Edited version of private advice

Authorisation Number: 1052201201761

Date of advice: 8 December 2023

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 1997 (ITAA 1997)?

Answer

No.

This ruling applies for the following period:

Year ending XX XX 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On XX XX 19XX, you were born in Country A. You continue to be a citizen of Country A.

From 19XX until the present time, you have been an employee of the Country A government.

In 20XX, you travelled to Australia to undertake study at University through sponsorship.

In XX 20XX, you graduated from the University.

Your family, including your wife and XX children, accompanied you to Australia.

You returned to Country A following the completion of your studies.

Due to your children commencing their schooling in Australia, and the difficulties with travel between Australia and Country A, you decided to return to Australia until you gained your Australian Citizenship.

In XX 20XX, whilst residing in Australia, you obtained your taxi licence.

In XX 20XX you acquired 50% ownership in Property A.

In XX 20XX, you acquired 100% ownership in Property B.

In XX 20XX, you acquired 100% ownership in Property C.

Property C is the family home for your wife and children.

On XX XX 20XX, you became an Australian citizen.

In XX 20XX, you departed from Australia and entered Country A using your Country A passport.

Your family did not return to Country A with you.

Your intention was to take up domicile in Country A and continue to work in your long-standing position as an Agricultural Engineer with the Country A government.

You wish to access your Country A retirement benefits, which will be lost if you do not continue to reside in Country A.

You acquired ownership of, and reside in, the family home (Property D) in Country A.

You also own land in Country A.

You made the decision to live independent of the family unit as you considered that it was not safe or beneficial for your family to return to Country A.

Prior to returning to Country A, you sold your taxi licence lease.

Your children attended school in Australia due to the additional facilities and education opportunities.

Your family continue to reside in Australia due to the ties they have developed.

You financially support some members of your family while they continue to reside in Australia, including:

•         Supporting your spouse with groceries and house bills.

•         Supporting a child with life support; including bills and living costs

•         Supporting a child with school bills and living costs

Your XX other children in Australia are now adults, and do not require you to financially support them.

You have no social or sporting connections in Australia.

In Country A, your connections are with work colleagues and immediate family. You have XX siblings in Country A.

On XX XX 20XX, you cancelled your private health insurance in Australia.

You have maintained a bank account in Australia.

You were not aware of the requirement to notify Australian financial institutions of your foreign resident status for non-resident withholding tax purposes, you are currently addressing this.

You were not aware you should advice the Australian Electoral role or Medicare that you are a foreign resident, you are currently addressing this.

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

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

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 not a resident of Australia under the resides test for the period XX XX 20XX to XX XX 20XXbased on the following:

•         From 19XX, you have been employed, on a permanent basis, with the Country A Government.

•         You have not had any physical presence in Australia in the 20XX financial year.

•         You have demonstrated a settled pattern of living for several years, maintaining a transitory nature of travel to Australia.

•         If you travel to Australia during the financial year, the purpose of the visit will be to see family for a finite period of time.

•         If you travel to Australia during the financial year, you intend to depart shortly after to return to your home in Country A and to continue in your employment with the Country A government.

•         You acquired and continue to own, the family home in Country A, which contains personal and household possessions.

•         Your family lives in Australia, separate from you, for both social and safety reasons.

•         You have no intention to settle in Australia on a permanent basis.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

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 Country A and your domicile of origin is in Country A. You immigrated to Australia in 20XX and became an Australian citizen on XX XX 20XX.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia.

Although you have obtained Australian citizenship in 2017, you do not intend to live in Australia indefinitely. It was your intention to return to Country A. The intent of obtaining citizenship was to enable you to travel between Country A and Australia wither greater ease, merely for the purpose of retaining access to your family.

Therefore, your domicile is Country A, and you are not 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 20YY 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

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