Edited version of private advice

Authorisation Number: 1052122574625

Date of advice: 1 August 2023

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes for the year ended 30 June 20XX?

Answer

Yes.

This ruling applies for the following period:

For the year ended 30 June 20XX

The scheme commenced on:

DDMM20XX

Relevant facts and circumstances

You were born in Country A in 19XX.

You are a citizen of Country A and Country B.

As a child your parent moved you to Country B from Country A.

On 20XX you departed Australia to visit your family in Country A and join your spouse for the birth of your child. You intended to only visit Country A for three months.

Due to unforeseen family circumstances your parents were both unwell in 20XX, and you were forced to stay overseas longer than you first anticipated. You are currently still in Country A however you intend to return to Australia this month and have a return airline ticket.

Your previous visa to enter Australia was a subclass X.

You were granted permanent Australian residency on DDMM20XX and will return using that visa.

You intend to seek your Australian citizenship next year.

You consider Australia to be your home country as you have lived here since 20XX.

You are employed an Australian company however you currently perform the role remotely from Country A.

Immediately prior to departing Australia you were an Australian resident for tax purposes.

You are not a resident of any foreign country for tax purposes, and you have not lodged any foreign income tax returns since departing Australia.

Prior to departing Australia, you were residing in an apartment you own.

While overseas, your mail is redirected to a friend's address and your family household and personal effects are stored there.

You and your spouse continue to pay the mortgage on the Australian property your spouse owns.

The property has been rented to tenants since DDMM20XX under usual a lease arrangement at market value rent.

In Country A you stay with family in an apartment your spouse in law owns.

You have not established your own permanent residence in Country A.

You do not receive income from any sources outside of Australia.

You have Australian assets such as bank account and shares.

You have a bank account in Country A for your daily living expenses.

You do not have other investments or real property located outside of Australia.

You continue to attend the religious services at your Australian church each week via the internet.

You hold an Australian driver's licence.

You did not advise any Australian financial institutions including any Australian companies with whom you have investments with that you are a foreign resident so that non-resident withholding tax could be deducted.

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 the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 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 TR 2023/1 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:

•         You were physically present in Australia from DDMMYYYY until DDMMYYYY.

•         Your intention when you left Australia in MMYYYY was to visit family in Country A for only a few months.

•         Your delay in returning to Australia is due solely to your parent's poor health condition.

•         You intend to return to Australia on DDMMYYYY and have a return airline ticket.

•         You have retained a continuity of association with Australia during the income year, demonstrated an intention to return to Australia and you maintain the attitude that Australia remains your home.

You are a resident of Australia under the resides test for the ruling period.

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 are also a citizen of Country B as your parent moved you there as a young child.

However, you immigrated and have been living in Australia since 20XX. You consider Australia to be your home country as you have lived here longer than in any other country since birth.

You have been granted Australian permanent residency you intend to seek your Australian citizenship in 20XX.

Based on the facts and circumstances provided it is considered that you abandoned your domicile of origin (Country A) and acquired a new domicile of choice as a permanent resident of Australia and you intend to live in Australia indefinitely.

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 (Harding) 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:

•         the intended and actual length of the taxpayer's stay in the overseas country;

•         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;

•         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;

•         whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

•         the duration and continuity of the taxpayer's presence in the overseas country; and

•         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.

Application to your situation

As mentioned above in relation to the Harding case, one of the two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia is whether the taxpayer has 'definitely abandoned, in a permanent way, living in Australia'.

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         Your intention when you left Australia in DDMMYYYY was to visit family in Country A for X months.

•         Your delay in returning to Australia is due solely to your parent's poor health condition.

•         You intend to return to Australia on DDMMYYYY and have a return airline ticket.

•         You have been granted permanent Australian residency.

•         In Country A you have been staying with family in an apartment your spouse in law owns.

•         Prior to departing Australia, you were residing in an apartment you own.

•         Your mail is redirected to a friend's address and your family household and personal effects are stored in Australia.

Although your intended length of stay overseas was extended beyond X months, the nature of your overseas accommodation is that of a transitory stay and you have demonstrated a durability of association that Australia remains your home and you have not abandoned Australia to commence living overseas permanently.

The Commissioner is satisfied that your permanent place of abode is not outside of Australia during the ruling period.

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

You have not been present in Australia for 183 days or more during the ruling period. Therefore, you are not a resident under this test.

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 are a resident of Australia for income tax purposes.