Edited version of private advice

Authorisation Number: 1051936214931

Date of advice: 22 December 2021

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes?

Answer

No

This ruling applies for the following period:

Year ending 20XX

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You are a citizen of a foreign country ("the foreign country")

You are not a tax resident of any other country and you have not lodged any foreign income tax returns while living in Australia.

You have a drivers licence in the foreign country.

You arrived in Australia a few years ago on a student visa to undertake study at an Australian University.

You are currently completing a Masters degree which you are currently completing online due to being unable to attend classes on site in Australia.

You state you are unsure whether you will stay in Australia once you have graduated.

You have purchased a residential property in Australia as an investment, you receive rental income from this property.

You lived in an apartment in Australia that you rented, the apartment is now vacated as you have been unable to return to Australia.

While living in Australia, you were employed. You no longer hold that job since returning to the foreign country.

Your family lives in an apartment in the foreign country, you stay with them when you return to that country.

You have regularly travelled back to the foreign country (eight times) in the University holidays since arriving in Australia.

You departed Australia and have been unable to return to Australia due to border restrictions as a result of the Covid-19 pandemic

You have spent approximately 217 days outside Australia in the relevant income year

You did not advise your private health insurer to suspend or cancel your health insurance policy. You have the required health insurance coverage for your student visa, Overseas Student Health Cover.

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

You do not receive income from sources outside Australia

Relevant legislative provisions

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997)

Section 6(1) of the ITAA 1936

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 have been overseas for approximately 217 days in the 20XX-XX income year

•         Each year since you moved to Australia to study, you have travelled back to the foreign country to stay with family in the University holiday.

•         You have not decided whether you intend to remain in Australia once you have finished studying.

•         You had employment in retail while you were in Australia which is now terminated.

•         You have a drivers license in the foreign country, not in Australia

•         You purchased a residential investment property in Australia which you receive rental income from.

•         You have vacated your residential property that you rented in Australia once you realised you would not be able to return to Australia due to the border closures.

•         You have not established any social, professional or sporting connections in Australia

•         You are not listed on the Australian electoral roll

•         You are completing your classes for your Masters degree remotely online.

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.

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 the foreign country and your domicile of origin is that country. You travelled to Australia a few years ago on a student visa to undertake study in Australia.

It is considered that you did not abandon your domicile of origin in the foreign country 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 student visa permit which was valid for 5 years in line with your enrolment and you are unsure whether you intend to stay in Australia after you complete your education.

You are not a resident of Australia under the domicile 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 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

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 year ended 30 June 20XX.