Edited version of private advice

Authorisation Number: 1052231195650

Date of advice: 27 March 2024

Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes for the period XX XX 20XX to XX XX 20XX?

Answer

Yes.

This private ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

XX XX 20XX

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You will move to XX to undertake employment at the XXXX

Your role is not entitled to any diplomatic privileges or immunities.

Your period of employment is from XX XX 20XX to XX XX 20XX.

You will enter XX on a 'X' class working visa. Once you are in XX you will be eligible to apply for a XX work permit.

Your offer of employment states that your employment is a "locally engaged position". The XXXX denotes locally engaged staff (LES) must pay Australian income tax on their earnings.

Your offer of employment requires a revaluation of your residency for tax purposes by using the ATO calculator or applying for a private ruling.

You intend to return to Australia once your employment contact ceases in XX 20XX.

You are currently employed with the XX in XX. You will retain your position with the XX, as you are taking a year's leave without pay to take on the role with the XXXX.

You do not own any real property in Australia.

While working in XX you will store your personal effects with family in XX

You intend to rent accommodation in XX.

You will not close any Australian bank accounts.

You will remain on the Australian Electoral Commission roll.

You do not hold any Australian private health insurance.

You hold an Australian learner's driver's licence.

You are a member of the XXXX

You will redirect any postal mail to a family member's home address.

Most of your relatives and family reside in XX.

If you return to Australia for any period during your employment you will stay with family.

You intend to maintain your professional, family, and social connections in Australia while overseas.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

These reasons for decision accompany the Notice of private ruling for XX XX.

Question 1

Are you a resident of Australia for tax purposes for the period XX XX 20XX to XX XX 20XX?

Summary

Yes.

Detailed reasoning

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 will be a resident of Australia under the resides test for the period XX XX 20XX to XX XX 20XX based on the following:

•         physical presence - you have been physically present in Australia for many years before accepting the employment contract and moving to XX

•         intention or purpose - your stated purpose to live in Australia is evidenced by your intent to return to Australia after the end of your 1-year contract

•         behaviour - you intend to maintain your professional, family, and social connections in Australia while overseas.

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 you will not abandon your domicile and acquire a domicile of choice in XX. Although you hold no residential property in Australia and will seek a long-term lease of a rental property in XX, you are not entitled to reside in XX indefinitely. While living in XX you will only hold a work permit valid for the period of your employment.

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 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 outside Australia because:

•         you intend to return to Australia once your employment contact ceases in XX 20XX.

•         you will lease a rental property in XX for the period of your employment only.

•         you will retain your position with the XX, as you are taking a year's leave without pay to take on the role with the XX.

•         you will not close any Australian bank accounts.

•         you will remain on the Australian Electoral Commission roll.

•         you intend to maintain your professional, family, and social connections in Australia while overseas.

Therefore, you are a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more (184 days or more in a leap year) 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 be present in Australia for 183 days or more during the income year ending XX XX 20XX. Therefore, you are not a resident under this test for the income year ending XX XX 20XX.

You have been in Australia for 184 days or more during the income year ending XX XX 20XX (a leap year). Therefore, you will be a resident under this test for the income year ending XX XX 20XX, unless the Commissioner is satisfied that your usual place of abode was outside Australia, and you do not have an intention to take up residence in Australia.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

Application to your situation

The Commissioner is not satisfied that your usual place of abode was outside Australia for the income year ending XX XX 20XX as you lived in Australia until XX 20XX.

Therefore, you will only be a resident for the income year ending XX XX 20XX 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 a child under 16 years, 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. The test does not apply if you are a member of the Public Sector Superannuation Accumulation Plan (PSSAP). Therefore, you are not a resident under this test.

Conclusion

You satisfy the resides test and domicile test of residency and so you are a resident of Australia for income tax purposes for the period XX XX 20XX to XX XX 20XX.