Edited version of private advice

Authorisation Number: 1051984499406

Date of advice: 19 August 2022

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes for the year ended 30 June 20XX?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20xx

The scheme commences on:

1 July 2020

Relevant facts and circumstances

You are an Australian citizen.

You have a spouse.

You have three children.

You moved from Australia to Country A over ten years ago with your spouse and children and you have lived in Country A permanently since then.

The Commissioner accepts that you acquired a domicile of choice in Country A when you moved there.

You, your spouse, and your children were granted permanent residency in Country A while living there as a family.

Your spouse and children returned in Australia to enable your children to complete their schooling in Australia.

You, your spouse, and your children remain permanent residents of Country A.

You have been employed by your employer in their Country A firm since you moved there.

You continue to rent an apartment in Country A on a fixed-term ongoing basis.

You intend to remain living and working in Country A indefinitely.

You maintain the following memberships and associations:

• Member of the Country A cricket club since you moved there.
• Member of the Country A tennis team.
• Member of a Country A based Australian Football Club and Golf Society, since a couple of years after you moved there.

Your employment income is paid into a Country A bank account and you pay tax on your income as a resident of Country A.

You also hold an Australian joint bank account with your spouse in which you receive rental income from an investment property in Australia.

The majority of your financial assets are held in Country A.

You have some assets held in an Australian self-managed superannuation fund.

You have not been a resident of Australia for taxation purposes at any time since you moved to Country A.

You do not have an Australian driver's license or Medicare card.

You have a Country A driver's license.

You, your spouse, and your children continue to be covered by private health insurance in Country A.

Your daughter, who currently lives in Australia, has been affected by mental health issues.

When you are in Australia you stay with your spouse and children in a property owned by your spouse.

You made two trips to Australia in the ruling year to visit your family and support your daughter with her mental health issues.

Your first trip was for a number of days in the first half of the ruling year.

You purchased a return airfare from Country A to Australia for your second trip.

You arrived in Australia in late in the first half of the ruling year and intended to return to Country A after about a stay of approximately one month.

You did not return to Country A as planned due to the following:

• The Country A government banned direct flights from Australia to Country A in the month which you had planned to return to country A, which was extended two months further.
• Flights remained available to Country A via Country B, however there were periodic bans of different airlines flying from Country B to Country A over the months you were attempting to return to Country A.

You chose not to travel via Country B as you have stated that it would entail two weeks of quarantine and a further three weeks of quarantine upon returning to Country A.

You rebooked your return flight to Country A halfway through the second half of the ruling year.

You became sick with COVID symptoms a few weeks prior to your rescheduled flight.

You tested positive for COVID on a RAT test a week after developing symptoms and on a PCR test shortly afterwards.

You were instructed to isolate until shortly before your scheduled flight.

You continued to experience symptoms until after your rescheduled flight.

You postponed your return to Country A until late in the second half of the ruling year.

Prior to this flight's departure you were informed that the flight had been further rescheduled to depart a few days later.

You chose not to fly on that day in as your quarantine hotel arrangements had been rendered obsolete due to the date change.

You returned to Country A late in the second half of the ruling year.

You have continued to work remotely for your Country A employer while in Australia.

You were in Australia for over 183 days over the ruling year.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 6

Income Tax Assessment Act 1936 sub-section 6(1)

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 sub-section 995-1(1)

Question

Are you a resident of Australia for taxation purposes?

Summary

Your stay in Australia does not meet the requirements of any of the four statutory tests for residency, therefore you are not an Australian resident for taxation purposes for the ruling year.

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 (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.

Application to your situation

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

•         You were physically present in Australia but had limited continuity over the period of the visits, although you lived with your family in a house owned by your spouse

•         The purpose of you being in Australia was to be with your family and support your daughter

•         You continued to work remotely for your Country A employer while in Australia

•         Your employment remains in Country A

•         You pay tax as a resident of Country A

•         Your primary dwelling remains in Country A

•         The majority of your personal belongings remain in Country A

•         The majority of your financial assets are held in Country A

•         Your community memberships and associations remain in Country A

•         Your stated intention in Australia was to stay to visit family, not to live as an Australian resident

You are not a resident of Australia under the resides test for the 20XX income year.

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.

Application to your situation

In your case, you were born in Australia and your domicile of origin is Australia

It is considered that you abandoned your domicile of origin in Australia and acquired a domicile of choice in Country A. You obtained permanent residency in Country A and you intend to live there indefinitely.

Therefore, your domicile is Country A and you are not a resident of Australia under the domicile test.

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.

Application to your situation

You have been in Australia for 183 days or more in the 20XX income year. Therefore, 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.

Application to your situation

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

•         Your family live in Australia in a house which your spouse owns which you stayed in when Australia

•         You do not hold an Australian driver's license

•         You have a dwelling available to you in Country A which you continued to consider your primary residence

•         The majority of your personal belongings remain in Country A

•         Your employment remains in Country A

•         Your community memberships and associations are in Country A.

Based on your circumstances, the Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income year.

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.

Application to your situation

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

•         You stayed in Australia longer than you had originally planned as encountered a number of setbacks which made it difficult for you to return to Country A when you had originally planned to

•         The nature of your stay had some characteristics of that of someone who is residing in that place rather than visiting

•         You did not obtain an Australian driver's license or Medicare card

•         Your community memberships and associations remained in Country A

•         You have returned to Country A and have not remained in Australia indefinitely.

Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia for the relevant income year.

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 under this test.

Conclusion

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the year ended 30 June 20XX.