Edited version of private advice

Authorisation Number: 1051965479773

Date of advice: 1 April 2022

Ruling

Subject: Residency for taxation purposes

Question 1

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

Answer

Yes.

Question 2

As a resident of Australia for taxation purposes for the relevant income years are you entitled to the tax free threshold?

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 Z.

You have lived and worked in Australia for a number of years.

Whilst residing in Australia, you established an Australian private company.

You are the managing director of the Australian company.

You receive renumeration in the form of salary for your services to the company.

You do not receive income from any sources outside Australia.

You do not have any assets in Country Z.

You do not own a property in Australia.

During the period from your arrival in Australia to your departure from Australia several years later, you returned to Country Z a few times throughout that period all for personal family reasons and no more than a couple of weeks duration, usually around Christmas or family holiday occasions.

You went to Country Z a couple of years ago for a family Christmas.

Your spouse accompanied you to Country Z.

Your intention was to return to Australia after a couple of months.

You ended your lease on your property in Australia when you left the country and intended to lease another property on your return.

You put your items into storage in Australia while on holiday in Country Z.

You were not able to return to Australia at the end of your trip to Country Z due to the pandemic and border restrictions implemented by both the Australian and Country Z Governments.

You needed to take into consideration your health and the health of your spouse when travelling. This meant that you believed it unsafe to travel and go into hotel quarantine as per government requirements.

While in Country Z you lived in short-term accommodation as you did not want to lease a property with the uncertainty around when you could return to Australia.

It was never your intention to leave Australia permanently.

You returned to Australia after a couple of years.

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.

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 living and working in Australia for a number of years.

•         You rented accommodation in Australia.

•         You have a business in Australia.

•         You and your spouse went to Country Z for a family Christmas.

•         It was your intention to return to Australia after a short period of time.

•         It was never your intention to be in Country Z for an extended period of time.

•         You have been renting short term accommodation in Country Z.

•         You returned to Australia over a year after leaving.

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.

You are not an Australian citizen.

You are a Country Z citizen and your domicile is Country Z.

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

You are not 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 years.

As a resident of Australia for taxation purposes you are entitled to apply the tax free threshold when calculating your tax.