Edited version of private advice

Authorisation Number: 1051929343832

Date of advice: 2 December 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

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

Basic facts

Person A's date of birth is XXXX

Person B's date of birth is XXXX

Person A's country of origin is Country A, however they migrated to Australia and acquired Australian citizenship years ago. As such Person A is a citizen of the Country A and Australia.

Person B's country of origin is Country B, however they migrated to Australia and acquired Australian citizenship some years after Person A. As such Person B is a citizen of Country B and Australia.

Neither of you have been granted permanent residency to any other country.

You are both each other's spouse.

You both regularly travel to Country B and spend time there with Person B's family.

You both left Australia a couple of years ago, with the intention of returning to Australia after about 12 to 18 months.

However, due to COVID-19 the Country B Government's advice was and still is no to travel.

The COVID-19 situation in Country B is currently getting worse, where Inter-provincial travel is severely restricted (unless fully vaccinated) and there is currently a ban on all domestic flights to and from areas of the country.

You are both currently staying in the south of Country B, a substantial distance from the capital so it is not possible for you to currently travel to the capital with the current travel restrictions.

You estimate that it could easily be six months before you can get vaccinated which would allow you to travel more freely, however with the current limited number of flights and restrictions on passenger numbers you may be needing to remain in Country B for at least another year.

You intend on returning to Australia as soon as you can travel safely back to Australia and when current travel restrictions are lifted.

Regarding your travel movements in the years going forward, it will depend on the COVID-19 situation.

When travel is relatively easy and affordable then you would continue with our plan to live in Australia and over-winter in Country B as you used to do when living in Australia.

Your prior travel movements are as follows:

Travel prior to the ruling period. In Australia until early 20XX except as detailed below in prior years:

•         20XX in country B for approx. 4 months

•         The following year in Country B for approx. 4 months

•         The following year in Country B for approx. 4 months

•         The following year in Country B for approx. 4 months up to the ruling period.

Travel during the ruling period;

In Country B, no domestic or international travel.

General

Person A entered Country B on a Non-Immigrant Type O (spouse) visa, which only allows him to stay for 90 days only. This visa was not supplied by an employer.

Person A has applied for the following extensions to this visa as follows:

Extension 1 - applied before the ruling period, extended for approx. 1 year. Reason - 90-day visa almost expired.

Extension 2 - applied just before expiry at beginning of COVID pandemic, extended for approx. 1 year. House not finished and cannot travel due to the first lockdown.

Extension 3 - applied prior to expiry, extended approx. one year. House almost finished but cannot travel due to second lockdown.

You were expecting to be in Country B for 12 to 18 months as detailed in the ruling application, so at least two extensions were always going to be required.

Person A does not intend on applying for citizenship or permanent residency in Country B.

You have not returned to Australia for any period after first arriving in Country B.

Regarding Medicare, you changed addresses in Australia from one state, to another

Regarding the Australian Electoral Commission, you changed addresses in Australia and registered as overseas voters.

Regarding your Australian Private Health insurance, this was renewed twice while overseas. However, the policy was only cancelled when it became obvious you would not be able to use your health insurance in Australia due to the lockdowns and travel restrictions.

When completing incoming and outgoing passenger cards, you stated that you were a resident of Australia with the address in Australia.

Accommodation

About two and a half years ago you sold your home in Australia, and once Person A's father had finished building his own home in another state in Australia, you both planned to move in with Person A's father, and following this you planned to build your own house on the same block of land.

Upon completion of this building and moving into it, your intention was to return to your normal routine of winters in Country B and summers in Australia. However due to COVID-19 these plans have been disrupted and as such you are now stuck in Country B, and in addition due to the COVID-19 situation back in Australia the completion of the building has also been delayed.

Your current overseas address is in Country B is a house owned by Person B's parents.

This house was built next to their existing family home. You have used the house for our holidays in Country B for years, staying on average 4.5 months every year. You also purchased a motor vehicle and furnished this house for your use during our holidays in Country B and for any other family members who may visit.

You do not own any other property in Australia.

Assets

You hold bank accounts in Australia, where you earn interest.

You hold cash, superannuation, and shareholding assets in Australia.

You also receive dividend income in Australia.

The savings held in these bank accounts were going to be used to build a house in Australia on the same block of land where Person A's father lives and you have relevant emails which show your intentions to do this.

Person A also has a superannuation account in Australia.

Person A made personal super contributions in Australia whilst he was overseas, along with share purchases.

When you left for Country B your mail was redirected from one Australian state to another as it was your intention to move to the other Australian state as per the abovementioned arrangement with Person A's father, not Country B.

Apart from a small amount of interest earned in Country B, no other income is being earned in Country B.

You have been living off your savings in Australia, and your living expenses in Country B are being paid from these Australian bank accounts.

Most of your belongings, including household and personal effects, were shipped from one Australian state to the other.

You have not advised any Australian financial institutions including any Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax can be deducted.

In Country B you own a motor vehicle and household effects which you purchased years before the ruling period for your regular trips to Country B.

You also have a bank account in Country B.

You have not lodged any income tax returns in Country B.

Family and social connections

You do not have any dependents.

No other family accompanied you overseas.

Person B still maintains her connection with an Australian church group via Zoom video calls.

You have not established any professional, social or sporting connections in Country B.

You have not obtained any overseas qualifications such as a driver's licence, as you still use your Australian driver's licence in Country B.

Person A maintains a Medicalert membership in Australia for an allergy.

Employment

You do not have any employment positions or jobs being held for you in Australia.

You have never been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

You have not undertaken any courses of study.

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.

This is because:

•         You only intended to go to Country B for 12 to 18 months, however due to reasons outside your control (COVID-19 and associated travel restrictions in Country B), your stay overseas has been extended.

•         You intend on returning to Australia as soon as you can travel safely back to Australia and when current travel restrictions are lifted.

•         Whilst you have sold your residence in Australia, you also have an agreement with Person A's father whereby you will be living in his property upon your return to Australia, and following this the agreement also allows you to build your own residence on Person A's fathers property.

•         Following you being able to return to Australia, and when travel is safe and affordable, you hope to return to your previous travel pattern of spending summers in Australia and winters in Country B.

•         Your current accommodation in Country B is a house owned by Person B's parents, and is considered to be temporary. This house is also available for any other of Person B's family to use.

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 Person A's case, he was born in Country A and his domicile of origin is the Country A. Person A immigrated to Australia years ago and became an Australian citizen.

It is therefore considered that Person A did abandon his domicile of origin and acquired a domicile of choice in Australia when he became an Australian citizen.

As Person A has not obtained permanent residency or citizenship of any other country, his domicile is Australia.

In Person B's case, she was born in Country B and her domicile of origin is in Country B. Person B immigrated to Australia and became an Australian citizen.

It is therefore considered that Person B did abandon her domicile of origin and acquired a domicile of choice in Australia when she became an Australian citizen.

As Person B has not obtained permanent residency or citizenship of any other country, along with the fact that she is not living in Person B on a permanent basis, her domicile is also 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.

The Commissioner is not satisfied that your permanent place of abode is outside Australia. This takes into account that:

•         You only intended to go to Country B for 12 to 18 months, however due to reasons outside your control (COVID-19 and associated travel restrictions in Country B), your stay overseas has been extended.

•         You intend on returning to Australia as soon as you can travel safely back to Australia and when current travel restrictions are lifted.

•         Whilst you have sold your residence in Australia, you also have an agreement with Person A's father whereby you will be living in his property upon your return to Australia, and following this the agreement also allows you to build your own residence on Person A's fathers property.

•         Your current accommodation in Country B is a house owned by Person B's parents, and is considered to be temporary.

•         You have used this accommodation in Country B for your holidays in Country B for years, staying on average 4.5 months every year.

•         This house is also available for any other of Person B's family to use.

•         You do not own any property in Country B.

You are a resident of Australia under the domicile test outlined in the definition of 'resident' in subsection 6(1) of the ITAA 1936.

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 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 satisfy the resides and domicile tests of residency and you are therefore a resident of Australia for income tax purposes for the year ended 30 June 20XX.