Edited version of private advice

Authorisation Number: 1052018169745

Date of advice: 8 August 2022

Ruling

Subject: Residency

Question 1

Are you an Australian tax resident for the income years from 20XX to 20XX?

Answer

Yes.

Question 2

Are you eligible for the foreign income exemption for temporary residents in the years that you are a tax resident?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

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 are an overseas citizen.

You are semi-retired.

You are not currently employed. Your earnings are derived from overseas investment income.

You have no children.

You have lived with your de facto spouse in Australia since late 20XX.

Your spouse is an Australian citizen who is employed in Australia and has children.

You met your spouse in overseas in 19XX and remained intermittently in contact. In early 20XX you visited your spouse in Australia for XXX weeks. You returned for a further month in early 20XX, returning again in late 20XX when you and your spouse decided to start a long-term relationship and live together.

You sold your overseas home in early 20XX and your rental property in mid-20XX. Because of your relationship, you decided not to purchase a further overseas home. You shipped your home contents and personal effects to Australia. You have not maintained an overseas residence since.

Your spouse sold their home in late 20XX and you purchased a larger home together in early 20XX. The property is owned as joint tenants.

You are currently living in this home with your spouse and their children.

Your Australian assets:

• ownership share in your home and contents
• two Vehicles
• bank accounts
• private health cover.

Your overseas assets:

• Investments under management with a private wealth manager that provide you with income
• two residential investment properties (never used as private residence) under management that provide you with income
• bank accounts.

You are in Australia on a temporary visa, the terms of which permit multiple entry visits to Australia, limited to a maximum three months' stay on each occasion with a "no work" condition. You have family and friends overseas, so regular short visits were expected. Australian employment was not required because of your overseas investments.

During the COVID-19 pandemic and the closure of international borders, you applied for and were granted an extended term visa. This enabled you to stay in Australia without leaving. You applied for the first visa in mid-20XX and were granted the visa in mid-20XX. The expiry of the third visa you applied for was early 20XX. The same conditions applied with the visa; with the exception you didn't have to leave the country.

With international travel restrictions now lifted you have reverted to the original visa.

Your spouse's children's father has seen very little of his children but maintains regular contact.

You have taken a paternal role and your priority has been to support your spouse and their children emotionally, financially, and with all the usual day-to-day activities.

Your spouse is a manager. They travel overnight once a week. You take responsibility for the children when they are away.

You also manage, maintain, and tend the home and garden that is 1.5 acres.

You volunteer at a local wildlife sanctuary where you maintain the grounds three mornings a week and have been doing so for the last two years.

You and your spouse have a broad and active social life with friends and family.

You intend to continue to live with your spouse and retain a home in Australia indefinitely.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 768-910

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Question 1

Overview of the law

For tax purposes, whether you are a resident of Australia is defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The definition has four tests to determine your residency for income tax purposes. These tests are:

• the resides test
• the domicile test
• the 183 day test, and
• the Commonwealth superannuation fund test.

It is sufficient for you to be a resident under one of these tests to be a resident for tax purposes.

Our interpretation of the law in respect of residency is set out in:

• Taxation Ruling IT 2650 Income tax: residency - permanent place of abode
• Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

The resides test

The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

Some of the factors that can be used to determine whether you reside in Australia include:

• 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.

No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

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

Under the domicile test, if your domicile is in Australia, you are a resident of Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile. For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case. Key considerations in determining whether you have your permanent place of abode outside Australia are:

• whether you have definitely abandoned, in a permanent way, living in Australia
• length of overseas stay
• nature of accommodation, and
• durability of association

The 183-day test

Under the 183 day test, if you are present in Australia for 183 days or more during the income year, you will be a resident, unless the Commissioner is satisfied that both:

• your usual place of abode is outside Australia, and
• you do not intend to take up residence in Australia.

The question of usual place of abode is a question of fact and generally means the abode customarily or commonly used by you when are physically in a country.

The Commonwealth 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 circumstances

We have considered each of the statutory tests listed above in relation to your particular facts and circumstances. We conclude that, for the periods from 2017 to 2023, you are a resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are a resident of Australia according to ordinary concepts.

We also consider that your domicile is in Australia, and the Commissioner is not satisfied that your permanent place of abode is outside Australia. We considered the following factors in forming our conclusion:

• how long you have been in Australia
• Your stated intentions about your residency
• your living arrangements in Australia
• your movements and habits are consistent with having a settled routine in Australia.

You were in Australia for 183 days or more during the 20XX to 20XX income, and the Commissioner is not satisfied that both:

• your usual place of abode is outside Australia, and
• you do not intend to take up residence in Australia.

We considered the following factors in forming our conclusion:

• family and social ties with Australia
• Your stated purpose in coming to Australia
• Your stated future intentions in Australia and outside Australia.

You do not fulfil the requirements of the Commonwealth Superannuation test and are therefore not a resident under this test.

Question 2

Overview of the law

Effective from 1 July 2006, section 768-910 of the Income Tax Assessment Act 1997 (ITAA 1997) makes ordinary and statutory income derived by a temporary resident from a source other than an Australian source non-assessable non-exempt income.

Under subsection 995-1(1) of the ITAA 1997, a taxpayer is a temporary resident if:

• they hold a temporary visa granted under the Migration Act 1958
• they are not an Australian resident within the meaning of the Social Security Act 1991, and
• their spouse (if applicable) is not an Australian resident within the meaning of the Social Security Act 1991.

Your spouse includes another person (of any sex) who:

• you were in a relationship with that was registered under a prescribed state or territory law
• although not legally married to you, lived with you on a genuine domestic basis in a relationship as a couple.

Under the Social Security Act 1991 and person is an Australian resident if they are an Australian citizen or the holder of a permanent resident visa.

Application to your circumstances

You are in Australia on a temporary visa, and you are not an Australian resident under the Social Security Act 1991. However, your de facto spouse is an Australian resident under the Social Security Act 1991. Therefore, you do not meet the third temporary resident requirement in that your spouse must not be an Australian resident. You need to meet all requirements to be considered a temporary resident. Therefore, you are not a temporary resident.

You are not entitled to the foreign income exemption for temporary residents under section 768-910 of the ITAA 1997.