Edited version of private advice

Authorisation Number: 1052194681360

Date of advice: 2 February 2024

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes as defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

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 are an Australian citizen.

You left Australia to commence employment overseas.

You lease a property overseas which is lived in and maintained by your extended family.

Your employer then transferred you to multiple other countries over the years, where you lived with your immediate family.

You eventually returned to Australia with your family.

While in Australia you were employed as a managing Director.

In XX 20XX your employer asked you to engage in integration activities in Country A.

You were based out of Country A from XX 20XX, staying in hotels and temporary accommodation.

Your employer then offered you another position.

You accepted this position while also retaining your position of managing Director in Australia.

Your new employment position commenced on XX 20XX.

You are currently staying in Country A under an employment visa.

You hold the lease in Country A. The lease expires on XX 20XX with the possibility for renewal.

You intend to remain working and living Country A for the next 2-3 years.

You purchased a vehicle in Country A.

Your family have remained living in Australia.

Your family is living in long-term rental accommodation. You are listed on the lease.

You are the main income earner for your family and are responsible for your families' living expenses in Australia.

Your family is considering relocating to Country A but is currently undecided.

During the period you've resided in Country A you've returned to Australia on multiple occasions.

It is part of your employment obligations to travel to Australia and other countries occasionally.

You are not a 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.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

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... 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 resides test is about 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. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

You are a resident of Australia under the resides test for the period XX XX 20XX to XX XX 20XX based on the following:

It is well established in case law that a person 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.

Your intention, purpose, or reason for being in Australia helps to determine whether you reside here. While you may have multiple reasons, there is usually a main purpose to your presence.

A resident will usually have an intention to treat Australia, or a place within Australia, as a home at least for the time being, though not necessarily forever. In your case, while staying in Australia, it is for the primary purpose of returning home to see your family. You have indicated that they are considering relocating however currently they reside in Australia on a permanent basis with no immediate plans to relocate.

This is outlined in paragraph 38 of TR 2023/1 which states "There may be a transition period. For example, you may hold a longer-term intention to ultimately live overseas with your family, but circumstances mean your family will remain living in Australia and you will split your time between working overseas and regularly returning to Australia to live with them until those circumstances change. In such a case, you might remain a resident until the relocation is complete."

The presence (or absence) of your family also informs the nature of your connection to Australia. Working overseas but returning to Australia at intervals to an established family means you are still residing in Australia. This is the case even if you spend more time overseas than in Australia in any given income year. Usually, such an arrangement indicates you are residing in Australia and another country. Having an ongoing, deliberate connection to Australia even though you have a connection to another country through your work does not make you a mere visitor to Australia. In such a case, Australia is your home, and you are properly regarded as residing here.

This can be contrasted with a situation where you leave Australia to work overseas and shift your life overseas. For example, if you, and your family relocate overseas for work for some years establishing a permanent base and a routine overseas consistent with 'living' there, returning only occasionally for short stays while taking leave from work, then, depending on other facts and circumstances, you might not be a resident under the ordinary concepts test.

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.

It is considered that you did not abandon your domicile of origin in the 20XX financial year and acquire a domicile of choice in Country A. You are not entitled to reside in Country A indefinitely and while living in Country A, you only hold a work permit which is valid until XX 20XX.

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:

•         the intended and actual length of the taxpayer's stay in the overseas country

•         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

•         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

•         whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

•         the duration and continuity of the taxpayer's presence in the overseas country

•         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

The Commissioner is not satisfied that your permanent place of abode is outside Australia because you have not demonstrated actions consistent with definitively abandoning living in Australia in a permanent way.

•         you have an established family home in Australia

•         your children are enrolled in an Australian school

•         you fund your family's lifestyle

•         you have returned to Australia on multiple occasions to be with your family

•         your family have not taken any definitive action to join you overseas

Paragraphs 76 and 77 of TR 2023/1 state that if you leave Australia for an unspecified or substantial period, pack up your home here, set up a home in a foreign country and live there with your family returning only occasionally such as for cultural events, special celebrations or annual leave, you are likely to meet the description of someone who has abandoned Australia as a place of residency and commenced living permanently overseas. This is despite the fact that you may at some point intend to return to Australia.

For practical purposes, it is convenient to set some 'rule of thumb' on what substantial means. Broadly, 2 years is considered to be a substantial period of time. What this means is that if your intended length of stay is less than 2 years, you are unlikely to be able to establish that your permanent place of abode is outside of Australia. Whether a stay of precisely 2 years or longer means you fall within the proviso will depend on the circumstances. The critical question is whether a person has in fact abandoned Australian residency and commenced to live in a permanent way overseas.

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

Currently 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.