Edited version of private advice

Authorisation Number: 1052038984640

Date of advice: 28 October 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Are you entitled to the 50% discount on the sale of your rental property?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Country Z.

You are a permanent resident of Australia.

You obtained your permanent residency of Australia several years ago.

You were living in Australia for a couple of years prior to obtaining permanent residency.

You live in a property in Australia which you own.

This property is on a short term lease while you are in Country Z.

You live in this property with your spouse and child.

You work for an employer in Australia.

You are currently on leave from your employment.

The leave is for an extended period of time.

You and your spouse and child went to Country Z for a holiday.

You may be in Country Z for several months visiting family.

You will stay with family while in Country Z.

You will move around Country Z visiting family.

You do not intend on being in Country Z on a permanent basis and you will return to Australia to return to your employment and to resume living.

You have no assets in Country Z.

You own a home with your spouse in Australia and you have a rental property which you jointly own with your spouse.

You have a rental property which you own on your own and a bank account with savings in it.

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

You intend on selling your rental property (which you own solely) in Australia.

You have owned the rental property for more than 12 months.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

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 period you are in Country Z 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 satisfied that your permanent place of abode is not outside Australia. We considered the following factors in forming our conclusion:

•         You have gone to Country Z for a holiday with your spouse and child.

•         You are currently on leave from your job.

•         You are visiting family in Country Z.

•         You may be in Country Z for several months.

•         It is not your intention to remain permanently in Country Z.

•         You intend on returning to Australia to live and work.

•         Your home in Australia is being rented out short term while you are in Country Z.

As a resident of Australia for taxation purposes you are eligible to apply the 50% discount when calculating the CGT when you sell your rental property.