Edited version of private advice

Authorisation Number: 1052181479783

Date of advice: 19 October 2023

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes for the 20XX income year?

Answer

Yes.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You reside in your family home in Australia for up to X months of the year.

You reside in Country X for parts of the year.

Your ex-spouse resides in Country X and is a Country X citizen.

You were granted permanent residency in Country X in XX/20XX after you married your ex-spouse in XX/20XX Permanent residency allows you to stay in Country X for an indefinite period.

You have co-owned a property in Country X with your ex-spouse since 20XX.

You rent X rooms at your property in Country X to tourists via a short stay accommodation platform. You have a licence to do this and pay tax as a sole operator. The income that you receive from this has been transferred into your Australian bank account since 20XX.

You have a bank account in Country X for your accommodation business and have a debit card that is used to pay for the utilities and the monthly licence and taxes.

Your ex-spouse maintains the property in Country X and assists with your accommodation business.

You intend to spend time in both Australia and Country X in the coming years, aiming to spend up to X months in each country, depending on the number of bookings you receive from your accommodation business in Country X and also depending on your social commitments in Australia.

You will travel to Australia from XX/XX/XX to XX/XX/XX to attend events.

You have a return plane ticket booked to travel to Australia in XX/20XX.

When you are in Country X you earn income from your business and spend time maintaining the property.

You never intended to leave Australia permanently and only intend to reside in Country X for temporary periods, during the peak tourist season.

You travel to Country X on your Australian passport.

You are permitted to enter Country X with an identity card for foreigners with permanent residency.

You are retired.

You own an investment property in Australia which is your main source of income.

Your personal and household effects are kept within your family home in Australia.

You store some of your personal items in your garage at your investment property in Australia.

Your extended family and your friends are all in Australia.

You have an Australian superannuation account.

You have an Australian driver's licence.

You have Medicare.

You have private health insurance in Australia.

You have Australian bank accounts.

You are a patient of several healthcare clinics in Australia.

You support several Australian charities.

You have a mobile phone account with an Australian provider.

You intend to provide your parents who live in Australia with assistance as they become older.

You are considering seeking employment in Australia in the future to support your income.

On incoming and outgoing passenger cards, you state that you are an Australian resident and provide your Australian address.

You did not notify the Australian Electoral Commission that you were departing Australia, however you have been removed from the electoral roll in recent years due to you being outside of Australian during an election and unable to lodge a postal vote.

You are not a Commonwealth of Australia Government employee for superannuation (super) purposes.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You receive your mail in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

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 meet the resides test:

•         You have Medicare.

•         You have private health insurance in Australia.

•         You have superannuation in Australia.

•         Your extended family and friends are in Australia.

•         You stay in your family home whilst in Australia.

•         You have an investment property in Australia.

•         You state that you are an Australian resident when completing incoming and outgoing passenger cards.

•         You have an Australian drivers' licence.

•         You have Australian bank accounts.

•         You receive your mail in Australia.

•         Your personal and household effects are in Australia.

•         You have a mobile phone account with an Australian provider.

You are a resident of Australia under the resides test for the year ending 30 June 20XX.

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 Australia and your domicile of origin is Australia.

Although you acquired permanent residency in Country X when you married your ex-spouse, it is considered that you did not abandon your domicile of origin in Australia and acquire a domicile of choice in Country X as you did not intend to remain in Country X indefinitely and instead, intended to live in Australia permanently.

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:

•         You did not intend to stay long term in Country X.

•         You always intended to return to Australia.

•         You only return to Country X to manage your accommodation business and maintain the property.

•         Your investment property is in Australia.

•         Your extended family and friends are in Australia.

•         Your personal and household effects are in Australia.

The Commissioner is not satisfied that your permanent place of abode is outside Australia.

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 20XX income year. 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 satisfy the resides and domicile tests of residency and so are a resident of Australia for income tax purposes for the year ended 30 June 20XX.