residence or place of abode the individual may have had in Australia;

(g) the duration and continuity of the individual's presence in the overseas country; and

(h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

In your case it is considered that you have established a permanent place of abode in Australia as:

•         you leased and live in a rental property in Australia with your partner, and it remains available to you.

•         you have not left Australia since you arrived in XXXX

•         you have Australian bank accounts

•         you purchased a car and taken out insurances

•         you intend living in Australia for a considerable and indeterminable period of time.

The duration and continuity of your presence in Australia supports the argument that you established a long-term place of abode in Australia. While you are a citizen of XXXX, this does not outweigh the enduring association and connection you have, and maintain, in Australia.

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 XXXX, your usual place of abode is Australia.

Therefore, while you are not a permanent resident of Australia, the Commissioner considers you have established a permanent place of abode within Australia for 20XX-20XX tax purposes.

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.

You have been present in Australia for more than 183 days in 20XX-20XX tax year, therefore you are a resident for tax purposes under this test for the year. You did not meet this test for your 20XX-20XX year.

The superannuation Test

An individual is still considered to be 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.

Application to your circumstances

You arrived in Australia in March 20XX; therefore, you meet the requirements as an Australian resident for tax purposes in the 20XX-20XX year. For the 20XX-20XX year you did not meet the requirements, therefore you were not an Australian resident for tax purposes for the year.