Edited version of private advice

Authorisation Number: 1051948762291

Date of advice: 15 February 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Are you eligible for the foreign income exemption for temporary residents?

Answer

Yes.

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 are a citizen of Country A and you immigrated from that country to Australia

Your country of origin is Country A

You have lived in Country A in the five years prior to your arrival in Australia

You arrived in Australia less than two years ago

You were granted a temporary visa to enter Australia; it does not allow you to stay in Australia permanently.

You have not applied to have your visa date extended and have not applied for permanent residency in Australia since arrival. You are required to live in Australia for two years before you can apply.

You entered Australia intending to immigrate, and have no intention to leave Australia

Your residency intention is to live in Australia permanently

You do not hold a return airline ticket to Country A

You have not left Australia since your arrival

You had previously visited Australia a few years before your arrival on a tourist visa to visit friends

You lived at your friend's house when you arrived in Australia, you have since began renting a property at a different address

You have a car and a bank account in Australia

You lived in your purchased property in Country A prior to your departure to Australia

You maintained a permanent place to live in Country A after arriving in Australia; your spouse and child resided in that property until they joined you in Australia. You rented out the property after your spouse and child moved out and it remains rented out currently.

You have assets in Country A including property, mandatory provident fund, life insurance and bank accounts.

You are receiving income from non-Australian sources, mainly investment income from shares listed in other countries. You do not have employment in Australia or a job or position being held for you in Country A

Your youngest child accompanied you to Australia, they live with you and attend school in Australia.

Your spouse joined you in Australia on the same visa type as you approximately X months after you arrived in Australia.

Your other child remains in Country A

You have friends in Australia but no other social or sporting connections

You have friends and relatives in Country A but no other social or sporting connections

You are still a resident of Country A for tax purposes during your stay in Australia as you need to pay rates and government rent for your property in Country A

Your spouse is not a permanent resident or citizen of Australia

Neither you nor your spouse are Commonwealth of Australia Government employees for superannuation purposes

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

Income Tax Assessment Act 1997 Section 768-910

Income Tax Assessment Act 1997 Section 768-915

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

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. 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 Taxation Ruling IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

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.

TR 98/17 states that a migrant who comes to Australia intending to reside here permanently, or for the foreseeable future, is a resident from the date of arrival.

We consider that your circumstances are consistent with you residing in Australia.

This is because:

•         You have been in Australia since your arrival

•         You intend to reside in Australia permanently, you do not have a return airline ticket and do not intend to leave Australia.

•         Your spouse and one of your children lives in Australia with you

•         You previously lived with your friend when you arrived in Australia, and you now lease a property with your spouse and child

•         You have a bank account and a car in Australia

•         Your youngest child attends school in Australia.

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 your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia with the intention to remain in Australia.

It is considered that you have not abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. You are not yet entitled to remain in Australia indefinitely as you are residing in Australia on a temporary visa, but intend to apply for permanent residency when you are able to do so after being in Australia for two years.

You are not a resident 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 were not present in Australia for 183 days or more during the 20XX income year. You are not a resident for the 20XX income year under this test.

You have been in Australia for 183 days or more in the 20XY income year. We now need to consider whether we are satisfied that, during the 20XY income year, your usual place of abode was outside Australia and your intention was not 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 not satisfied that your usual place of abode was outside Australia for the 20XY income year and that you did not intend to reside in Australia.

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

•         You have maintained overseas assets due to your spouse and child remaining overseas, but your spouse has since joined you in Australia and you lease out your property in Country A

•         You rent a property in Australia

•         You came to Australia on temporary visas but intend to apply for permanent residency when the two-year waiting period is complete

•         You have not maintained strong social, sporting or professional connections in Country A, you have friends and relatives there

•         Your youngest child is enrolled in school in Australia.

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

•         You arrived in Australia with the intention to immigrate and remain in Australia permanently

•         You have not left Australia since arriving

•         You rent a property in Australia

•         Your property in Country A is being leased

•         You have no return airline ticket to Country A

•         You came to Australia on temporary visas but intend to apply for permanent residency when the two-year waiting period is complete

•         Your youngest child is enrolled in school in Australia.

You are a resident for the 20XX year 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.

You are not a resident under this test.

Conclusion

You satisfy one or more of the tests of residency and so are a resident of Australia for income tax purposes from the date you arrived in Australia to the year ending 30 June 20XY.

Question 2

Are you eligible for the foreign income exemption for temporary residents?

Summary

Yes.

Detailed reasoning

If you are a temporary resident, the following income will not be taxable in Australia:

•         Income you derive from a foreign source if you are a temporary resident when you derive it, unless the income is remuneration from employment you perform overseas while you are a temporary resident (section 768-910 of the ITAA 1997).

•         A capital gain you make from the disposal of an asset located in a foreign country / non-taxable Australian property (section 768-915 of the ITAA 1997).

Section 995-1 of the ITAA 1997 states that you are a temporary resident if:

•         you hold a temporary visa granted under the Migration Act 1958;

•         you are not an Australian resident within the meaning of the Social Security Act 1991; and

•         your spouse is not an Australian resident within the meaning of the Social Security Act 1991.

Under the Social Security Act 1991, an Australian resident is generally a person who resides in Australia and is either an Australian citizen or the holder of a permanent resident visa.

In your case, you and your spouse arrived in Australia both on temporary visas. You are not Australian citizens or the holders of permanent resident visas.

Therefore, you have been a temporary resident of Australia since your arrival and foreign sourced income will not be taxable in Australia unless it is remuneration from employment you perform overseas while you are a temporary resident.