Edited version of private advice

Authorisation Number: 1051982315481

Date of advice: 28 July 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes. You are a resident of Australia for taxation purposes for a relevant period.

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

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You stated you are a tax resident of Country Z.

You stated that you lodge income tax returns in Country Y but do not believe that you are a tax resident.

You completed the majority of your schooling in Country Z.

You obtained your first Australian Visa a couple of decades ago.

You subsequently obtained another Australian visa a couple of years later.

You became an Australian Permanent Resident several years later.

You were employed in Australia in the following couple of years.

You became an Australian citizen several years later. This automatically ceased your Country Z citizenship.

When you obtained your citizenship it was your intention to remain in Australia. Your intentions changed over time due to you not being able to find further employment in Australia.

You and your then partner purchased an apartment in Country Z jointly several years ago.

You returned to Country Z in the following year.

A year later you were married, a Country Z national.

For several years, you held a Country Z working visa.

You were officially employed by your family business in Country Z.

You and your partner have one child who was born in Country Z.

The Country Z apartment was officially jointly registered in the name of you and your partner. You explained that in Country Z, ownership of property occurs at the time it is registered. Prior to registration, purchasers have the option to dispose. You further advised that this is common practice in Country Z and as you intended to return home to Country Z, you proceeded with the exercise of obtaining certification and registering the apartment.

You and some friends founded the broader Company Z business, a cloud-based international banking platform. Company Z Pty Ltd was incorporated in Australia several years ago, as some Company Z Founders were based in Australia at the time, however, Company Z was ultimately headquartered and launched in Country Y, under Company Z (Country Y) Ltd, which was incorporated as a private company limited by shares registered in Country Y.

You explained that there is a technology hub in Australia. Company Z Pty Ltd was the first entity incorporated in the business. This is where it all started and as such the development of the first product was in Australia. The focus was then shifted towards the market in Country Z and developed new products there whilst maintaining the Australian development hub.

The shares in Company Z Country X are in a company incorporated under the laws of the Country X.

Several years ago, you returned to Australia for a number of months. You advised you were visiting friends who were in Australia at the time. You initially stayed at a friend's place then stayed at an apartment leased by Country Z Pty Ltd. Your partner and your child remained in Country Z and were living in the Country Z apartment during this time. They did not visit.

During that trip, you became officially employed by Company Z (Country X) Ltd, as a company officer. You worked remotely up until when the Country Z office opened.

You also led the development team located in Australia who primarily reported directly to you, requiring you to travel Australia.

As your commitment with Company Z grew your commitment to the family business heavily reduced. You ceased employment in the family business.

After a few days out of Australia, you returned to Australia for a couple of months. You stayed at an apartment leased by Company Z Pty Ltd. Your partner and your child remained in Country Z and were living in the Country Z apartment during this time. They did not visit.

After a few days out of Australia, you returned to Australia for several months. You stayed at the apartment leased by Company Z Pty Ltd. Your partner and your child remained in Country Z and were living in the Country Z apartment during this time. They did not visit.

After a few days out of Australia, you returned to Australia for several months. Your partner and your child came to Australia with you. You stayed at an Airbnb until moving to an apartment leased by you. You leased this apartment for a number of years. Your partner and your child stayed with you at these locations.

You advised that your partner and your child relocated to Australia several years ago to live. They stayed at the apartment when you were not in Australia, until they moved into their own residence.

After a few days out of Australia, you returned to Australia for several months. You stayed at the apartment you leased with your partner and your child.

After a day out of Australia, you returned to Australia for several months. You stayed at the apartment you leased with your partner and your child.

After a couple of days out of Australia, you returned to Australia for several months. You stayed at the apartment you leased with your partner and your child.

A few years ago, you entered into a separation agreement with your partner. You agreed to trial your separation for several years before filing for divorce.

You stated that since separation, you have not maintained regular contact with your partner or your child. You also stated that you continued to live under the same roof when you were in Australia, however you slept in separate rooms.

On a number of occasions you left Australia for a few days and returned for a number of days or a few weeks. You stayed at the apartment you leased.

Company Z hired a formal team leader for the Australian staff to directly report to, who reported directly to you. This change reduced your need to travel to Australia to perform your role in overseeing and directing the development activities performed in Australia and allowed you to spend more time in Country Z where you could focus on the rapidly expanding development team located in Country Z as part of your role and to grow the business.

You continued to enter and exit Australia a few days or weeks at a time. You stayed at the apartment you leased.

After a number of weeks out of Australia, you returned to Australia for a few weeks. You finished up at the apartment and then stayed at your partner's home. Their home was funded by their parents.

On a number of occasions, you left Australia for a few days or weeks and returned to Australia for a few days or weeks. You stayed at your partner's home.

A couple of years ago you permanently returned to Country Z on a specific visa.

You applied for a Residence Permit of the Country Z which was issued several months ago. Holders of valid residence permits may enter and exit without applying for a visa.

You spent the periods outside Australia mainly in Country Z for work and to spend time with your family. You also made visits to Country Y for work purposes.

Your only immediate family members are your parents who are based in Country Z. You regularly see your parents in Country Z and maintain a close relationship with them.

Your friendships in Country Z include the people you went to school and university with.

Your social relationships in Australia were limited to those in the workplace. This includes your friends who you co-founded Company Z with.

You hold the following assets in Australia:

•         Bank Accounts

•         Superannuation fund.

You hold the following assets in Country Z:

•         Bank Accounts

•         Shares in investments

•         Shares in Company Z Country X and Company Z LP

•         The Country Z Apartment (joint with partner).

You do not own a car in Country Z on the basis public transport and ride sharing services are sufficient.

During the Relevant Period, you spent, on average, approximately 10-15 hours a day working for Country Z (Country Y) Ltd growing and building the business.

You did not participate or join any social clubs/memberships or grow your friendship circle in Australia.

You have not contributed financially or non-financially to your partner's house. Your partner pays all expenses associated with the property.

The majority of your furniture and sentimental belongings remain in the Country Z apartment that included your bedroom, clothes and other personal and sentimental items.

Pursuant to the separation agreement, you make an annual fixed payment to partner to support your child's school tuition, education expenses and medical expenses.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Overview of the law

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 (also referred to as the ordinary concepts test)

•         the domicile test

•         the 183-day test, and

•         the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides 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 domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

We have considered the statutory tests listed above in relation to your situation as follows.

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

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.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

We have taken the following into consideration when determining whether you meet the resides test:

•         You became an Australian citizen several years ago which ceased your Country Z citizenship from this date.

•         A few years ago you were employed with Country Z (Country Y) Ltd and were leading the development team located in Australia. You had commenced making trips to Australia to carry out these duties.

•         In fact, you spent the majority of days in Australia during the tax year working for Country Z across a couple of visits. This means you spent only a number of weeks in the tax year either working out of Australia or visiting friends and family out of Australia.

•         You continued to spend considerable time in Australia in the following tax years. You spent the majority of days in Australia in the following tax year across several visits leaving only a number of days in the tax year either working out of Australia or visiting friends and family out of Australia.

•         You spent nearly half of the days in the following tax year across several visits and several months in the year after across several visits.

•         You did not have an office out of Australia as there was no Company Z office overseas until a few years ago when the Country Z office opened.

•         You moved your spouse and child to Australia prior to that date.

•         You initially stayed in accommodation in Australia that was provided by your employer. When your family joined you in Australia you leased an apartment continuously for a couple of years.

•         You travelled out of Australia to visit family and for work as required. All up you spent only 32% of the time outside Australia.

•         You did not participate or join social clubs or memberships anywhere.

•         You contend your lifestyle was dictated by the demands of your employment of which you were entirely committed. You continually spent approximately 10 to 15 hours a day working and have explained that you spent time in Australia because it was required in your role.

•         You have established connections with Australia given the time spent here working, and your immediate family being here.

While you contend it was not your intention to reside in Australia, the objective facts and circumstances suggest otherwise. It is not until you returned to Country Z on visa a couple of years ago that there is objective evidence of you taking the necessary steps to permit you to stay in Country Z more permanently than as an Australian citizen taking business trips to Country Z.

You are a resident of Australia under the resides test for the relevant period.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

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 in 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 a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and 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 but you ceased being a Country Z citizen when you became an Australian citizen over a decade ago. At that time, it was your intention to make Australia your home.

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 phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. 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 their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•         whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

(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.

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         You took steps a couple of years ago to obtain a visa to permit you to stay in Country Z. Up until this point you were considered an Australian citizen visiting Country Z and were not legally allowed to reside there indefinitely.

•         Although you jointly own a property in Country Z it is not considered to be a permanent place of abode as you did not establish a home there until you moved back to Country Z.

•         You lived in an apartment that you rented with your family in Australia. You ended this lease and from then on stayed with your family at your spouse's premises.

•         You worked considerable hours for Company Z during the relevant period and did not spend any great length of time in Country Z during this period. In fact, the longest period out of Australia during the relevant period is a few weeks and you returned with your family (who you advised permanently moved to Australia from that time).

•         When you went to Country Z during the relevant period it was to work or visit family and friends.

•         At all times when you went to Country Z you planned to return to Australia, up until the time you returned to Country Z on a visa.

The Commissioner is not satisfied that your permanent place of abode was outside Australia for the relevant period.

You are a resident of Australia under the domicile test for the relevant period.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•         the person's usual place of abode is outside Australia, and

•         the person does not intend to take up residence in Australia.

In your case, you were not in Australia for more than 183 days for some of the relevant income years. You are not a resident of Australia under the 183-day test for the relevant income years.

As you were in Australia for more than 183 days in the prior relevant income years, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia and you do not have an intention to take up residence in Australia.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

We have taken the following into consideration when deciding whether your usual place of abode is outside of Australia during the prior income years:

•         Your immediate family were in Australia.

•         Your work was predominately in Australia. You worked considerable hours for Company Z during the relevant period and did not spend any great length of time in Country Z during this period.

•         In the early income year you were in Australia for the majority days and in the following income year you were in Australia for the majority of days, making it improbable that you established a usual place of abode outside Australia during this time.

•         You lived in an apartment that you rented with your family in Australia. You ended this lease and from then on stayed with your family at your spouse's premises.

•         Although you had a home available to you in Country Z, the nature of your accommodation in Australia remained constant and settled during this period.

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the prior relevant income years.

Intention to take up residency

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here.

We have taken the following into consideration when deciding whether you intend to take up residence in Australia:

•         You became an Australian citizen and did not take steps to return to Country Z permanently until a decade later when you returned to Country Z on a specific visa.

•         You worked in Australia for significant periods of time, only taking short breaks out of Australia for work or to visit friends and family, which is consistent with someone residing in Australia.

•         You established a home in Australia with your immediate family.

Based on your circumstances, the Commissioner is satisfied that you intended to take up residence in Australia for the prior relevant income years.

You are a resident of Australia under the 183-day test for the prior relevant income years. The Commissioner is not satisfied that your usual place of abode is outside of Australia and contends that you had an intention to reside in Australia for these income years.

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 member on behalf of whom contributions are being made to 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. Therefore, you are not a resident of Australia under this test.

Conclusion

You are a resident of Australia under the resides test for the relevant period.

As well, you are a resident of Australia under the domicile test for the relevant period.

You are a resident of Australia under the 183-day test for the prior income years. You are not a resident of Australia under the 183-day test for the later income years.

You are not a resident of Australia under the superannuation test for any of the income years.