Edited version of private advice

Authorisation Number: 1051917612633

Date of advice: 5 November 2021

Ruling

Subject: Residency

Question

Were you a resident of Australia for income tax purposes for the relevant income years?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 Jube 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in country X and are a citizen of that country.

You were granted an Australian permanent residency visa.

You were advised by your migration agent that you would need to meet the presence requirement of your permanent residency visa, otherwise it would be difficult to renew it or even resulted in cancellation of your visa.

Following that advice, you decided to stay for longer periods in Australia.

You have spent more than 183 days in Australia in each of the relevant years.

Your spouse and adult child live in Australia.

You and your family own a business in Australia through a company structure. You and your child are directors of the Australian company.

Your child is the managing director of the company and has been managing the business since it commenced. You are not involved in the management of the business due to your limited English skills.

You live at the property which is owned by your business.

You own bank accounts in Australia.

You are the managing director of your own company in country X and receive salary from the company. You are responsible for formulating the company's strategy and are in charge of the management team. You communicate with the management team through electronic communications and video conferences when you are in Australia.

You lodged income tax returns in country X for the periods you lived in Australia and lodged as a resident of country X.

You own bank accounts and commercial investment properties in country X.

You own your own home in country X and the property is unoccupied while you live in Australia.

You have enrolled in an English language course in Australia.

You have not applied for Australian citizenship and do not intend to apply for it.

You intend to go back to country X to care for an elderly relative as they need attentive care.

You have not developed any professional, social, or sporting connections in Australia.

You are a key member and president of local business associations in your hometown in country X.

You and your spouse are not Commonwealth of Australia Government employees for superannuation purposes.

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 Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia 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. This is because:

•         You hold a valid Australian visa which allows you to stay in Australia permanently,

•         Your family lives in Australia,

•         You spent most of the year living in Australia with your family during the relevant years, although we acknowledge that the reason is at least partly to meet your Australian permanent visa requirement,

•         You and your family own a business in Australia,

•         You and a family member are directors of the Australian company.

•         You have enrolled in an English language class in Australia.

You are 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 country X and your domicile of origin is country X. You were granted an Australian permanent residency visa but you have not applied for Australian citizenship and you do not intend to apply for it.

There is not enough evidence to say that you have abandoned your domicile of origin in China and acquired a domicile of choice in Australia.

Therefore, you are 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 have been in Australia for 183 days or more since the 20yy income year. We now need to consider whether we are satisfied that, during the periods, your usual place of abode was outside Australia and your intention was not to take up residence in Australia.

In the context of the 183-day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode (Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836).

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts.

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income years and that you did not intend to reside in Australia.

In respect of the usual place of abode, this takes into account that:

•         You spend most of the year living in Australia during relevant periods, although we acknowledge that the reason is at least partly to meet your Australian permanent visa requirement,

•         You and your family own a business in Australia,

•         You live with your spouse and adult child in Australia,

•         You have enrolled in a course to study English in Australia.

In respect of the intention to take up residence, this takes into account that:

•         Your Australian visa allows you to stay in Australia permanently,

•         Your family lives in Australia,

•         You set up a business in Australia.

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 satisfy the resides and 183-day tests of residency so were a resident of Australia for income tax purposes for the relevant income years.