Edited version of private advice

Authorisation Number: 1051893889445

Date of advice: 14 September 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes in the 20XX income year?

Answer

No.

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.

You married in Australia.

You travelled with your spouse to Country Z a couple of years after you were married.

You lived in Country Z several years.

You then travelled to Country Y.

You remained in Country Y until Winter 20XX when your spouse offered an opportunity in Country X. Due to determining that living in Country X would not be suitable for your family, your spouse organised for their employer to cover the costs of temporary accommodation in Australia for you and your children.

In Winter 20XX, you went to Australia.

Prior to departing Country Y, you shipped X parcels with basic personal effects to Australia.

The other personal effects remained in the Country Y apartment until XX XXXX 20XX. Your spouse briefly returned from Country X to Country Y on XX XXXX 2019 to make arrangements for the personal effects to be packed up and collected by an international relocation company. The personal effects were collected and initially placed in storage in Country Y, with the intention to be shipped to the future work location of you both following your spouse's 6-month assignment in Country X.

After finalising your personal affairs in Country Y, your spouse returned to Country X until Summer 20XX.

In Summer 20XX, as previously agreed, your spouse was presented with a work opportunity to commence an assignment in Country B. They agreed to this proposal and you and your family departed from Australia in Autumn 20XX.

The small amount of personal effects previously shipped to Australia by you were sent to Country B in advance of air freight.

You and your spouse along with your children returned to Australia in Autumn 20XX.

This trip was initially a holiday to Australia.

You completed 2 weeks of hotel quarantine.

You were planning to return to Country B at the end of June / beginning of July 20XX to finalise your tasks in Country B.

Due to a COVID-19 outbreak in Country B, which started shortly after you left Country B it was agreed that your spouse would continue working remotely from Australia (home office).

Your spouse has received a proposal from their employer to shift permanently to a different role in an Australian office.

Your spouse has commenced the handover process for this new role and will finalise the handover of their responsibilities for Country B remotely from Australia (i.e. no further travel foreseen to Country B).

You have children that were born in Country Y.

Neither you nor your spouse has been a member of any Commonwealth Employee Superannuation Scheme.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

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

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 IT 2650 and 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.

We consider that your circumstances are not consistent with residing in Australia.

This is because:

•         When you and your family returned to Australia you initially came to Australia for a holiday.

•         Prior to arriving in Australia in Autumn 20XX, you were living on a permanent basis in Country B.

•         Due to an outbreak of Covid in Country B your spouse commenced working remotely in Australia for their employer in Country B.

•         You didn't form a strong intention to stay in Australia until post the 20XX income year. You were in Australia for a temporary holiday until your plans changes in the 20XX income year.

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

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside 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 were born in Australia and your domicile of origin is Australia. You have not taken steps to change your domicile. Therefore, your domicile is Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The courts have held that the phrase 'permanent place of abode' calls for a consideration of the town or country where a person is located. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has his or her permanent place of abode outside Australia are:

a)    whether the taxpayer has definitely abandoned, in a permanent way, living in Australia; and

b)    whether the taxpayer is living permanently in a specific country.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

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

b)    whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

c)    whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

d)    whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)    the duration and continuity of the taxpayer's presence in the overseas country; and

f)     the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

The Commissioner is satisfied that your permanent place of abode is outside Australia. This takes into account that:

•         you were in Australia on a holiday

•         Your home and belongings were in Country B

•         It was your intention to return to Country B

Therefore, you were not a resident of Australia under this test.

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

You were not present in Australia for 183 days or more during the 20XX income year. You are not a resident under this test.

Superannuation Test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test.