Edited version of private advice

Authorisation Number: 1052165852488

Date of advice: 6 September 2023

Ruling

Subject: Residency

Question

Is the taxpayer a resident of Australia for tax purposes under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2023

Relevant facts and circumstances

The taxpayer was born in Australia and has always lived and worked in Australia.

The taxpayer has never ceased being a resident of Australia for the purposes of subsection 6(1) of the ITAA 1936 in the periods prior to the year ended 30 June 2023.

The taxpayer has one adult child, siblings, parents and extended family that reside in Australia. Another daughter of the taxpayer is currently on a working holiday in Country Z.

The taxpayer has a fiancé who is a citizen of Country A and resides in Australia with the taxpayer under a permanent partner visa.

The taxpayer is the ultimate shareholder and director of a number of Australian companies (collectively referred to as the Company Group), all of which are actively trading.

The taxpayer is actively employed by the Company Group, often performing his duties remotely.

The taxpayer derives most of his income from dividends paid by the Company Group.

The taxpayer is also the ultimate shareholder and director of other Australian companies.

The taxpayer is the ultimate beneficiary of discretionary trusts in Australia.

The taxpayer's social and economic ties are in Australia.

The taxpayer resides with his fiancé in a capital city in Australia. He owns this main residence and retains exclusive use of it at all times.

One of the taxpayer's discretionary trusts owns other Australian properties, for rental purposes.

The taxpayer maintains all his investments in Australia.

The taxpayer maintains various bank accounts, term deposits and mortgages with an Australian bank.

The taxpayer does not own or maintain any bank accounts outside Australia.

The taxpayer is registered with the Australian Electoral Commission and fulfils his voting obligations as required.

The taxpayer is registered with Medicare and claims the relevant benefits.

The taxpayer maintains private health insurance in Australia.

The taxpayer maintains a gym membership in Australia.

The taxpayer has 4 motor vehicles registered in Australia.

The taxpayer has no assets outside of Australia.

The taxpayer's fiancé has family in Country A and maintains a bank account, motor vehicle and rental property in Country A.

The taxpayer maintains an Australian superannuation fund and continues to actively contribute to it.

The taxpayer spent 267 days outside of Australia during the year ended 2023. His movements in that year are summarised below:

The purpose of the taxpayer's time overseas, spent in a total of 10 countries, was split between business travel and personal holidays.

The taxpayer expects to spend a similar number of days overseas during the year ending 30 June 2024. That time is expected to be spread between various countries.

When the taxpayer departed Australia during the year ended 30 June 2023, it was always his intention to return to Australia to live. He was departing temporarily.

Whilst outside Australia, the taxpayer predominantly stayed in short term accommodation.

Occasionally, whilst the taxpayer was in Country A (not at all times), he stayed at his fiancé's parent's house or at their holiday home.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1936 paragraph 6(1)(a)

Income Tax Assessment Act 1936 subparagraph 6(1)(a)(i)

Income Tax Assessment Act 1936 subparagraph 6(1)(a)(ii)

Income Tax Assessment Act 1936 subparagraph 6(1)(a)(iii)

Reasons for decision

Summary

The taxpayer is a resident of Australia for tax purposes under subsection 6(1) of the ITAA 1936.[1]

Detailed reasoning

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in paragraph 6(1)(a) of the ITAA 1936 to mean:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residency in Australia; or

(iii) who is:

(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B) an eligible employee for the purposes of the Superannuation Act 1976; or

(C) the spouse, or a child under 16, of a person covered by sub-paragraph (A) or (B)...

These definitions contain 4 alternative tests for residency of individuals. These tests are:

•                  the resides test (also known as the ordinary concepts test);[2]

•                  the domicile test;[3]

•                  the 183-day test;[4] and

•                  the Commonwealth superannuation fund test.[5]

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. It is sufficient for the individual to be a resident under one of the tests to be a resident for tax purposes.

Guidance regarding the residency tests for individuals and when the Commissioner considers that a person will be a resident of Australia is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals (TR 2023/1).

The resides test

Under the resides test an individual is a resident if they reside in Australia. The term 'resides' is not defined in the Income Tax Assessment Act and has its ordinary meaning, 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'.

The resides test asks whether the individual's presence in Australia is usual and settled in contrast to temporary and casual, informed by both the nature, duration and quality of their physical presence and an intention to treat Australia as home.

Factors that commonly inform the relevant association with Australia are:

•                  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; and

•                  social and living arrangements.[6]

No single factor is decisive, and the weight given to each factor depends on the individual's circumstances.

The domicile test

Under the domicile test, an individual is a resident of Australia when their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside Australia.

Domicile considers whether there is a legal relationship between a person and Australia, and consists of 3 types:

•         a 'domicile of origin', which is attributed to each individual at birth;

•         a 'domicile of dependence', which is relevant where a person lacks capacity to acquire their own domicile and their domicile is determined by reference to someone else's domicile; and

•         a 'domicile of choice', which is the domicile a person acquires voluntarily.[7]

An individual will have their permanent place of abode[8] overseas where they have retained their Australian identity (as reflected in their Australian domicile), but have definitely abandoned their residency in Australia, and commenced living permanently overseas.[9]

Relevant factors as to whether an individual's permanent place of abode is overseas include:

•         length of overseas stay;

•         nature of accommodation; and

•         durability of association.[10]

The 183-day test

Under the 183-day test, an individual who is present in Australia for 183 days or more during the income year will be a resident, unless the Commissioner is satisfied that both their usual place of abode is overseas and they do not intend to take up residency in Australia (i.e. do not intend to make Australia their home).

An individual's usual place of abode is the place they usually live or would live but for being absent from it due to temporary circumstances. Relevant factors in considering whether an individual's usual place of abode is outside Australia include:

•         where they lived before and after their time in Australia;

•         the availability of their overseas dwelling to them (if they have one) while they

•         were in Australia;

•         where their possessions and assets are;

•         the type of visa they have and the length of their intended stay;

•         their purpose of coming to Australia; and

•         the travel arrangements they made, including whether they departed from and

•         returned to the same place outside Australia.[11]

The Commonwealth superannuation test

The Commonwealth superannuation test only applies to make resident members who are contributing, or are having contributions made on their behalf, to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) (as well as the spouse and children under 16 years old of such members).

Application to your circumstances

While physical presence is an important consideration in the context of the resides test, the taxpayer's physical absence from Australia for an aggregate period of 267 days in the year ended 30 June 2023 does not necessarily result in non-residence.

It is well established that an individual does not cease to be a resident simply by absence; rather, the question is whether they have maintained a 'continuity of association' with Australia which is in turn established by considering their other connections to Australia.[12]

The taxpayer, being an individual that had always been a resident of Australia for tax purposes in the periods prior to the year ended 30 June 2023, did not cease to be resident in respect of that year as a result of his absence for parts of it. Broadly, this is because the taxpayer maintained a 'continuity of association' with Australia, as evidenced by his many other connections to Australia, together with an intention to return to Australia and an attitude that Australia remains his home.

Some of the relevant factors which inform the connection and intention the taxpayer has to Australia that characterises his presence as 'residing' in it include the following:

•         the presence of the taxpayer's immediate and extended family in Australia (except for one daughter who is on a working holiday overseas) and the absence of any family overseas (except for that of his fiancé's);

•         the presence of all of the taxpayer's employment, business and investment ties in Australia and the absence of any employment, business or investment ties overseas;

•         the taxpayer's living arrangements, i.e. living in a property that he owns in an Australian city (and held for the exclusive use of he and his fiancé), and not owning any property overseas or leasing any property whilst overseas (other than for short term accommodation);

•         the holding of assets such as motor vehicles, superannuation investments and bank accounts in Australia and the absence of any assets held overseas; and

•         the presence of other factors, including the taxpayer's ongoing registration with the Australian Electoral Commission, registration with (and use of) the Medicare system, the holding of private health insurance and the maintenance of a gym membership.

Having resided in Australia for the year ended 30 June 2023, the taxpayer is considered to have satisfied the resides test under paragraph 6(1)(a) and been an Australian resident for tax purposes in respect of that year.

The taxpayer's satisfaction of any of the other 3 residency tests is therefore of no relevance to their residency status for that year, but is nevertheless briefly discussed below for completeness.

The taxpayer's domicile of origin is Australia and there is no basis on which to conclude that the taxpayer has demonstrated an intention to acquire a domicile of choice in a foreign country. The taxpayer will therefore also have satisfied the domicile test, unless the Commissioner can be satisfied that their permanent place of abode is outside Australia.

The Commissioner is not satisfied that the taxpayer has a permanent place of abode outside Australia because there is no basis on which to conclude that the taxpayer has abandoned their residency in Australia and commenced living permanently overseas. That is:

•         none of the taxpayer's stays overseas were for a 'substantial' period of time, the time spent overseas was split between a number of different countries and, at the time of each departure from Australia during the year ended 30 June 2023, the taxpayer retained an intention to return to Australia after a finite period;

•         at no point did the taxpayer pack up his home in Australia, set up a home in a foreign country and live there;

•         the taxpayer regularly stayed in short term accommodation whilst overseas and retained his dwelling in Australia for his exclusive use (together with his fiancé); and

•         the taxpayer maintained strong family, professional and social ties to Australia.

The taxpayer is therefore also considered to have been an Australian resident for tax purposes in respect of the year ended 30 June 2023 pursuant to subparagraph 6(1)(a)(i).

The 183-day test under subparagraph 6(1)(a)(ii) is not satisfied by the taxpayer in respect of the year ended 30 June 2023 on the basis that he was present in Australia for less than 183 days during that year (among other reasons), and the Commonwealth superannuation test under subparagraph 6(1)(a)(iii) is not satisfied by the taxpayer in respect of the year ended 30 June 2023 on the basis that he is not a member (active or otherwise) of the PSS or CSS.

[1] All subsequent legislative references are to the ITAA 1936.

[2] Paragraph 6(1)(a).

[3] Subparagraph 6(1)(a)(i).

[4] Subparagraph 6(1)(a)(ii).

[5] Subparagraph 6(1)(a)(iii).

[6] TR 2023/1, at [20].

[7] TR 2023/1, at [57].

[8] In this context, place of abode refers to the physical surroundings in which the individual lives, extending to a town or country.

[9] TR 2023/1, at [63].

[10] TR 2023/1, at [71].

[11] TR 2023/1, at [90].

[12] TR 2023/1, at [25].