Edited version of private advice

Authorisation Number: 1051910588887

Date of advice: 25 October 2021

Ruling

Subject: Residency and work-related home office expenses

Question 1

Are you a resident of Australia for taxation purposes up until you ceased renting the property in Australia?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes after you ceased renting the property in Australia?

Answer

No.

Question 3

Are you able to use the short cut method when calculating working from home deductions?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Y.

You are a citizen of Country Y.

You are not a permanent resident of any other country.

You have been living and working in Australia since the 20XX income year.

You have a 485 temporary visa to enter Australia.

You have XX months left on your visa.

It was your intention to obtain permanent residency in Australia.

In March 20XX you went back to Country Y for a 3 week holiday taking only minimum luggage as you intended on returning to Australia.

Due to the pandemic, you have not been able to return and you have remained in Country Y at your parents' home.

You have made attempts to return to Australia but due to Australian government restrictions as you are not a citizen or permanent resident of Australia you are not able to return to Australia.

This restriction is in place for the foreseeable future.

You have been working remotely for your Australian employer in Country Y.

You are a full-time employee of the Australian employer.

You rented accommodation in Australia and you vacated this property in XXXX 20XX as you have not been able to return to Australia.

You have lived at this accommodation the whole time you have been in Australia.

Your sibling is storing your belongings from the property in Australia at their premises.

You have social connections in Australia which consist of friends from when you were studying in Australia, your friends from work and you play tennis and go to the gym in Australia.

You have family and social connections in Country Y and attend a gym in Country Y.

You work from a home office at your parents' house in Country Y.

You have no assets in Australia.

You have some cash and a small amount of property in Country Y.

You do not have a spouse or any dependants.

You are not eligible to contribute to the PSS or the CSS Commonwealth super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 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. 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 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 consistent with you residing in Australia prior to you ceasing the lease on your rental property in XXX 20XX.

You have been living and working in Australia since 20XX.

Your behaviour and habits have been consistent with someone residing in Australia.

The Commissioner is satisfied that prior to you ceasing your lease in Australia in XXX 20XX you were residing in Australia according to ordinary concepts.

After you ceased your lease in Australia the Commissioner does not believe you are residing in Australia.

This is because you are unable to return to Australia due to you not being a citizen or permanent resident of Australia.

You do not have a home in Australia as you ended the lease in XXX20XX.

You have been in Country Y for the whole of the 20XX income year.

You are a resident of Australia under the resides test up until XXX 20XX when you ceased your lease in Australia as you maintained a connection with Australia up until this period.

You are not a resident of Australia for taxation purposes from when you ended your lease in Australia.

The Commissioner believes that you no longer have a connection to Australia as you cannot return to Australia at the present time and you do not have a continuity of association with Australia.

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 Country Y and your domicile of origin is Country Y.

You are not a citizen or permanent resident of Australia.

It is considered that you did not abandon your domicile of origin in Country Y and acquire a domicile of choice in Australia.

You are not a resident 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 in Australia for 183 days or more in the 20XX income year.

You left Australia in March 20XX and have not been able to return to Australia.

You have not been 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.

Conclusion

You are a resident of Australia for taxation purposes up until you ended your lease on your Australian property in XXX 20XX.

You are not a resident of Australia for taxation purposes after you ended your lease in Australia.

You will be able to use the short cut method to calculate your work- related deductions against any Australian sourced income when you lodge your tax returns. This method applies to residents and non-residents who have Australian source income.