Edited version of private advice

Authorisation Number: 1051919552305

Date of advice: 8 November 2021

Ruling

Subject: Residency - medical treatment

Question

Are you a resident of Australia for income tax purposes?

Answer

No.

This ruling applies for the following periods:

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

General facts

You were born in Country A.

You are a citizen of Country A.

You arrived in Australia in July 20XX and shortly thereafter, you were hospitalised for 38 days.

You were granted the Resident Return Visa (subclass 155) on 25 June 20XX and the visa is valid until 25 June 20YY.

In applying for the Resident Return Visa (subclass 155), you provided the following information in support of your substantial ties to Australia and your eligibility for the visa:

•         You have four adult children, three of whom reside in XXX, State A since 19XX.

•         Your three adult children who reside in Australia, have full-time employment.

•         You have seven grandchildren who reside in Australia.

•         You own a property State A (Investment Property) which is being rented.

•         You own a property (the Property) which you use as accommodation while you are in Australia.

•         The Property is unoccupied while you are absent from Australia.

You intend to reapply for the Resident Return Visa closer to the expiry date.

Your permanent place of abode is Country A and you occasionally travel between Australia and Country to visit your adult children and for the purpose of satisfying the travel requirements stipulated by the Return Resident Visa.

You have been in Australia for more than 183 days.

You have not been able to return to Country A due to the need for ongoing life-saving renal dialysis treatment in Australia.

You require medical treatment 3 days per week in Australia.

But for your serious ongoing health condition, you would ordinarily live in Country A and you consider Country A as your home.

You intend to start travelling between Country A and Australia once the COVID pandemic is over and if you receive a kidney transplant.

When completing incoming and outgoing passenger cards, you state your address in XXXX and your residency status as a resident of Country A.

You own a XXX trading business in Country A which is currently being managed by your child while you are receiving medical treatment in Australia.

Your assets in Country A include your home, a secondary home, an apartment, various vacant land holdings, commercial properties and savings bank accounts.

You and your spouse plan to live in Australia after you retire from the XXX trading business.

Family and social connections

All of your close extended family relatives are in Country A.

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

You hold a driver's licence in Australia and Country A.

Income and employment

You receive director fees/wages from your XXX trading business which is based in Country A.

You receive rental income from your investment property in Australia.

You lodge an income tax return annually in XXXX and declare that you are resident of Country A for tax purposes.

You have lodged income tax returns in Australia for the ruling period, declaring that you are a non-resident for Australian tax purposes and have only declared Australian sourced income.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(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 not consistent with residing in Australia.

This is because:

•         You hold significant assets in Country A including your home, a secondary home, an apartment, various vacant land holdings, commercial properties and savings bank accounts.

•         You own and operate a timber trading business in Country A.

•         You lodge income tax returns annually in XXXX and declare that you're a resident of Country A for taxation purposes.

•         You have lodged income tax returns in Australia for the ruling period and declare that you are a non-resident of Australia for tax purposes.

•         Except for your three adult children who live in Australia, all of your close extended family are in Country A.

•         Ordinarily you live and work in Country A.

•         You occasionally travel to Australia to visit your children and grandchildren.

•         When completing incoming and outgoing passenger cards, you state your address in Country A and your residency status as a XXXX resident.

•         You arrived in Australia in July 20XX and were hospitalised for 38 days.

•         Since your arrival, you have remained in Australia for the purpose of receiving life-saving medical treatment.

•         But for your serious ongoing medical condition, you ordinarily live in Country A.

•         You have not been able to return to Country A due to the border closures as a result of the pandemic.

•         You intend to travel between Australia and Country A once the pandemic is over and if you receive a kidney transplant.

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 Country A and your domicile of origin is Country A.

It is considered that you did not abandon your domicile of origin in Country A and acquire a domicile of choice in Australia. You were not entitled to reside in Australia indefinitely and while living in Australia, you only held a Resident Return Visa which is valid until 25 June 20YY.

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 in the in the ruling period. We now need to consider whether we are satisfied that, during the ruling period, your usual place of abode was outside Australia and your intention was 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 satisfied that your usual place of abode was outside Australia for the ruling period and that you did not intend to reside in Australia.

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

•         you live and work in Country A;

•         you own and operate a timber trading business in Country A.

•         your close extended relatives all live in XXXX, save for your three adult children who live in Australia;

•         you hold significant assets in XXXX including your home, a secondary home, an apartment, various vacant land holdings, commercial properties and savings bank accounts; and

•         you occasionally travel to Australia to visit your adult children and grandchildren.

In respect of the intention to take up usual place of abode in Australia this takes into account that:

•         you hold a Return Resident Visa which is valid until 25 June 20YY;

•         you intend to reapply for the Resident Return Visa closer the expiry date; and

•         you have not applied for an Australian citizenship.

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

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the ruling period.