Edited version of private advice

Authorisation Number: 1052131443817

Date of advice: 13 July 2023

Ruling

Subject: Residency

Question

Were you a non-resident of Australia for taxation purposes from your arrival in Australia on Date 1 until your departure on Date 2?

Answer

Yes.

This ruling applies for the following period:

Income year ending 30 June 20XX.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances

You were born in COUNTRY X and are a citizen of COUNTRY X.

While you were in Australia, you lodged an application to become a citizen of Australia.

After some months you and your family left Australia to travel to COUNTRY X.

After your arrival in COUNTRY X, you and your family lived at the COUNTRY X Property.

You were a non-resident of Australia for taxation purposes in the income year after you departed Australia.

You have the following children:

•         Person A, who is enrolled in school in COUNTRY X and is expected to graduate in several years. They hold a permanent resident visa of Australia:

•         Person B, who has previously stayed with you in COUNTRY X and has now come to Australia to finish their Australian university study.

Your family immigration agent advised that your entire family's permanent visa would be very hard to renew as your family had spent too little time in Australia previously and have no plans to return to Australia in the near future.

You were of the belief that getting Australian citizenship would be the easiest way to guarantee a visa renewal for your family.

You arrived in Australia on Date 1 for the purpose of finalising your Australian citizenship application, not planning to stay in Australia.

You travelled to Australia on a Permanent resident visa, issued several years prior to your arrival in Australia, with an expiration date some years after it was issued.

You did not have a return ticket to COUNTRY X booked as there was no clear date when you would receive your Australian passport and you may have incurred unnecessary charges by the airline if you had changed the return flight date.

You have the following in Australia:

•         a property (the Property) jointly purchased by you and your spouse several years prior to Date 1 that you have used for short term holiday breaks. Your eldest child often lives at the Property rent free when you are not in Australia

•         a car and Australia drivers' licence

•         a bank account that was primarily used for paying living expenses during your stay in Australia; and

•         health insurance for the period you were in Australia, which was permanently suspended when you returned to Australia.

You brought mainly personal possessions when you travelled to Australia, such as clothing and daily necessities.

While you were in Australia you:

•         had your mail was sent to the Property

•         earned income from your investments in COUNTRY X and supported yourself with your personal savings and family financial support.

•         actively searched for, and applied, for employment positions in COUNTRY X

•         attended an English course to polish your language skills for your future opportunities in COUNTRY X

•         made aged care arrangements for your parents in COUNTRY X, such as organising professional visits, payments, daily exercise, and meal plans

•         spent time at the Property, spending time with your adult child, watching television and doing house chores

You did not have any professional, social and/or sporting connections in Australia.

You have the following in COUNTRY X:

•         your spouse and youngest child

•         aged parents, who you take care of due to their health conditions

•         properties, investments, cars and a drivers' licence; and

•         social connections in relation to your youngest child's school where you volunteer. You are also a community volunteer and a member of a fitness club.

Your spouse has a business in COUNTRY X, and is a citizen and tax resident of COUNTRY X.

You booked a return flight ticket to COUNTRY X when you became aware of the expected issue date of your Australian passport.

The naturalisation process took longer than you had expected, and you had remained in Australia for more than 183 days during the ruling period even though you did not have any intention to stay in Australia, and you wanted to live with your family in COUNTRY X.

You received your Australian citizenship some months after your arrival, with your Australian passport being issued on the same date.

You applied for a COUNTRY X visa, which was issued in the same month as your Australian passport, and which was conditional on you entering COUNTRY X on multiple occasions within a specified number of years.

You received letter of offer of employment from a company located in COUNTRY X, which you accepted.

You stayed the Property for the duration of your time in Australia.

You departed Australia to return to COUNTRY X on Date 2 and after your arrival you resumed living with your family.

You are still a citizen of COUNTRY X. You intend applying for a working visa and plan to renounce your COUNTRY X citizenship when you will apply to become a permanent resident of COUNTRY X as an Australian citizen in the future.

COUNTRY X does not acknowledge dual citizenship and you need to renounce your citizenship there when you returned and intend applying for a working visa and to become a permanent resident of COUNTRY X as an Australian citizen in the future.

You do not intend returning to Australia to live and anticipate coming to Australia for short periods to visit your eldest child, with no plans to travel to Australia at this point.

You are not eligible to contribute to the PSS or CSS Commonwealth Superannuation funds.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Summary

You have not met any of the residency tests for the period commencing on Date 1 until Date 2 and are therefore not a resident of Australia for taxation purposes during that period.

Detailed reasoning

Overview of the law

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 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 met the resides test:

•         while you were physically in Australia on Date 1 until your departure on Date 2 your intention was to obtain your Australian citizenship and not to settle in, or migrate to Australia

•         you came to Australia to obtain your Australian citizenship, which took longer than expected resulting in you having to remain in Australia until you had obtained your citizenship and Australian passport

•         you did not create any connections during the period you were in Australia, having a property and car in Australia with your eldest son staying at the property, but not having any sporting and/or social connections; and

•         you continued to have connections in COUNTRY X which included your immediate family, your family home, properties and investments and undertaking activities in relation to the care of your parents in COUNTRY X

•         you searched for employment in COUNTRY X while you were in Australia, accepting an offer of employment in COUNTRY X while you were in Australia, to commence after your return to COUNTRY X; and

•         you returned to COUNTRY X within a reasonable period after you had been granted Australian citizenship and received your Australian passport.

Based on the information provided it is viewed that you were staying in and not residing in Australia. Therefore, you do not meet the resides test.

The 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

You were born in COUNTRY X and your domicile of origin is COUNTRY X.

You came to Australia on a permanent residency visa and obtained your Australian citizenship. You had to apply for, and be granted, a tourist visa to enable you to return to COUNTRY X.

Based on the information provided it is viewed that your domicile changed from COUNTRY X to Australia.

Therefore, your permanent place of abode needs to be considered to determine if you meet the domicile test.

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 stayed at the Property while you were in Australia until you had received your Australian citizenship and Australian passport and then returned to COUNTRY X.

•         You lived in your family home in COUNTRY X prior to coming to Australia where you kept your possessions. The family property was available to you for your immediate use and enjoyment whenever required, and to which you returned.

It cannot be viewed that you had abandoned the family home while you were in Australia and it had continued to be your home at all material times, which remained your home while you were in Australia.

The Commissioner is satisfied that your permanent place of abode is outside Australia, and you are not a resident of Australia under the domicile test.

The 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 in Australia for more than 183 days in the income year covered by the ruling period. 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 as considered below.

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 where your usual place of abode is:

•         the place where you usually live, or would live but for being absent from it while you were in Australia, is your family home in COUNTRY X

•         you lived at the family home prior to coming to Australia and returned to live with your family when you left Australia

•         you have family, social and employment ties in COUNTRY X, with your family continuing to reside at the family home while you were in Australia

•         you stayed at the property you jointly own with your husband for the temporary period you were in Australia, where your eldest son resides rent free; and

•         the majority of your possessions and assets are located in COUNTRY X.

Based on the information provided it is viewed that your usual place of abode is in COUNTRY X.

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

You came to Australia to obtain your Australian citizenship and passport, staying for the period required to obtain them. You did not have any intention of living in Australia with the time spent in Australia being determined by the time it took for you to obtain citizenship and your passport.

Based on your circumstances, the Commissioner is satisfied that you did not intend to take up residence in Australia.

Therefore, as your usual place of abode is viewed as being COUNTRY X and your intention was not to live in Australia you do not meet the 183-day test.

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

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

Conclusion

You have not met any of the residency tests for the period you were in Australia on Date 1 until your departure on Date 2 and are therefore not viewed as being a resident of Australia for taxation purposed during that period.