Edited version of private advice

Authorisation Number: 1052227408106

Date of advice: 12 March 2024

Ruling

Subject: Residency

Question 1

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

Answer

Yes.

Question 2

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 Ending DD MM 20YY

The scheme commenced on:

DD MM 20YY

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect, and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are a dual citizen of Country A and Country B.

Your parents moved the whole family to Country B in the late 90s.

You arrived in Australia on DD Mm 20YY.

You left Australia for Country B on DD MM 20YY for x days and arrived back in Australia on DD MM 20YY.

You left Australia on DD MM 202YY as your Second Working Holiday visa expired on

DD MM 20YY.

While living in Australia you held jobs in different industries.

You continued working remotely overseas for your Australian Employer.

Your Australian employer terminated your employment on DD MM 20YY.

You have applied for Full Skills Assessment through Organisation A on DD MM 20YY.

Your intention is to then apply for a Skilled Nominated Visa which will allow you to live and work in Australia as a permanent resident.

You have a Country B driver's licence.

You do not have any spouse or dependants in Australia.

Your family reside and work in Country A and Country B.

When you were in Australia you lived with relatives and had your own accommodation.

You do not have a return airline ticket yet, but your intention is to return to live in Australia as soon as practicable but planned before end of June 20XX.

You have not yet organised permanent accommodation for when you come back to Australia.

You do not own any properties either in Australia or overseas.

You hold bank accounts in Country A and Country B.

You hold a bank account in Australia and an investments account still active.

Your Medicare has expired, and your intention is to renew it when you come back to Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1999.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

You have not advised your Australian financial institution/s with whom you have investments with that you are a foreign resident for tax purposes so that non-resident withholding tax can be deducted on any interest income received.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

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 (TR 2023/1).

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.

Application to your situation

You are a dual citizen of Country A and Country B.

You lived in Australia from DD MM 20YY until DD MM 20YY when your Second Working Holiday visa expired on DD MM 20YY.

You left Australia for Country B on DD MM 20YY for x days and arrived back in Australia on DD MM 20YY.

While living in Australia you held jobs in various industries.

You continued working remotely overseas for your Australian Employer until DD MM 20YY.

Your family reside and work in Country A and Country B however you intend to return to live permanently in Australia as soon as practicable (planned before end of MM 20YY) however you do not yet have a return airline ticket or permanent accommodation organised in Australia).

On DD MM 20YY you applied for a Full Skills Assessment through Organisation A, and your intention in due course is to apply for a Skilled Nominated Visa which will allow you to live and work in Australia as a permanent resident.

You do not have any spouse or dependants in Australia.

You do not own any properties either in Australia or overseas.

You hold bank accounts in Country A and Country B.

You hold a bank account in Australia, and an investments account still active.

Therefore, you are an Australian resident for tax purposes under the resides test for the period DD MM 20YY until DD MM 20YY as you were physically present and living in Australia.

Income earned in Australia from Australian sources during that period is included in a working holiday maker's (WHM) s taxable income while they are a WHM. From January 2017 WHMs are taxed at a special rate of 15% on their taxable income earned in Australia up to $45,000.

Working Holiday Makers may be taxed on the same basis as a resident Australian national if they are both:

•         from a non-discrimination article (NDA) country

•         an Australian resident for tax purposes.

The list of non-discrimination article (NDA) countries are as follows:

•         Chile

•         Finland

•         Germany (for 2017-18 and future income years)

•         Israel (for 2020-21 and future income years)

•         Japan

•         Norway

•         Turkey

•         United Kingdom.

You are from an NDA country. Tax should have been withheld from your pay by your employers at the rate of 15%. As a WHM, you will pay the lower amount of tax that results from you being assessed on the same basis as an Australian resident national earning the same income in the same circumstances.

We understand that your intention is to return to live in Australia before end of DD MM 20YY and seek permanent residency by applying for a Skilled Nominated Visa, however this has not yet occurred and there is no supporting evidence. Credible evidence will be needed to show that you are not a temporary visitor. The securing of a different type of longer-term visa may be such credible evidence.

Therefore, you are not an Australian resident for tax purposes under the resides test for the period

DD MM 20YY to DD MM 20YY according to the ordinary meaning of the word. You had departed Australia and were not living in Australia from DD MM 20YY.

However, you may still be an Australian resident from DD MM 20YY to DD MM 20YY, 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

You were born in Country A.

Your parents moved the whole family to Country B in the late 90s.

You are a dual citizen of both Country A and Country B.

It is considered that you did not abandon your domicile in Country A and Country B and acquire a new domicile of choice in Australia. You were not entitled to reside in Australia indefinitely and while living in Australia, you only held a temporary visa with the most recent visa expiring on DD MM 20YY.

Therefore, your domicile of origin is Country A and you are not an Australian residentunder the domicile test from DD MM 20YY to DD MM 20YY.

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 for the period DD MM 20YY to DD MM 20YY. 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 an Australian resident under this test.

Conclusion

For the period DD MM 20YY until DD MM 20YY until you departed Australia, you satisfied the resides test of residency and were a resident of Australia for income tax purposes.

However, from DD MM 20YY once you departed Australia, you did not satisfy any of the four tests of residency. You are not a resident of Australia for income tax purposes from DD MM 20YY.