Edited version of private advice

Authorisation Number: 1051962459884

Date of advice: 22 March 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Country Z.

You are a permanent resident of Australia.

You and your spouse came to Australia a couple of years ago for several weeks.

You entered Australia on a temporary visa.

You applied for and was granted a bridging visa.

Your intention to stay for several more weeks so you could meet the requirements for the permanent resident visa.

You have applied for another type of visa and this has not been granted yet.

You had a flight booked to return to Country Z and you were not able to return due to the pandemic.

You were not ready to live in Australia on a permanent basis and you wanted to return to Country Z to arrange your affairs prior to returning to Australia to live on a permanent basis.

You have been here in Australia during the pandemic.

You have chosen not to return to Country Z as you are required to quarantine, the flights are expensive, and there is a level of complexity involved which you do not want to undertake.

You have not left Australia since arriving.

Prior to your arrival in Australia a couple of years ago you have been in Australia for a number of weeks each year for the past few years and you entered on the same type of visa.

While in Australia you are living in a home you and your spouse purchased.

You live off your savings and use your Country Z credit cards while in Australia.

You do not work in Australia.

You and your spouse own a business in Country Z which provides exhibition services.

You are in the process of transferring the business to another company who provides similar services to your business.

You need to terminate employees' contracts and organise the payout of their entitlements.

You have an apartment in Country Z which you own with your spouse which you purchased many years ago.

The apartment is vacant in Country Z while you are in Australia.

You have some social connections in Australia.

You have family and social connections in Country Z.

You are a Country Z tax resident.

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

Relevant legislative provisions

Income Tax Assessment Act 1936

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 have been in Australia for a couple of years.

You and your spouse are living in Australia in a home you both purchased.

You are choosing not to return to Country Z at this time as you are required to quarantine for 28 days when you arrive back in Country Z and the airfares are expensive.

You have now been in Australia for a couple of years living and carrying out your daily life.

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 Country Z.

You have applied for permanent residency in Australia but this has not yet been granted.

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 have been in Australia for more than 183 days in the relevant income years.

The Commissioner is not satisfied that your usual place of abode is in Country Z as you have not returned to Country Z since arriving in Australia.

You are choosing not to leave Australia due to quarantine rules in Country Z and the cost of airfares.

You have also applied for permanent residency in Australia and it is your intention to live in Australia on a permanent basis.

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.