Edited version of private advice

Authorisation Number: 1052138913674

Date of advice: 7 July 2023

Ruling

Subject: Residency

Question 1

Were you an Australian resident for taxation purposes from XX XXXX 20XX to XX XXXX 20XX?

Answer

Yes.

Question 2

Were you an Australian resident for taxation purposes from XX XXXX 20XX to XX XXXX 20XX?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A.

You are a citizen of Australia and Country A.

You departed Australia on Date One for Country A.

Since departing Australia, you have travelled on the following occasions for the following periods:

Table 1: You have travelled on the following occasions for the following periods:

You have a spouse who you have been in a relationship with for several years. They are a citizen of Country A and have a temporary partner visa which allows them to stay in Australia until their permanent Partner visa application is finalised or they withdraw their application.

You have a child with your partner (child A). They have an Australian passport.

Your spouse also has a child with a previous partner (child B). Child B lives in Country A.

Your parents and your spouse's parent (Parent A) and your spouse's child (child B) all reside in Country A.

You have several relatives in Australia:

You left Australia because your spouse had not seen their child (child B) for several years due to COVID travel restrictions. Your plan when you departed was unclear. If you and your spouse were able to re-establish a relationship quickly with their child (child B), you would stay. If this didn't occur, you would consider returning to Australia in the summer.

You plan to return to Australia to live when your child (child A) is several years of age so they can start their education in Australia.

At this time, you plan to return to paid employment and your spouse will apply for a permanent visa and then Australian citizenship.

You also plan to buy a larger property in City B and a car once your spouse becomes a permanent resident and increase rates drop.

You plan to visit Country A every summer once you return to Australia.

While in Country A, you stay in your spouse's home in City C. After each trip away, you have returned to this property.

You chose XXXX 20XX to depart Australia as by this time your child (child A) had received their scheduled immunisations. XXXX is also the time when school holidays commence in Country A and the weather is more pleasant as it is summer.

You would have remained in Australia until XXXX 20XX, however your spouse did not want to miss out on important months of your child's (child A)'s life.

Your assets in Australia are:

• Bank A bank account
• Bank B bank account (you have used this account for day-to-day purchases in Country A since XXXX 20XX)
• Life and Income protection insurance
• Health insurance - you have paused your health insurance for a period of XXX years from XXXX 20XX
• Shares
• Superannuation account
• Pets

On XX XXXX 20XX, you sold your property in Australia. Settlement occurred on XX XXXX 20XX. You purchased the property in 20XX.

From XXXX 20XX, the property was rented out. Prior to that, you had resided at the property.

Your assets in Country A are:

• A bank account with a minimal balance

You did not advise Medicare that your coverage should be ceased when you departed Australia.

You did not request that the Australian Electoral Office remove your name from the electoral roll when you departed Australia.

You did not advise Australian banks that you are a non-resident when you departed Australia. You did advise the banks to forward your mail to a friend's house in Australia (Address A).

When you complete incoming and outgoing passenger cards, you state that you are an Australian citizen. You state your address as Address A.

Your bank letters and statements are sent to your Address A. Some mail gets sent to your Country A address. You receive most of your bank statements electronically.

All of your personal and household items are currently at your spouse's relative's house in State A.

Large furniture was sold with the property.

You are not employed in Country A and do not plan to seek employment there.

Your spouse has been employed by Company A since XXXX 20XX in Country A.

They signed a XX-month employment contract on XX XXXX 20XX. They commenced employment on X XXXX 20XX. They expect to renew the contract.

They expect to work for the same company when they return to Australia as most of their work can be done

remotely.

They have already advised Company A of their potential intention to move to Australia.

They did not have employment organised at the time they departed Australia. They decided to seek employment once they and their child (child B) reconnected. They wanted to be able to pay appropriate child support for their child (child B) in Country A.

You have several close friends and relatives living in Australia.

Some of your friends are caring for your pets in Australia.

You don't hold any sporting association memberships in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Issue- Residency

Question 1

Were you an Australian resident for taxation purposes from XX XXXX 20XX to XX XXXX 20XX?

Summary

Having considered your circumstances as a whole and the residency tests, it has been determined that for the period from XX XXXX 20XX until XX XXXX 20XX, you resided in Australia. Therefore, you were a resident of Australia for this period.

Question 2

Were you an Australian resident for taxation purposes from XX XXXX 20XX to XX XXXX 20XX?

Summary

Having considered your circumstances as a whole and the residency tests, it has been determined that for the period from XX XXXX 20XX until XX XXXX 20XX, you did not reside in Australia. Therefore, you were not a resident of Australia for this 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 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 residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory test 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 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.

There are numerous cases that consider the issue of residency for taxation purposes. You have provided references to a number of Tribunal decisions to support your interpretation of the term 'resides' and how it applies to your situation.

It was stated by Logan J in Harding v FC of T [2019] FCAFC 29 at paragraph 8, "it is of cardinal importance not to elevate into matters of principle in a later case the particular facts found decisive in the different circumstances of an earlier case". The facts of your case will not be compared to the facts of the previous cases.

Application to your situation

We have taken the following into consideration when determining whether you met the resides test:

•         Physical presence - You will reside in Country A for the entire period of the ruling, with the exception of short trips to visit family and friends in Country A and Australia.

•         Intention or purpose - Your stated intention was to live in Country A for several years until your child, child A is due to start school. At that time, your intention is to return to Australia

•         Behaviour -You are a dual citizen of Country A and Australia. As a result, you are able to reside in Country A indefinitely without requiring a visa. You have disposed of your property in Australia where you previously resided. Your behaviour supports your stated intention to reside in Country A for the next few years.

•         Family and business/employment ties - Your parents and your spouse's parent (parent A) and their child (child B) reside in Country A.

•         Your spouse is employed in Country A on a XX- month contract. They expect to renew that contract. Their employer is aware of their intention to return to Australia, and they expect to continue working in the same employment remotely on their return. You are not employed in Country A and have no plans to seek employment there

•         Maintenance and location of assets - You have disposed of your property in Australia in XXXX 20XX. You have most of your personal possessions stored at your relative's house in State A. You sold your large furniture items with your property in State A. You have a superannuation account, bank accounts, shares, several pets and a life insurance and income protection policy in Australia. You have a bank account in Country A.

•         Social and living arrangements - You, your spouse, and your child (child A) reside in a house in City C in Country A owned by your spouse. Your parents live in Country A and your spouse's parent (parent A) and your spouse's child (child B) also live in Country A. You have retained social connections in Australia and have relatives residing there. You plan to travel to Australia to visit friends in the future, including attending one of their weddings. Prior to travelling to Country A, you volunteered for a charity and attended monthly outings and weekend camp.

We consider that for the period from XX XXXX 20XX until XX XXXX 20XX you resided in Australia. However, from XX XXXX 20XX until XX XXXX 20XX, we consider that you did not reside in Australia. Therefore, you were not a resident of Australia for this period under the resides test.

When you left Australia, your spouse had not seen their child (child B) for several years due to COVID travel restrictions. Your plan when you departed was unclear, however if you and your spouse were able to re-establish a relationship quickly with their child (child B), you would stay.

We understand that your intention is to return to Australia when your child (child A) reaches school age (in several years' time) and that you have retained ties to Australia. However, on the balance, your circumstances demonstrate that you are residing in Country A according to the ordinary meaning of the word and that you did make a conscious decision to stay after re-establishing a relationship with your spouse's child (child B).

This is evidence by your spouse seeking long term employment (which you have stated is likely to be extended), along with your family ties in Country A, your intention to remain in Country A until your child (child A) reached school age (in several years' time), your property in Australia being rented and then ultimately sold, the permanency of your accommodation in Country A (which is owned by your spouse), and your physical presence in Country A for an extended period, all of which point to you residing in Country A.

We balanced these circumstances against your stored assets in Australia, and the possibility that your spouse's employment could potentially be performed remotely within Australia, at a later date. It is not a requirement of the resides test that the intention to reside in Country A be permanent, or that all ties to Australia be severed, to no longer be considered a resident of Australia for taxation purposes.

Although the resides test is the primary test, we have discussed the other tests and how they would apply to your circumstances, below.

Domicile test

Domicile

Whether your domicile is 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 you must 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 A and are a dual citizen of Australia and Country A

•         Since at least 20XX to XXXX 20XX, you resided in Australia

•         Since 20XX, you have owned a property in Australia

•         In XXXX 20XX, you sold the property. From XXXX 20XX until the time of sale, you rented the property out

•         Your spouse is a citizen of Country A and has a temporary partner visa for Australia

•         Your spouse and your child (child A) accompanied you to Country A and you all reside in a house owned by your partner.

Your domicile of origin is Country A. At some point during your time in Australia, we accept that you changed your domicile of origin by choice. In your situation, you have had both a lawful physical presence in Australia and a substantial period of time in Australia also.

While accepting that you have changed your domicile of origin by choice, we need to consider whether you have a 'permanent place of abode' outside Australia, for the relevant ruling period.

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

•         You have resided in Country A since XXXX 20XX and plan to reside there for several years before returning to Australia.

•         You have established a home in Country A in a property owned by your spouse. Your child (child A) and spouse reside in the property with you.

•         Although you have undertaken several short trips to visit family and friends since arriving in Country A, between trips you return to the house you occupy with your spouse and child (child A) in City A.

•         You have sold your place of abode in Australia, and have no specific place of abode to return to in Australia

•         Your parents reside in Country A and your spouse's parent (parent A) and child (child B) also reside in Country A

•         You have several close friends in Australia, two pet cats and assets including superannuation, health insurance and bank accounts, along with stored personal and household possessions.

We accept that when you initially departed Australia with no fixed timeframe to remain overseas, you had not made the decision to abandon Australia. However, once your spouse commenced employment in XXXX 20XX, we consider that at that point, you abandoned Australia. From that time onwards, your actions strongly indicate that you intended to stay in Country A for a substantial period of time. This is supported by the fact that your spouse did not want to be separated from your child (child A) due to their young age and the employment contract your spouse had signed.

While your intention is to return to Australia in several years' time, during the period of the ruling you established a settled presence in Country A. While the meaning abode can refer to a country and does need to be a specific property, you did not have a strong presence in Australia during this period based on your spouse and child (child A) being in Country A with you, and you not having available accommodation in Australia as your property was rented out and later disposed of.

The Commissioner is not satisfied that your usual place of abode was outside Australia for the whole of the ruling period.

Based on the facts provided, we consider that from XX XXXX 20XX, you had a permanent place of abode in Country A. We consider that you have abandoned Australia to your family and family home in Country A.

Prior to that time, we accept that you had not permanently abandoned Australia.

Therefore, you were not a resident of Australia under the domicile test from XX XXXX 20XX to XX XXXX 20XX.

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.

Given you left Australia in XXXX 20XX, you were not present in Australia for 183 days or more during the 20XX income year.

You are not a resident of Australia under this test for the relevant period.

The Commonwealth Superannuation Fund 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 contributing member of 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 of Australia under this test.

Conclusion

Having considered your circumstances as a whole and the residency tests, it has been determined that for the period from XX XXXX 20XX until XX XXXX 20XX, you resided in Australia.

However, from XX XXXX 20XX until XX XXXX 20XX, we consider that you did not reside in Australia. Therefore, you were not a resident of Australia for this period.