Edited version of private advice

Authorisation Number: 1052216128120

Date of advice: 2 February 2024

Ruling

Subject: Australian resident for taxation purposes

Question

Were you a resident of Australia for taxation purposes for the 20YY-YY and 20YY-YY income years?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20YY

Year ended 30 June 20YY

The scheme commenced on:

1 July 20YY

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Country Z.

You are a permanent resident of Australia for immigration purposes.

You arrived in Australia during the 20YY-YY income year on a visa for returning permanent residents.

You had intended to return to Country Z shortly afterwards.

COVID restrictions in Country Z were in place and you decided not to return to Country Z on the planned date.

You came to Australia to visit your spouse and child.

You were staying with your spouse and child in Australia.

Your spouse had been living in Australia for several years.

Previously, you had made several trips to Australia for short visits.

You and your spouse separated a few years ago and the divorce was finalised a couple of years later.

You worked remotely in Australia for your Country Z employer.

You have not returned, or attempted to return, to Country Z since arriving in Australia.

From the 20YY-YY income year, your Country Z employer assigned you to work for its Australian subsidiary.

You purchased a house in Australia several months after you arrived.

You moved into the house in Australia on your own.

Your child sometimes stays with you.

Approximately a year after you arrived, you became entitled to Medicare benefits and acquired private health insurance.

The properties you have in Country Z are vacant.

You also have a car in Country Z.

You are establishing social networks in Australia.

You have family and social ties in Country Z.

You and your spouse are not eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1997 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 tests

•         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... [W]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 everyone'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 were a resident of Australia under the resides test for the 20YY-YY and 20YY-YY income years based on the following:

•         Since arriving during the 20YY-YY income year, you have been physically present in Australia.

•         You have not left Australia, nor have you even attempted to leave Australia.

•         You initially stayed with your spouse in Australia and then purchased your own home in Australia.

•         You have been working for your Country Z employer in Australia.

•         You have a child who stays with you from time to time in Australia.

•         Your day-to-day life since arrival, has been in Australia.

While you still maintain connections with Country Z, such as family and friends, these are not enough to outweigh the factors listed above.

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. When considering intention, we have regard to objectively observable conduct. While assertions of intention will always be relevant, if there is a difference between that assertion and the conduct, we may rely on the conduct.

Application to your situation

In your case, you were born in Country Z and your domicile of origin is Country Z.

It is considered that you have abandoned your domicile of origin in Country Z and acquired a domicile of choice in Australia as you obtained permanent residency in Australia, and have been living here indefinitely with no clear plan for returning to Country Z.

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 considering 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 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 not outside Australia because:

•         You have not been back to Country Z since arriving in Australia more than X years ago.

•         Your day-to-day life has been in Australia since your arrival.

•         You have lived in settled residential accommodation in Australia since your arrival.

Therefore, you were a resident of Australia under the domicile test for the 20YY-YY and 20YY-YY income years.

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 been in Australia for the whole of the 20YY-YY and 20YY-YY income years.

You do not have a usual place of abode in Country Z as you have not been back to Country Z for any reason since arriving in Australia.

You purchased a home in Australia, obtained permanent residency in Australia, and have been living here indefinitely with no clear plan for returning to Country Z. The objective facts show that your intention has been to reside here.

You were a resident under this test for the 20YY-YY and 20YY-YY income years.

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 were not a resident under this test.

Conclusion

A person need only meet one of the four residency tests to be considered a resident of Australia for taxation purposes. You met three of the four residency tests for the 20YY-YY and 20YY-YY income years. As at least one test has been met, you were a resident for taxation purposes for those income years.