Edited version of private advice

Authorisation Number: 1052183407856

Date of advice: 28 November 2023

Ruling

Subject: Residency

Question 1

Does the Commissioner consider that Mr A began to qualify as an Australian resident for tax purposes on the Relevant Date?

Answer

Yes.

Question 2

If the answer to Question 1 is 'no', on what date during the 2021 income year does the Commissioner consider that Mr A qualified as an Australian resident for tax purposes?

Answer

Do not need to answer.

This ruling applies for the following period:

Income year ended 30 June 2021

Relevant facts and circumstances

Mr A was born in Country A in 19XX and, due to his parents being Country X nationals at the time, is a Country X citizen. Mr A has never been an Australian citizen.

Mr A 's parents moved to Australia with Mr A and his siblings in 19XX for 2 years, returning to City A in 19XX, before returning to Australia in 19XX.

Having moved to Country B in 19XX, Mr A returned to Australia in 19XX where he continued to live until 19XX, during which time he married his Australian-born wife (Mrs A) and had 3 children.

In 19XX, Mr A and his family moved to Country C until 19XX when they moved to Country D, before moving back to Country C in 19XX. In 19XX, Mrs A and the children moved to Australia so that the children could complete their education, while Mr A accepted a role as a managing partner of a financial advisory firm, resulting in him splitting his time between Country B and Country C.

In 200X, Mr A accepted a role as Executive Director of a firm based in Australia and moved into a property in Australia (the first Property) with Mrs A and the children. Mr A and Mrs A purchased the first Property in 19XX and held it as an investment property until 19XX.

In 200X, Mr A accepted a role with his current employer, a large family corporate group that predominantly operates in Country D, Country B, China, USA and Country C, and returned to living in Country C. Mr A is Senior Advisor, and provides financial advice.

Mr A's employer has some operations in Australia, and in the course of fulfilling his employment duties Mr A has been a director of various Australian companies that his employer has had interests in over the years. These companies have always had at least one Australian resident director living in Australia, and Mr A has never been primarily responsible for managing the activities of these entities, but rather has been appointed as director to assist with protecting his employer's interest in those entities by:

•         managing the relationship between his employer and the other interest holders where his employer was not the sole shareholder; and

•         overseeing and advising the Australian employee directors, and managing liaisons between the Australia employees and the other entities from either Country D or Country C, where his employer was the sole shareholder.

In 200X, Mr A purchased a XX-year lease over a penthouse apartment in Country C to serve as his main residence in Country C (the second Property).

A year later (in 200X), Mr A and Mrs A moved to Country D and, in 200X, they purchased an apartment in Country D to serve as their main residence in Country D (the third Property).

Mrs A also purchased a house in Australia to serve as an Australian holiday home for Mr A and Mrs A when they visited Australia (the Australian Property) as well as a home for Mr A's adult children as required. In that regard:

•         Mr A and Mrs A's daughters, who had moved out of the first Property years prior to live in on-campus accommodation as they were undertaking their respective tertiary studies, lived in the Australian Property between 200X and around 20XX;

•         Mr A and Mrs A's son lived in the Australian Property between 20XX and 20XX (having lived in on-campus accommodation for the duration of his tertiary studies prior to that time);

•         Mr A and Mrs A's daughter lived in the Australian Property between 20XX and 20XX; and

•         when not occupied by any family member, the Australia Property remained unrented and, on occasion, was used by close friends when needed.

Since the acquisition of the second Property, the third Property and the Australian Property, Mr A and Mrs A have always had a fully furnished and serviceable home available to them when in Country C, Country D and Australia. Each of these properties are fully equipped with white-goods, furniture, and a fully functioning kitchen.

For all or most of the period between 200X and early 20XX:

•         Mr A and Mrs A have owned a car in Australia (which is typically parked in the garage of the Australian Property while not in use) and a car in Country D (which is typically parked in the garage of the third Property when not in use). In Country C, Mr A and Mrs A primarily rely on private drivers for transportation; and

•         Mr A's work was primarily in Country D and Country C. Visits to Australia during this time primarily occurred for holiday and vacation purposes, and Mr A would typically only attend occasional board meetings as a non-executive director, and to minor work responsibilities during these trips.

Between 200X and early 20XX, Mr A and Mrs A spent about half of each year in Country D, around 10-25% in

Country C, 16-30% in Australia, and 5-30% travelling throughout Europe and Country E. The below table shows the breakdown of days (including part-days) spent in each country/region for the 2020, 2021 and 2022 income years.

2020 income year

Table 1: This shows the breakdown of days (including part days) spent in each country for the 2020-2022 income years:

2021 income year

2022 income year

The first Property was sold in 20XX.

Mr A became a tax resident of Country D from 1 January 20XX. Prior to obtaining his tax residency in Country D, Mr A was a resident of Country C.

Impact of Covid-19

In late March 2020, while Mr A and Mrs A were in Country C, the Government of Country D announced its intention to impose strict lockdowns due to the COVID-19 pandemic. Mr A and Mrs A originally intended to return to Country D and took steps to satisfy various requirements that Country D's Government had imposed for non-citizen travellers to return to Country D. Due to conflicting information published by Country D's Government, Mr A's employer failed to obtain approval from Country D's Government prior to re-entry to Country D. As a consequence, Mr A's employment pass was revoked, and he was banned from working in Country D. Upon re-entering Country D, Mr A was advised he had to leave Country D following 14 days in quarantine.

At that point, Mr A and Mrs A considered they had the following 3 main options:

•         return to Country C, which was not appealing given Country C's relatively unsophisticated health system, and Mr A and Mrs A's age and medical risk profiles;

•         travel to Country X using Mr A's citizenship, and attempt to build a temporary life there until they were able to return to Country D; or

•         travel to Australia using Mrs A's Australian citizenship, and live in the Australia Property until they were able to return to Country D.

Ultimately, Mr A and Mrs A chose to go to Australia and arrived on XX XX 202X. Around this time:

•         Mr A held a tourist eVisitor (subclass 651) visa which allowed him to stay until XX XX 202X;

•         Mr A prepared his incoming passenger card to record his intention not to become an Australian resident;

•         Mr A and Mrs A had a return flight to Country D booked, as they intended to return to Country D as soon as borders reopened; and

•         upon entry into Australia, Mr A and Mrs A were required to spend 14 days in hotel quarantine in order to comply with travel restrictions imposed by the State Government.

Once Mr A and Mrs A completed their quarantine, they moved into the Australia Property.

As the pandemic developed, it became increasingly apparent that it would not be possible for Mr A and Mrs A to leave Australia by XX XX 202X as planned. Mr A therefore applied for a Resident Return (subclass 155) visa and was granted a Resident Return (subclass 155) visa on XX XX 202X, noting the period of stay was an indefinite length of stay from the date of arrival.

Mr A continued to fulfil his employment duties during his stay in Australia, primarily managing his employer's interests in Country D and Country C.

In XX XX 202X it remained apparent to Mr A and Mrs A that they were unlikely to be able to leave Australia for some time and the pair decided it would be an appropriate opportunity for Mrs A to commit to a medical procedure (which she'd been waiting for an opportunity to commit to since late 20XX). Mr A was committed to remain in Australia to assist with Mrs A's rehabilitation regardless of whether travel to Country D became possible in the meantime.

Following Mrs A's medical procedure, Mr A began to take various steps to make life in Australia more efficient, on the basis that he would need to remain in Australia for at least a few more months to look after Mrs A and there were no signs of border restrictions easing in the immediate future. These steps involved:

•         applying for re-enrolment in Medicare on the Relevant Date;

•         obtaining a Seniors Card on XX XX 202X;

•         taking out private health insurance with an Australian provider on XX XX 202X, noting that his global medical insurance plan would lapse on XX XX 202X, and was not renewed at that time; and

•         opening an Australian superannuation account on XX XX 202X and making a contribution based on advice from his accountant.

According to the Medicare enrolment form submitted by Mr A, his application for re-enrolment in Medicare was made on the basis he had "plans to reside in Australia permanently". Mr A received his Medicare card on XX XX 202X and received medical care at least XX times between XX 202X and XX 202X for which he obtained medical benefits from Medicare.

Australia opened its borders permitting individuals to travel overseas on XX XX 202X, and a 'vaccinated travel lane' became available on XX XX 202X allowing quarantine-free travel between Australia and Country D.

Mr A purchased travel insurance on XX XX 202X which had sufficient health cover for his trips to Country D, and returned to Country D on XX XX 202X (for the first time since arriving in Australia in XX 202X).

Mr A and Mrs A subsequently returned to their usual work and travel arrangements, with Mr A spending around 50% of his time working in Country D and travelling to meet Mrs A in either Country C, Country D, Australia or Europe around his work commitments. The below table outlines the dates of the trips and reasons for each trip up to XX XX 202X:

Table 2: This table outlines the dates of the trips and reasons for each trip up to XX XX 202X:

The following table notes Mr A's travel movements into and out of Australia since XX XX 202X:

Table 3: This table notes Mr A's travel movements into and out of Australia since XX XX 202X:

Management of the third Property and mail

At all relevant times, the third Property has been Mr A 's primary address for receiving mail. At no time between XX 20XX and XX 20XX did Mr A arrange for the Country D postal service to forward his mail to the Australian Property. Mr A arranged for a trusted work colleague to visit the third Property once a week to collect mail. Important mail would be couriered to Australia, whereas non-priority mail would be bundled and couriered to the Australian Property once a sufficient number had accumulated to justify the courier costs. The colleague would also drive Mr A's car (in Country D) for maintenance purposes and Mr A and Mrs A's long-term housekeeper would attend the third Property every second week to check on it.

Hobbies and Social Life

Mr A has never been deeply involved in clubs or formal social organisations in Australia. His main hobby is cycling, which he typically engages in by himself or with friends in Country D, although occasionally in Country C and Australia with others.

Mr A is a member of 2 professional institutions and has no other professional or social ties to Australia.

Assets and Investments

None of the second, third or Australian Properties are used as income producing assets. The third Property is Mr A's main home, while the second and Australian Property are each used as holiday homes by Mr A, Mrs A, their adult children and their respective families, and close friends.

In addition to the above residential property, Mr A has:

•         interest-bearing deposits with Country D banks, held personally;

•         a personal Australian securities account with X Bank, held personally for the purpose of investing in shares on a long-term basis (opened after Mr A moved to Country D);

•         an investment bank account with X Bank, linked to Mr A's X Bank account;

•         personal and Visa accounts with Y Bank, opened while Mr A was living in Australia;

•         personal and Visa accounts with X Bank, held jointly with Mrs A and opened when Mr A and Mrs A were living in Australia.

All correspondence relating to accounts held personally by Mr A with X Bank and Y Bank is sent to the third Property and interest on the account with Y Bank is subject to interest withholding tax.

Neither Mr A nor Mrs A are (or have been) a member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

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)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Summary

Mr A commenced to be a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) from the Relevant Date.

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 theITAA 1936.

The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) 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);[1]

•         the domicile test;[2]

•         the 183-day test;[3] and

•         the Commonwealth superannuation fund test.[4]

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).

To determine an individual's residency status, it is appropriate to look beyond the period they have spent in (or out of) Australia. Factors from the entire income year and surrounding income years provide more information to help determine whether they meet one of the residency tests (paragraph 16 of 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:

•         physical presence;

•         intention or purpose of presence;

•         family and business/employment ties;

•         maintenance and location of assets; and

•         social and living arrangements.

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

Paragraph 24 of TR 2023/1 relevantly explains:

Because the ordinary concepts test asks whether you reside in Australia, having a connection to, or being a resident of another country does not necessarily diminish any connection to Australia.¹³ For this reason, the ordinary concepts test is not about dominance or exclusivity of residence in one place versus another. Nonetheless, continued connections overseas will inform the nature of your connection to Australia.¹⁴

While the period of physical presence or length of time in Australia is an important factor when considering whether an individual resides here, it is important to recognise that there is a distinction between 'staying' in Australia and residing in it. The individual must have some connection to Australia that characterises their presence as 'residing' in it (paragraph 26 of TR 2023/1).

Where an individual stays longer in Australia than intended, then the facts surrounding their entire stay in Australia must be considered, nor merely the original intended length of the stay, and an individual who stays in Australia longer than intended because they cannot depart when initially planned may become a resident where their behaviour is consistent with residing here (paragraphs 39 and 40 of TR 2023/1).

Mr A was not a resident of Australia for tax purposes and did not become a resident of Australia for tax purposes at the time of, or shortly after, his arrival in Australia on XX XX 202X. Broadly, this is because Mr A had not maintained a sufficient 'continuity of association' with Australia following his move to Country C and then

Country D, did not have the kind of connection to Australia at that time which characterised his presence as residing in Australia, nor the intention to live in Australia and an attitude that Australia was becoming his home.

Some of the relevant factors which inform the insufficient connection and intention Mr A had to Australia before and as at XX XX 202X that characterises his presence as 'staying' (rather than 'residing') in it include the following:

• Mr A had not lived permanently in Australia since 200X and has never applied for Australian citizenship.
• Mr A's physical presence in Australia, and the duration of his stay (spanning more than XX months), was largely due to the pandemic and the unprecedented travel restrictions that prevented him from leaving Australia. That is, Mr A and Mrs A were holidaying in County C when governments first began to announce impending border closures and when they returned to be in their home in Country D were advised to leave Country D (after a period of quarantine) due to a clerical error by Mr A's employer. This left Mr A and Mrs A with a need to make a swift decision as to which country to stay in until borders re-opened, and Australia was chosen due to quality of medical care and their access to a dwelling.
• Mr A and Mrs A did not arrive on XX XX 202X with any intention to establish an enduring lifestyle in Australia, as reflected by the eVisitor (subclass 651) visa he was granted (allowing him to stay until XX XX 202X), the information disclosed on his passenger card (that he had no intention of becoming an Australian resident) and the return flights he and his wife had (for use once borders reopened).
• Mr A did not and does not have any employment or business ties in Australia. He continued to be employed by a foreign employer (having not worked for an Australian employer since 200X) and his role for that employer did not at any point require or substantially involve any physical presence in Australia. Mr A does not have any personal ownership or beneficial interest in Australian businesses, private companies or trusts.
• While Australia is a country Mr A has had a longstanding connection with and the Australian Property is of significance to Mr A and to Mrs A as the place they typically stay at when in Australia, the third Property has been and remained Mr A's home and the place they stayed at more than any other. This is reflected by the fact that the third Property remained Mr A's primary mailing address at all times (including for his Australian bank accounts).
• Mr A returned to his pre-pandemic lifestyle based in Country D soon after border restrictions lifted (in XX XX 202X).

While Mr A was not a resident of Australia for tax purposes and did not become a resident of Australia for tax purposes at the time of, or shortly after, his arrival in Australia on XX XX 202X, he is considered to have become a resident of Australia for tax purposes on or around the Relevant Date, being the time when he started to take steps to access Australian benefit schemes, resembling behaviour consistent with residing here and resulting in a more enduring continuity of association with Australia. This is reflected in the following:

• Mr A's application for re-enrolment in Medicare on the Relevant Date and the receipt of a Medicare card soon after having stated on the enrolment form the reason for re-enrolling was he had "plans to reside in Australia permanently".
• Mr A's subsequent receipt of medical benefits under the Medicare system (during the period XX XX 202X to XX XX 202X).
• Mr A's obtainment of a Seniors Card on XX XX 202X.
• Mr A's acquisition of private health insurance with an Australian provider on XX XX 202X.
• Mr A's decision to open a superannuation account on XX XX 202X and contribute to it.
• Mr A intended to stay in Australia with his wife to assist with her post-surgery rehabilitation even if the borders were to reopen with Country D.

Even though Mr A did not qualify as an Australian resident until the Relevant Date under the resides test, Mr A may still qualify as an Australian resident from an earlier time if he satisfies one of the alternative tests.

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 and is generally the country of their father's permanent home;

•         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 (paragraph 57 of TR 2013/1).

In the context of a domicile of choice, TR 2023/1 states (at paragraphs 59 and 62):

59. To acquire a domicile of choice you must have both lawful physical presence in a foreign country and an intention to make your home indefinitely in that country.³⁸

...

62. If you have an Australian domicile and you are living outside Australia, you will retain your Australian domicile if you intend to return to Australia on a clearly foreseen and reasonably anticipated contingency (for example, at the end of your employment contract), even if you stay overseas for a substantial period. This is because you lack the necessary intention to settle in that country indefinitely. On the other hand, if you only have in mind a vague possibility of returning to Australia, such as making a fortune or some sentiment about dying in the land of your forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country.⁴⁰

As a Country X citizen born of 2 parents from Country X, Mr A's domicile of origin is Country X.

Having relocated countries a number of times during his lifetime, Mr A's domicile has changed to the extent he had both a lawful physical presence in a foreign country and an intention to make his home indefinitely in that country.

It is accepted that Mr A's domicile of choice from 200X until XX XX 202X was Country D, which he treated as his home base with no intention of returning to living in Australia.

Mr A's domicile of choice did not become Australia at any time between XX XX 202X to XX XX 202X (despite having started to reside in Australia as at the Relevant Date), and continued to be Country D, because it is considered that Mr A never intended to make his home indefinitely in Australia, and rather always intended to return to living in Country D once the border restrictions lifted (subject to his wife having completed her rehabilitation at the time) and did return to living in Country D once the border restrictions lifted.

Mr A was therefore not an Australian resident for tax purposes in respect of the year ended 30 June 2021 pursuant to subparagraph 6(1)(a)(i) of the ITAA 1936.

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. Their usual place of abode may still be overseas despite spending the majority, or even the whole, of the income year in Australia.

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 (paragraph 90 of TR 2023/1).

Given that Mr A was physically present in Australia for the entirety of the income year ended 30 June 2021, he will be an Australian tax resident for the entirety of that income year unless the Commissioner is satisfied that both limbs of the exclusion are satisfied.

It is considered that Mr A 's usual place of abode from XX XX 202X until XX XX 202X remained overseas (in Country D). In this regard, it is noted (with reference to the factors listed in paragraph 90 of TR 2023/1) that:

• Mr A primarily lived in the third Property before arriving in Australia on XX XX 202X, and returned to living primarily in the third Property soon after border restrictions lifted in XX 202X;
• but for border restrictions, the third Property was available to Mr A at all times during that period;
• the majority of Mr A's important personal belongings are kept at the third Property, no possessions held in Country D were sold, and the third Property remained Mr A's primary mailing address;
• Mr A arrived in Australia on a temporary visa and intended to return to Country D once border restrictions lifted; and
• Mr A did not arrive in Australia for the purpose of establishing a permanent life, and his decision to come to Australia at the time was only arrived at as a consequence of being unable to remain in Country D (due to COVID-19 restrictions imposed in Country D).

It is also considered that Mr A did not intend to take up residence in Australia at the time of his arrival in Australia on XX XX 202X (and at least not before the Relevant Date). On the contrary, Mr A's intention was to remain in Australia for a limited period of time (the duration of border restrictions) before returning to living in his home in Country D. This intention is objectively supported by the nature of Mr A's actions while in Australia. In particular, Mr A:

• did not update his mailing address to the Australian Property;
• did not dispose of any of his possessions in Country D, or arrange for any possessions to be shipped from the third Property to the Australian Property;
• maintained return flights to Country D; and
• returned to living in Country D mere weeks after border restrictions lifted.

Mr A was therefore not an Australian resident for tax purposes in respect of the year ended 30 June 2021 pursuant to subparagraph 6(1)(a)(ii) of the ITAA 1936.

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 PSS or the CSS (as well as the spouse and children under 16 years old of such members).

The Commonwealth superannuation test under subparagraph 6(1)(a)(iii) of the ITAA 1936 is not satisfied by Mr A in respect of the year ended 30 June 2021 on the basis that he is not a member (active or otherwise) of the PSS or CSS.

[1] Paragraph 6(1)(a) of the ITAA 1936.

[2] Subparagraph 6(1)(a)(i) of the ITAA 1936.

[3] Subparagraph 6(1)(a)(ii) of the ITAA 1936.

[4] Subparagraph 6(1)(a)(iii) of the ITAA 1936.