Edited version of private advice

Authorisation Number: 1052202738676

Date of advice: 10 January 2024

Ruling

Subject: Residency

Question

Are you an Australian resident for tax purposes from DD/MM/20YY?

Answer

No.

This ruling applies for the following periods:

Year ended DD/MM/20YY

Year ended DD/MM/20YY

Year ended DD/MM/20YY

Year ended DD/MM/20YY

The scheme commenced on:

DD/MM/20YY

Relevant facts and circumstances

You were born in Country B and are a citizen of Country B.

You are not a citizen of Australia.

You primarily resided in Country B before your arrival in Australia on DD/MM/20YY with your spouse and child A.

You are not a tax resident of any foreign country.

You entered Australia on a Subclass 187 - Regional Sponsored Migration Scheme (RSMS) visa, which allowed you to stay in Australia permanently.

You travelled to Australia with the intention of permanently relocating with your family.

Your spouse and child A accompanied you to Australia on DD/MM/20YY.

Upon your arrival in Australia, you were unable to find a suitable residence, so you did not purchase a property or establish your own family home. A friend offered the family the opportunity to stay at his house for free. You did not sign a rental agreement or pay any rental payments.

You opened a bank account upon arrival in Australia and enrolled child A in the local AEG English program.

On DD/MM/20YY, you accepted a role with Employer A, and on DD/MM/20YY, you returned to Country B as per your employer's directive to host some information sessions.

Upon leaving Australia on DD/MM20YY with your spouse and child A, you intended on returning to Australia a few months later after completing your employment duties.

However, due to the COVID outbreak, and following discussions with your employer, you were instructed to remain in Country B to continue your work.

When you left Australia, you did not advise any Australian financial institutions including any Australian companies with whom you have investments with that you are a foreign resident so that non- resident withholding tax could be deducted.

You have a driver's license for Country B and did not have an Australian license upon leaving.

After applying for a Medicare card, you did not then inform Medicare you were leaving as you perceived it would be a short business trip.

You do not have private health insurance.

You own an apartment in Country B located at XXX.

You resided in this apartment whilst living in Country B.

Your parents live in this property, you do not rent it out.

You left your household effects in your property in Country B, as your parents continued to live there.

You left personal possessions at the friend's house in Australia.

On DD/MM/20YY child B was born in Country B.

In MM/20YY your employment with Employer A ended.

Child B's passport was issued on DD/MM/20YY and VISA granted DD/MM/20YY.

You returned to Australia from DD/MM/20YY with the intention to reside here permanently and you are currently still onshore as at the issue date of this ruling.

On DD/MM/20YY you commenced employment with employer B.

In MM/20YY, you purchased your current residence at XXX.

You are not a member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or the spouse of such a member.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

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 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 DD/MM/20YY to DD/MM/20YYbased on the following:

You and your family arrived in Australia on DD/MM/20YY from Country B.

You did not purchase a property at this time. You and your family stayed with a family friend in their home.

You applied for a Medicare card and opened a bank account.

You accepted a role with Employer A on DD/MM/20YY.

You returned to Country B as per your employer's directive to host some information sessions on DD/MM/20YY.

Due to the COVID-19 outbreak, and following discussions with your employer, you were instructed to remain in Country B to continue your work.

You conceived another child whilst in Country B, and on DD/MM/20YY child B was born in Country B.

In MM/20YY your employment with employer A ended.

Child B's passport was issued on DD/MM/20YY and VISA granted DD/MM/20YY.

You returned to Australia from DD/MM/20YY with the intention to reside here permanently and you are currently still onshore as at the issue date of this ruling.

In your case, you were present in Australia for XX days in 20YY with the intention of living here permanently with your family. However, despite this intention, we do not consider your period of physical presence, along with the limited activities you were able to undertake to establish a permanent living arrangement sufficient enough to maintain a continuity of association with Australia once you departed. You were not an Australian resident for tax purposes under the resides test from DD/MM/20YY.

However, 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 B and your domicile of origin is Country B.

It is considered that you did not abandon your domicile of origin in Country B in 20YY and acquire a domicile of choice in Australia. You obtained permanent Australian residency in 20YY and even though you may have intended to live there indefinitely from DD/MM/20YY, you did not do so until DD/MM/20YY.

Therefore, your domicile is Country B, and you are not a resident of Australia under the domicile test.

However, we have added a discussion of permanent place of abode below as an alternative argument.

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 satisfied that your permanent place of abode is outside Australia because:

You own an apartment in Country B located at XXX.

You resided in this apartment whilst living in Country B from DD/MM/20YY to DD/MM/20YY.

Your parents also live in this property, you do not rent it out.

You left your household effects in your property in Country B.

You did not own a property or establish your own family home in Australia during this period. You resided with a friend, at their property upon arrival in Australia on DD/MM/20YY, until leaving on DD/MM/20YY. You did not enter into a rental agreement or make any payments to your friend.

As you did not have a residence or place of abode established in Australia, along with your limited durability of association to Australia, while you were physically present in Country B, you are therefore 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,20YY,20YY and 20YY income years. 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 from DD/MM/20YY and the relevant ruling periods which follow.