Edited version of private advice

Authorisation Number: 1052001195673

Date of advice: 4 July 2022

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A. You are a citizen of Country A.

You are a citizen of Australia. You became an Australian citizen during the year ended 30 June 19XX.

You lived in Australia from 19XX to 20XX.

You resided in Country A in the 5 years prior to coming to Australia.

You arrived in Australia in early 20XX for a holiday with your spouse, children and parents.

You had flights booked to return to Country A after approximately 11 weeks.

Australia and Country A closed their borders to the rest of the world within the first six weeks of your holiday in Australia.

As a result, the flight booked to return to Country A was cancelled and you and your family could not leave Australia as you had planned.

While in Australia, you stay at your sibling's house along with your spouse, children and parents.

One of your children is currently studying at an early learning centre in Australia.

One of your children is currently studying at a College in Australia. They commenced studying in the Australian school in Term 2, 20XX.

You are employed by Company A in Country A and have been taking extended leave while you stay in Australia.

You have not been working in Australia.

You financially support your family with your savings and Country A sourced income.

You are required to go back to Country A in due course.

Country A has now opened its border, however, people entering the country are still required to do mandatory hotel quarantine.

You and your family are waiting for that requirement to cease as you will be traveling with young children and elderly parents.

You own your place of residence in Country A.

The property is not being rented and is still being maintained as your permanent place to live.

You have a domestic helper that has been living in and taking care of your house in Country A while you are in Australia.

You own two investment properties in Country A.

You own one bank account in Country A.

You have three vehicles in Country A owned under the family name.

Your income from Country A is comprised of rental income from your two investment properties and salary from your employment.

You own bank accounts in Australia.

You purchased a car in 20XX in Australia.

You own an investment property in Australia which you purchased during the year ended 30 June 20XX.

You receive rental income from your investment property which has been leased in 20XX.

You have Australian documents mailed to your sibling's house and Country A documents mailed to your Country A address.

You have taken out private health insurance in Australia but still have several health policies in Country A.

You have a driver's licence in Country A.

You have not developed or maintained any professional, social or sporting connections in Australia or Country A.

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.

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 (TR 98/17).

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.

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.

Application to your situation

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

•         You arrived in Australia in early 20XX and have not yet left Australia

•         You stayed at your sibling's house along with your spouse, children and parents

•         You have spent over 2 years living in Australia

•         Your children attend school in Australia

•         You have chosen to stay in Australia even though the borders have re-opened, and you can now return to Country A

•         You purchased a vehicle in Australia in 20XX

•         Your movements and habits were consistent with having a settled routine in Australia

You are a resident of Australia under the resides test for the period 1 July 20XX to 30 June 20XX.

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.

Application to your situation

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in 19XX and became an Australian citizen in 19XX.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia in 19XX.

You resided in Country A in the 5 years prior to coming to Australia. It is considered that you abandoned your domicile of choice in Australia and acquired a domicile of Country A when you returned to live there indefinitely.

Your domicile remains in Country A as you have no intention of living in Australia indefinitely.

Therefore, 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

20XX Income Year

You were not present in Australia for 183 days or more during the 20XX income year.

Therefore, you are not a resident under this test for the 20XX income year.

20XX and 20XX Income Years

You have been in Australia for 183 days or more in the 20XX and 20XX income years. 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:

•         You were unable to return to Country A due to border closures

•         You have chosen to stay in Australia even though the borders have re-opened, and you can now return to Country A

•         You stay at your sibling's house along with your spouse, children and parents

•         Your children attend school in Australia

•         You are on extended leave from your employment in Country A

•         Your movements and habits were consistent with having a settled routine in Australia.

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income years. You are a resident under this test for the 20XX and 20XX 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.

Application to your situation

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

You satisfy the resides test of residency and so are a resident of Australia for income tax purposes for the year ended 30 June 20XX.

You satisfy the resides and 183-day test of residency and so are a resident of Australia for income tax purposes for the year ended 30 June 20XX and 20XX.