Edited version of private advice

Authorisation Number: 1051941081277

Date of advice: 11 February 2022

Ruling

Subject: Residency for tax purposes

Question

Are you a resident of Australia for tax purposes under section 6(1) Income Tax Assessment Act 1936 for the years XXXX and XXXX?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

XX Month 20XX

Summary

Based on the facts you are a resident for tax purposes for the year ending June 20XX.

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The terms 'resident' and 'resident of Australia', regarding an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a 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 the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant:

•         physical presence

•         intention or purpose

•         family or business ties

•         maintenance and location of assets

•         social and living arrangements.

In your case, you are still a citizen of Australia, as you do not have a residency status in XXXX and have to renew your visa to stay in XXXX every X months. You departed from Australia to XXXX to see your spouse who had moved to XXXX to be with your parents and your in-laws for xxxx xxxx.

This subject is addressed in Taxation Ruling 98/17 (TR98/17) Income tax: residency status of individuals entering Australia. At paragraphs 20 and 21 it states -

20. All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

•         intention or purpose of presence;

•         family and business/employment ties;

•         maintenance and location of assets; and

•         social and living arrangements.

21. No single factor is necessarily decisive, and many are interrelated. The weight given to each factor varies depending on individual circumstances.

You do not have an intention to remain in XXXX and your stay was only because you were unable to travel back to Australia due to travel restrictions. You did book and rebook your flight back to Australia, but they were cancelled due to the travel restrictions. You have also satisfied the following conditions:

•         you and your spouse still maintain a property in Australia where you stay together. All your personal belongings are still in Australia. You also have a car and pay insurances for your belongings and the motor vehicle in Australia. You have also continued to pay electricity bill for your house.

•         you have not established an abode in XXXX.

•         you maintain professional and social connections in Australia with various friends and social organisations.

•         you are considered a resident for tax purposes under the resides test because you maintain an enduring association with Australia

•         you have Australian bank accounts as well as you established XXXX bank account to use in XXXX for your spouse and yourself.

•         you have a car and renewed insurances in Australia

Your circumstances taken together lead to a conclusion that you are a resident under this test for the 2019-20 and 2020-21 income tax years.

The Domicile Test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied, they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

Your domicile of origin is Australia. Your intention is to continue to work and reside on a permanent basis in Australia with your spouse and child.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that 'permanent' does not mean everlasting or forever, but it is to be contrasted with temporary or transitory.

The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number of factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the intended and actual length of the individual's stay in the overseas country;

(d) any intention either to return to Australia at some definite point in time or to travel to another country;

(e) the establishment of a home outside Australia;

(f) the abandonment of any residence or place of abode the individual may have had in Australia;

(g) the duration and continuity of the individual's presence in the overseas country; and

(h) the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

In your case it is considered that you have established a permanent place of abode in Australia as:

•         you maintain a residential property in Australia that you will come back to with your spouse and child, and it remains available to you

•         you have Australian bank accounts that you maintain and utilise to pay for bills in Australia

•         you still maintain a car and renewed insurances in Australia

•         you intend to return to Australia as soon as travel restrictions are lifted.

The duration and continuity of your presence in Australia supports the argument that you established a long-term place of abode in Australia. You have an enduring professional and social connections in Australia.

Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly when you are physically in a country. Your place of abode does not have to be fixed but must have the attributes of a place of residence or a place to live. Based on your facts and circumstances, it is determined that your usual place of abode is Australia and therefore you are a resident for tax purposes.

The 183 days 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.

Although you have been in You do not have an intention to remain in XXXX and your stay was only because you were unable to travel back to Australia due to travel restrictions. for more than 183 days in XXXX and XXXX years, it was due to the Covid 19 travel restrictions.

The superannuation Test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or 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, this test does not apply to you.

Application to your circumstances

You travelled to XXXX as your spouse xxxxx and you went to be with them for xxxx xxxxx. You are an Australian citizen and have no intention to reside in XXXX on a long-term basis. Your visa to stay in XXXX is renewed every X months. You have built long-term social and professional relationships in in Australia. You still have your main residence in Australia and pay for the outgoings on regular basis as required. You still hold bank accounts in Australia and use them even when you are in XXXX. Furthermore, you have a job in Australia to return to, but travel restrictions have made it difficult for you to return to your job. You have motor vehicle and renewed insurances in Australia. Therefore, you are a resident for Australia for tax purposes.