Edited version of private advice

Authorisation Number: 1052091604207

Date of advice: 22 March 2023

Ruling

Subject: Residency of Australia for taxation purposes

Question 1

Are you a resident of Australia for taxation purposes for the relevant period?

Answer

No.

Question 2

Are you a resident of Australia for taxation purposes from the relevant date?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 May 20XX

Relevant facts and circumstances

You were born in COUNTRY A.

You are a dual citizen of Australia and COUNTRY A.

You immigrated to Australia in XXXX and were granted citizenship in XXXX.

You and your spouse were employed in Australia from XXXX to XXXX.

In XXXX, you and your spouse moved to COUNTRY B and were living there from XXXX to XXXX.

You and your spouse purchased a property in COUNTRY B in XXXX. This property had been your main residence for the entity of your time spent living in COUNTRY B.

You were a resident of COUNTRY B for taxation purposes from XXXX through to XXXX. You did also work within COUNTRY C from XXXX to XXXX.

You had no employment from XXXX to XXXX due to Covid19.

Travel restrictions had been imposed within Australia from XXXX, making travel to Australia difficult.

In XXXX you and your spouse purchased a property in Australia, as joint tenants.

When you purchased the property in Australia you were a non-resident of Australia for taxation purposes.

The property in Australia was rented out from XXXX to XXXX.

In XXXX, you had retired from your employment in COUNTRY B and it was your intention to return to Australia. Travel restrictions were still in force at this time.

Your plans were put on hold by the Australian Government's imposed mandatory COVID travel restrictions with respect to inbound passenger flights from countries considered as high-risk, including COUNTRY B.

To remain consistent with Australian Government advice you stayed in COUNTRY B, rather than risk travelling back to Australia

At that time, you were confident, that based on Australian Government communications that you would be able to return to Australia before the end of XXXX.

In XXXX, while still residing in COUNTRY B, the house on the land of your Australian property was demolished and you were seeking planning permission to commence a rebuild.

On XXXX you applied to XXXX for assistance to make the return journey to Australia.

In XXXX you were offered a flight to Australia from COUNTRY D, however borders between COUNTRY B and COUNTRY D were effectively closed with advice from Governments not to travel.

You were later offered another flight from COUNTRY E which you declined given that you were based in COUNTRY C and overland travel with attendant risks was not considered viable.

In XXXX, you commenced marketing your COUNTRY C property for sale. The property was sold in XXXX.

On XXXX, you returned to Australia. Your flight was timed to avoid the worst of the restrictions in Australia which were being progressively lifted.

You arrived in Sydney and stayed for 14 days at your cost until Queensland border restrictions were relaxed.

You and your spouse are not eligible to contribute to the PSS or the CSS super funds.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Detailed reasoning

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 Draft Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals.

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:

•         In XXXX, you and your spouse moved to COUNTRY B and were living there from XXXX to XXXX

•         You and your spouse purchased a property in COUNTRY B in XXXX, as joint tenants. This property had been your main residence for the entity of your time spent living in COUNTRY B.

•         You were a resident of COUNTRY B for taxation purposes from XXXX through to XXXX. You did also work within COUNTRY D from XXXX to XXXX.

•         You did not work from XXXX to XXXX due to Covid19.

•         You and your spouse purchased a home in Australia in XXXX.

•         You rented this property out from XXXX to XXXX.

•         In XXXX, you had retired from your employment in COUNTRY B, and it was your intention to return to Australia. Travel restrictions which were imposed, were still in force at this time.

•         In XXXX, while still residing in COUNTRY B, the house on the land of your Australian property was demolished and you were seeking planning permission to commence a rebuild.

•         In XXXX, you commenced marketing your COUNTRY B property for sale. The property was sold in XXXX.

•         You returned to Australia on XXXX.

Although your intention was to return to Australia in XXXX the fact is you did not, as travel restrictions had been in force from XXXX, restricting travel, and you were unable to return until XXXX.

You were not residing in Australia according to ordinary concepts for the period XXXX to XXXX.

You were not physically present in Australia and continued to live in your property in COUNTRY B, which you had been living in, as your main residence, since XXXX. Your property in Australia was not available to you at this time, as it was being rented from XXXX until XXXX. All personal and economic ties were also closer to COUNTRY B for this period.

You commenced residing in Australia according to ordinary concepts from XXXX and are considered

a resident of Australia for taxation purposes from this date.

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 E and your domicile of origin is COUNTRY E. You immigrated to Australia in XXXX and were granted citizenship in XXXX.

It is considered that you abandoned your domicile of origin in COUNTRY E and acquired a domicile of choice in Australia

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:

•         In XXXX, you and your spouse moved to COUNTRY B and were living there from XXXX to XXXX.

•         You and your spouse purchased a property in COUNTRY B in XXXX. This property had been your main residence for the entity of your time spent living in COUNTRY B.

•         You worked in COUNTRY B from XXXX to XXXX.

•         In XXXX you and your spouse purchased a property in Australia, as joint tenants.

•         The property in Australia was rented out from XXXX to XXXX

•         In XXXX, while still residing in COUNTRY B, the house on the land of your Australian property was demolished and you were seeking planning permission to commence a rebuild.

The Commissioner is satisfied that, for the period XXXX to XXXX, you had a permanent place of abode outside Australia.

Therefore, you are not a resident of Australia under this test from XXXX to XXXX.

The Commissioner is satisfied that you your return to Australia on XXXX, you did have a permanent place of abode in Australia. Whilst you still owned your COUNTRY B property until XXXX, it had been on the market for sale since XXXX and was ultimately sold in XXXX.

Therefore, you are a resident of Australia under this test from XXXX.

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 were not in Australia for more than 183 days in the XXXX, XXXX, and XXXX income years.

The Commissioner is satisfied that, for the period XXXX to XXXX, you had a permanent place of abode outside Australia.

The Commissioner is satisfied that on your return to Australia on XXXX, you did have a permanent place of abode in Australia. Whilst you still owned your COUNTRY B property until XXXX, it had been on the market for sale since XXXX and was ultimately sold in XXXX.

You did not return to Australia until XXXX.

You are not a resident under this test.

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:

•         In XXXX, you had retired from your employment in COUNTRY B, and it was your intention to return to Australia. Travel restrictions which were imposed, were still in force at this time.

•         Your property in Australia was not available to you at this time, as it was being rented out from XXXX to XXXX.

•         In XXXX, while still residing in COUNTRY B, the house on the land of your Australian property was demolished and you were seeking planning permission to commence a rebuild.

Although your intention was to return to Australia in XXXX the fact is you did not, as travel restrictions had been in force from XXXX, restricting travel, and you were unable to return until XXXX

Based on your circumstances, the Commissioner is satisfied that you did intend to take up residence in Australia, until your eventual return on XXXX.

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 were not a resident of Australia for taxation purposes for the earlier period.

You became a resident of Australia for taxation purposes on the date you returned to Australia.