Edited version of private advice

Authorisation Number: 1051898451865

Date of advice: 21 September 2021

Ruling

Subject: Residency for tax purposes

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2021

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You and your spouse are Australian citizens who are long term Australan residents.

You retired many years ago due to poor health.

You and your spouse went to Country X for an extended holiday.

Your spouse returned to Australia for urgent family reasons.

Your spouse later rejoined you in Country X and you spent time with family and friends.

Your spouse then returned to Australia to care for a relative.

You were unable to return to Australia due to your poor health.

Your original plan was to return to Australia after several months; however, due to the onset of the COVID-19 pandemic and your age and poor health, it was too much of a risk for you to travel.

You are currently still in Country X and your spouse remains in Australia.

You are living in accommodation in Country X that you had previously purchased.

One of your adult children lives in Country X.

On initially going to Country X, you rented out your home in Australia to a friend as a holiday place on a daily basis. The rent was below the market price and contingent on the friend vacating at short notice on your return.

You and your spouse subsequently sold your home and your spouse moved into a another dwelling.

You will return to Australia as soon as you are able.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

•       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. 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'. 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, we consider that your circumstances are consistent with you residing in Australia. This is because, in particular:

•       you left Australia for a holiday and had to extend your stay due to circumstances beyond your control

•       you intend to return to Australia as soon as you are able

•       you have a spouse in Australia.

You are a resident of Australia under the resides test.

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, your domicile is Australia and there is no evidence to suggest that you have taken any steps to change your domicile to Country X.

Therefore, your domicile is still 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.

In your case, the Commissioner is not satisfied that your permanent place of abode is outside Australia. This takes into account that:

•         you left Australia for a holiday and had to extend your stay due to circumstances beyond your control

•         you intend to return to Australia as soon as you are able

•         you have not definitely abandoned, in a permanent way, living in Australia.

You are 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.

In your case, you were not physically present in Australia for over half the relevant income year. Therefore, 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 as you meet at least one of the residency tests as outlined above.