Edited version of private advice

Authorisation Number: 1051925720497

Date of advice: 29 November 2021

Ruling

Subject: Residency

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 ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in country A and are a citizen under that country's laws.

You lived and received your education in Australia and became an Australian citizen.

You hold both an Australian and a country A passport.

You left Australia many years ago to live in country A and have resided there since departure from Australia.

You are a resident of country A for taxation purpose.

You have not spent more than 183 days in Australia since the departure.

You own a residence in country A.

You met your ex-spouse in country A. Your ex-spouse is an Australian citizen who had moved to country A.

You children lived in country A and they attended school. The children relocated to Australia with your ex-spouse in 20xx.

You remained living in country A.

You and your ex-spouse separated, and a divorce was granted.

Pursuant to the divorce, your children will reside with your ex-spouse (apart from school vacations) and it is intended that you will spend time in Australia to be with your children. You have requested your ex-spouse to return to country A with the children, but your ex-spouse is not willing to do this.

On your most recent trip to Australia, after hotel quarantine, you spent time in Australia visiting your family. You had to stay additional weeks longer than expected in Australia due to COVID-19 restrictions that prevented you from leaving.

You stayed in a serviced apartment close to your ex-spouse and children's residence.

Quite a lot of your time in Australia during the period was spent on the divorce.

Now that your children will reside in Australia, you anticipate spending average x months per year in Australia.

Prior to the Covid pandemic your visits to Australia would be brief and mainly focussed on spending time with your children. You had little recreation time and that would be spend in sport and limited social activities with other school parents and in-laws.

However, the pandemic has forced a change in your travel. You now travel to Australia for more extended visits (to allow for quarantine).

You have been advised by a child psychologist that to have meaningful custody arrangements you must show consistency and routine with the children. Accordingly, you propose to rent a property in Australia where your children can have their own rooms and belongings.

Subject to availability, you are looking for a 3-bedroom furnished apartment with a one-year lease, within walking distance to your children's residence. It will be vacant when you are not in Australia.

You cancelled your Australian driver's license. When in Australia you can drive by using an international license.

Since returning to country A, you have not voted in Commonwealth, State or local government elections.

You were removed from the Australian Electoral Commission's electoral roll.

You do not hold health insurance in Australia. You do not have an Australian Medicare card and have not claimed medical benefits in Australia for many years.

You do not own real estate, a vehicle, or other assets in Australia. You no longer maintain an Australian bank account.

You have no superannuation in Australia.

You have few significant social connections in Australia as you have not maintained a close social network with your friends.

When in Australia, you also mentor a group of business friends and former work colleagues from country A. This is a voluntary role without payment where you can share your knowledge and experience with others.

Most of your assets are in country A.

Your family, friends and the entirety of your business network is in country A.

Neither you nor your ex-spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

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

Detailed reasoning

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 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 not consistent with residing in Australia.

This is because:

•                You left Australia many years ago to live in your home country and have resided there since the departure.

•                You have not spent more than 183 days in Australia since the departure.

•                Most of your assets are in country A with any income derived from predominantly these assets. You do not hold Australian assets or investments and do not receive Australian income.

•                You own a residence in country A, you have no plans to sell this residence as you intend this to be your home.

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. You lived and received your education in Australia and became an Australian citizen Although you may have acquired a domicile of choice in Australia, you left Australia many years ago to live in country A and have resided there since your departure.

It is considered that even if your domicile did change to Australia, you then adopted a domicile of choice in country A.

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 not been present in Australia for 183 days or more during the relevant income years. 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 PSS or the 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.