Edited version of private advice

Authorisation Number: 1051960324895

Date of advice: 15 March 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes for the relevant period?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

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 Australia.

You are a citizen of Australia.

Several years ago, you went with your ex-spouse to Country Z where your ex-spouse was working.

You were based in Country Z for a number of years.

Your children were in Country Z with you until they returned in a few years later to live with your parent in Australia.

You were a home maker in Country Z and did not work.

You did not own any property in Country Z.

A few years ago you returned to Australia.

Shortly after returning to Australia your ex-spouse sold a property you owned.

You rented an apartment for a period of time before purchasing another property.

This property was your main residence (the property).

During the relevant period, you were a regular traveller outside of Australia attending to your own business activities and for personal holidays:

You operate as a sole trader in Australia.

You started to operate in Country Z. These overseas trips during this period also furthered this business.

Some of the trips were for personal reasons while you accompanied your ex-spouse on his business travel.

During this period the property remained your primary place of residence.

You travelled to numerous countries on your personal business, staying in short-term accommodation; you had no lease of a property outside Australia.

In a prior year there was breakdown in the marriage between you and your ex-spouse.

You attended to your business overseas and so applied for an essential departure visa with the Department of Immigration to enable you to travel outside Australia.

You first left Australia a couple of years ago.

Due to the Australian Government's changes to the travel rules/restrictions during Covid-19 persons were unable to depart Australia on short-term travel visas, which you typically used in the past when travelling on your business trips.

Consequently, during the relevant period you left Australia based on essential business purposes.

You were concerned that while needing to travel overseas for business purposes, changes to travel rules into foreign countries and Australia could be announced at any time, thus potentially stranding you overseas for extended periods of time, while you tried to arrange return flights to Australia.

You consequently applied for a permanent residency ("PR") visa overseas as Country Z halted issuing short term visas due to Covid-19. This PR was sponsored by a company overseas (controlled by contacts of yours'), as they were looking to contract your services for a short-term engagement. This PR provided you with a measure of reassurance that, if you were stranded outside Australia, you would have a valid visa in a country you could remain in while organising your return to Australia. In this respect, because the Country Z main airline hub into/out of Europe it was the best location to be based to organise flights home to Australia if you were stranded.

This PR visa for Country Z was granted, on a term for a couple of years. You had no intention of taking up permanent residency overseas.

After a trip taken a couple of years ago you returned to Australia, having been out of the country for only a couple of months (including days in transit). During this time, you only spent a few days in Country Z with the remaining time days in other countries.

You did not leave Australia again until the following year, when you also travelled on essential business purposes.

You were present in Australia for the majority of the year prior to departing for another overseas trip.

For this trip, you left Australia for a few months (including transit times).

This trip only had a couple of weeks spent in Country Z and the remaining time days spent in other countries.

During your overseas trips you stayed in short-term accommodation (i.e. hotels or Airbnb).

During your time in Country Z, you did some work for the sponsoring company in Country Z but was not paid for this work.

Your primary purpose for leaving Australia was for essential business purposes.

Your intention was always to return to Australia where your family and life had been based since your return from Country Z.

In accordance with a binding financial agreement, you and your spouse officially separated:

As part of the financial arrangement, you received a property in Australia, which was previously owned by a company controlled by your ex-spouse.

In addition, the financial agreements dealt with other matters such as transferring your car from your ex-spouse's name, splitting up your joint Australian bank accounts and your removal as trustee from a self-managed superannuation fund.

You sold the property and had your personal effects shipped to the unit which you intended to make your primary place of residence following settlement of sale of the property.

You have a current driver's licence, has Australian private health cover with APIA and had your name on all bills and rates notices for the property.

You failed to register to vote in Australia upon your return, but this was an oversight.

Neither you or your ex-husband have ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

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. 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 Residency - Permanent place of abode outside Australia (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 explains that an individual may be considered a resident under the resides test if their behaviour while they are here is such that they exhibit a degree of continuity, routine or habit that is consistent with a person residing in Australia according to the ordinary meaning of the word 'reside'.

As a broad principle, where a person has a settled routine for six months or more (for example, the person has stayed in one place or has been with one employer for six months at the same location) they may satisfy the resides test. The period of time of the settled routine need not be confined to one financial year. As long as the pattern of behaviour is exhibited the individual may be regarded as being a resident from the time of their arrival.

We consider that your circumstances are consistent with you residing in Australia according to ordinary concepts.

This is evident from the following:

•         You returned to Australia several years ago to live on a permanent basis

•         Your family are in Australia

•         Your physical home is in Australia

•         You have a business which takes you overseas for work

•         You do not intend on being outside Australia on a permanent basis.

You are a resident under this 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 Australia and are a citizen of Australia.

You have not taken any steps to change your domicile.

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 you have a permanent place of abode outside Australia.

You make short trips overseas for your work and you only stay in short term accommodation. You do not intend on being outside Australia on a permanent basis.

You are 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 in Australia for more than 183 days in the relevant income years.

You are 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 and your spouse 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 are a resident of Australia for taxation purposes.