Edited version of private advice

Authorisation Number: 1051960394146

Date of advice: 16 March 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes from DDMMYYY?

Answer

No.

Question 3

Are you a resident of Australia for taxation purposes from DDMMYYYY?

Answer

Yes.

The Commissioner is satisfied you are a resident of Australia for tax purposes from DDMMYYYY.

This ruling applies for the following period:

Year ending 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are an overseas citizen and resident.

You came to Australia in 19XX and left Australia in 19XX and returned overseas.

You lived, worked, and married in your birth country.

You applied to become a permanent resident of Australia (while not living here). This was granted in 20XX.

You own property jointly with your spouse, bank accounts, and other necessary things that tie you to your birth country.

For many years you have been employed as a subcontractor for international based telecommunication companies.

You are responsible for certain international regions and travel frequently to these regions including Australia.

When you travel to Australia for business, these trips can be between four to eight weeks.

Your child moved to Australia in 20XX, and they lived in a rental property.

You stayed with your child when you had business trips to Australia.

In 20XX you purchased property (property A) for your child to live in. You are the sole legal owner of property A. Property A consists of two bedrooms and your child was the sole occupier.

Your travel movements to Australia from DDMMYY to DDMMYY was less than 183 days.

On DDMMYY you arrived in Australia for work purposes amid the commencement of COVID-19.

Due to COVID-19 and lockdown restrictions you have not been able to return to your birth country and lived in property A and worked remotely.

Any return flights booked, were postponed and eventually cancelled by the airline.

You have not returned to your birth country since arriving in Australia on DDMMYYYY.

On DDMMYYYY you entered into a contract of sale and purchased property B.

On acquisition, property B had tenants, so you did not move into property B straight away. You were in receipt of rental income from acquisition, up until the time you moved in.

As COVID-19 was worsening overseas, on DDMMYYYY you applied for permanent visas so your family could come to Australia as it was safer.

The permanent resident visas were granted for your family and they arrived in Australia in 20XX.

You and your family moved into property B in 20XX.

You have the following ties to Australia:

•         Spouse and children

•         Bank account

•         Driver's licence

•         Motor vehicle

•         Property

•         Social groups

•         Private health insurance

•         Car and house insurance.

Neither you nor your spouse have ever been a member of the Commonwealth Superannuation Scheme or the Public Sector Superannuation Scheme.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1936 subsection 6(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. The facts surrounding the entire stay in Australia must be considered, not merely the original intended length of stay. On entering this country, individuals may demonstrate they do not intend to reside in Australia. When a change in their behaviour indicates an intention to reside here, e.g., they decide to migrate here, they are regarded as residents from the time their behaviour that is consistent with residing here commences.

In your case, you arrived in Australia for work purposes. However, you had to remain in Australia due to COVID-19 lockdown. During COVID-19 lockdown your intention started to change indicating that you wanted to remain in Australia, and you also wanted the rest of your family living with you in Australia, because it was safer here than overseas in terms of COVID-19. On DDMMYY, you took those steps to have your family come and live with you in Australia, as you applied for their permanent resident visas. Their permanent resident visas were granted. In view of their pending arrival in Australia you purchased a second property, with the intention of making this your new family home, once your family arrived; and you enrolled your child in a school.

Therefore, we consider your circumstances are consistent with residing in Australia. This is because:

•         your continuity of association you have with Australia

•         you have been physically present in Australia since you arrived on DDMMYYYY

•         you had a family tie (your child) here in Australia since you arrived on DDMMYYYY

•         you have brought your family to Australia from overseas as permanent residents

•         you have purchased two Australian real properties. One as an investment property and one as a new family home.

Consequently, the Commissioner has a state of satisfaction that you are a resident of Australia for taxation purposes under the ordinary meaning.

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 where you were born) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must hold the positive intention to make that country your home indefinitely.

You have intentionally changed your place of residence from overseas to Australia, and you hold the positive intention to stay in Australia indefinitely or permanently. You confirmed this change of residence when you purchased your second property with the intent of making this your new family home once your family arrived permanently from overseas.

Therefore, your domicile of choice is 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 satisfied that your permanent place of abode is Australia. This takes into account that:

•         your family has joined you in Australia

•         you purchased a property in Australia that you and your family have established as your new home

•         you will use your home overseas as a holiday house

•         you have Australian insurances including private health

•         you are doing necessary things to settle in Australia.

You are a resident of Australia 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 have been present in Australia for 183 days or more during the income year of the ruling period.

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 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

As you satisfy three of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, the Commissioner is satisfied you are an Australian resident for tax purposes in the 20XX-XX income year commencing from DDMMYYYY. This is the date you became a resident when you acquired property B. It is not the date of DDMMYYYY when you applied for permanent visas for your family.

As an Australian resident for tax purposes, you must declare income you earn anywhere in the world in your tax return. This includes any foreign income and rental income that you have received in the 20XX-XX income year.