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Edited version of private advice
Authorisation Number: 1052071278065
Date of advice: 19 January 2023
Ruling
Subject: Residency for tax purposes
Question 1
Are you an Australian resident for tax purposes in the 20YY to 20YY income year?
Answer 1
Yes
Question 2
Is the income which you earned whilst living and working in Country C between the DD MM YYYY to the DD MM YYYY taxable in Australia.
Answer 2
Yes
This ruling applies for the following period
Year ended 30 June 20YY
The scheme commences on:
1 July 20YY
Relevant facts and circumstances
You are an XXXX citizen
You hold a drivers' licence in Australia and Country B.
You are not a resident of any foreign country for taxation purposes
On DD MM YYYY you left Australia to commence work in Country C as XXXX consultant.
Whilst you were working in Country C you held a Business Visa.
You did not rent or own any properties in Country C.
On DD MM YYYY you returned to Australia.
You currently reside in Australia and are employed by an Australian company.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1)
Income Tax Assessment Act 1997 subsection 6-5(2)
Income Tax Assessment Act 1997 section 995-1
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 4 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 Draft Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals.
Intention is a relevant factor in several of the residency tests. However, in circumstances where you intend to depart Australia permanently and due to unforeseen circumstances, you return to, or remain in, Australia, the facts around your actual circumstances will be more relevant than your intended outcome.
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 from the DD MM YYYY to the DD MM YYYY and you have been physically present in Australia since your return on the DD MM YYYY
• When you returned to Australia on DD MM YYYY, you resumed the social and familiar relationships which you had before your departure on the DD MM YYYY
• On your return to Australia, you were employed by an Australian company and resided in the Australian accommodation provided by this employer.
• You are currently residing in Australia and employed by an Australian employer.
You are a resident of Australia under the resides test for the period 20YY to 20YY.
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 Australia and your domicile of origin is Australia.
It is considered that you did not abandon your domicile of origin in MM 20YY and acquire a domicile of choice in Country C. You were not entitled to reside in Country C indefinitely and while living in Country C you only held a business visa which was valid for X days after your entry into Country C. Therefore, your domicile is Australia.
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.
Application to your situation
We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:
• You entered Country C with a business visa and a X month contract with XXXX.
• You intended for your employment contract in Country C to be extended for a minimum of X months.
• You did not acquire a permanent place of abode in Country C.
• Your employment contract in Country C was extended beyond the initial X months for a further X months but not for the initially intended extension of a minimum of X months.
• You were in Country C for a total of X days.
The Commissioner is not satisfied that your permanent place of abode is outside Australia.
Therefore, you are 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
Your movements during the 20YY to 20YY income year were as follows:
• You were present in Australia between the DD MM YYYY to the DD MM YYYY
• You departed Australia for XXXX on the DD MM YYYY
• You returned to Australia on the DD MM YYYY
• You have not reported any movements outside of Australia since the DD MM YYYY
You have been in Australia for X days in the 20YY to 20YY 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 in Australia:
• You are an XXXX Consultant
• Your family and social connections remain in Australia
• Whilst in Country C your usual place of abode was the XXXX
• On your return to Australia, you initially stayed in employer supplied accommodation, in XXXX.
• Your current accommodation is split between a Hotel in XXXX and an Air BnB located in XXXX where your family is located.
• Since X month after your return to Australia on the DD MM YYYY, you have been employed by Australian companies.
• You do not currently have an employment position or job being held for you in any overseas country.
Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income 20YY to 20YY 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 Commonwealth of Australia Government employee for superannuation (super) purposes.
• You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.
• You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.
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, the domicile test, the 183-day test of residency and so are a resident of Australia for income tax purposes for the 20YY income year ended 30 June 20YY.
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. For a taxpayer, foreign earnings include income you earn such as salary, wages, commissions, bonuses, allowances, and incomes assessed under the employee share scheme provisions.
As a resident of Australia for income tax purposes for the 20YY income year ended DD MM YYYY, the income which you earned whilst living and working in XXXX between the DD MM YYYY to the DD MM YYYY is subject to income tax.
If you have paid foreign income tax on your foreign employment income, you may be eligible to claim a foreign income tax offset to relieve double taxation.