Edited version of private advice

Authorisation Number: 1051960904360

Date of advice: 29 March 2022

Ruling

Subject: Residency for taxation purposes

Question

Are you a resident of Australia for taxation purposes for the whole of the relevant income year?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2021

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Australia.

You are a permanent resident of Country Y.

You have been employed full time overseas for many years.

This role requires that you work in various countries around the world for several years at a time.

You were posted to Country X.

You applied for and obtained residency status in Country X.

Your spouse was waiting for your residency to be granted before joining you in Country X.

Due to the pandemic your spouse was unable to join you in Country X and stayed in Australia.

You rented a villa in Country X for the period you were in Country X.

A few months later you fell seriously ill and you returned to Australia for medical treatment.

It was recommended by your doctors that you did not return to Country X given your age and medical status due to the pandemic.

Due to the pandemic your posting was cut short and was terminated.

You terminated your rental lease.

You were on medical leave with your employer until several months later.

You financially support your spouse as they have not worked for several years.

You have the following assets:

•                    A home in Australia where you and your spouse live

•                    rental properties in Australia

•                    A bank account in Australia

•                    A bank account in Country X

•                    A life insurance policy

•                    Pension fund in Country Y

Neither you nor your spouse are eligible to contribute to the PSS or the CSS super fund.

Relevant legislative provisions

Income Tax Assessment Act 1936subsection 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 were in Australia for the whole of the prior income year

•                    You were living in your home in Australia with your spouse

•                    You returned to Australia in due to medical reasons

•                    You have not been able to return overseas due to your medical conditions

•                    Your employment was terminated in later in the year

•                    Due to the pandemic you were not able to leave Australia until early in the following year and you did not leave due to being unwell and your employment

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 Country Z and are a citizen of Australia.

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 not satisfied that you had a permanent place of abode outside Australia for the relevant income year.

This is because you were not able to return to Country X due to the pandemic and your health.

You were advised by medical professionals that you were at high risk due to your age and medical status.

The rental property lease ended along with your employment in Country X.

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 year.

You were not able to travel overseas. During the relevant income year and you therefore were not able to return to the rental property in Country X.

The Commissioner is satisfied that you did not have a usual place of abode in Country X.

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 were a resident of Australia for taxation purposes for the relevant income year.