Edited version of private advice

Authorisation Number: 1052199785336

Date of advice: 1 December 2023

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes up until XX/XX/20XX?

Answer

No.

Question 2

Are you a resident of Australia for tax purposes from XX/XX/20XX?

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 have a spouse and dependent children.

Your spouse is an Australian citizen.

In XX/20XX, you and your spouse moved to Place A indefinitely.

You terminated your lease on your Australian property.

You relocated your furniture in Australia to Place A.

You sold both of your vehicles in Australia.

You cancelled your private health insurance in Australia.

You disconnected your utilities in Australia.

You removed yourself from the Australian Electoral Role.

In XX/20XX, you were granted Place A residency. After several years of continuous residency, you, your spouse, and your children became permanent residents.

You were employed in Place A the entire time you were there and worked for several employers.

Since XX/20XX, you have lived in an apartment in Place A. This apartment has been rented on X year leases.

You visited Australia several times for various visits since moving to Place A. You also visited Australia for several business trips.

On XX/XX/20XX, you decided that you would relocate from Place A to Australia.

You spouse intends to move to Australia with your children in XX/20XX so that they can commence the school year in Australia. Your children have been accepted into local primary schools; however, this is dependent on you finding a place to live within the school's enrolment zone.

Your family will live with your spouse's mother until you relocate to Australia. You have decided not to lease accommodation or purchase a property prior to your arrival in Australia.

When your spouse relocates to Australia, you intend on moving from your apartment in Place A due to the high costs in real estate. You intend on moving into smaller, furnished accommodation that is close to your work.

On XX/XX/20XX, you intend to visit Australia for family celebrations. You intend to stay in Australia until XX/XX/20XX. You will stay with your family during this time at your spouse's mother's home. This trip will be taken using annual leave; therefore, you will not be required to work remotely.

Your employment contract in Place A will cease on XX/XX/20XX. You intend on moving to Australia on XX/XX/20XX. This is the earliest possible date that you can move due to work commitments in Place A. You will continue to work for your current employer when you relocate to Australia.

You intend on relocating most of your belongings to Australia. Some of your belongings will remain in your temporary accommodation in Place A until you relocate to Australia. Your household effects will be placed into storage and will be shipped to Australia once you and your family have established your permanent home in Australia.

You may have some business trips to Australia following your family's departure and you intend to visit your family during this time.

You have family and friends in Australia.

You have bank accounts and shares in Australia. You notified the banks that you reside in Place A.

You are a potential beneficiary of an Australian discretionary trust.

Most of your assets are in Place A.

You will provide the funds for your family's accommodation and expenses when your family moves to Australia as your spouse will not be working.

In the coming years, you intend to travel to Country A once per year and to Country B for work.

When completing incoming and outgoing passenger cards, you state that you are a visitor or temporary entrant.

Your social connections are in Place A.

You have retained a sporting membership from Australia. You changed this membership to an overseas membership in 20XX when you departed Australia.

You have also retained a career related membership from Australia.

You are a member of a family club in Place A.

You have a Place A drivers' licence.

You have an Australian driver's licence which you have retained as your Place A drivers' licence is not accepted in many countries.

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

You are not a member nor the spouse of a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

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... 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 not a resident of Australia under the resides test up until XX/20XX based on the following:

•         You departed Australia to live in Place A indefinitely.

•         You have lived in Place A for seven years.

•         You were granted permanent residency in Place A.

•         You are working in Place A.

•         Your household effects are in Place A.

•         You have a membership at a family club in Place A.

•         You have been renting an apartment in Place A on X year leases and intend on moving from your apartment into a smaller, furnished accommodation that is close to your work, once your spouse and children depart.

•         Some of your belongings will remain in your temporary accommodation in Place A until you relocate to Australia.

•         Your social connections are in Place A.

You will be a resident of Australia under the resides test from XX/20XX based on the following:

•         You will depart Place A to live in Australia.

•         Your family will be in Australia.

•         You will live in Australia with your spouse and your dependent children.

•         Your belongings will be relocated to Australia.

•         You will work in Australia.

•         You intend on purchasing a property or leasing a property in Australia.

•         You intend on enrolling your children into school in Australia.

•         You have friends in Australia.

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 abandoned your domicile of origin in Australia and acquired a domicile of choice in Place A. You moved to Place A in 20XX and were entitled to reside there indefinitely, having obtained permanent residency. Your domicile of origin then changed from Australia to Place A.

When you return to Australia to join your family and live in Australia permanently from XX/XX/20XX, it is considered that you will have abandoned your domicile of choice in Place A and acquired a new domicile of choice in Australia, seeing as from this point forward you will have a lawful physical presence in Australia and an intention to make Australia your home indefinitely.

Therefore, your domicile is Australia from X/XX/20XX, and you will be a resident of Australia from this date under the domicile test.

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 will be outside Australia because:

•         When you return to Australia to join your family and live in Australia permanently from XX/XX/20XX, you will have abandoned your accommodation in Place A.

•         Prior to relocating to Australia, your intention is to move into a smaller, furnished accommodation that is close to your work.

•         Your personal and household effects will be placed in storage while you are residing in the short-term accommodation and will be shipped to Australia upon your departure.

•         You will initially stay with family upon your arrival in Australia and will look to purchase your own property shortly thereafter.

•         Your intentions at this time will be to reside in Australia indefinitely.

Therefore, you will be a resident of Australia under the domicile test from XX/XX/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.

Application to your situation

You will not have been present in Australia for 183 days or more during the 20XX income year. Therefore, you will not be 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

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes up until XX/XX/20XX.

From XX/XX/20XX, you will satisfy the resides and domicile tests of residency and so will be a resident of Australia for income tax purposes.