Edited version of private advice

Authorisation Number: 1052231698287

Date of advice: 13 March 2024

Ruling

Subject: Residency

Question

Are you a resident for tax purposes of Australia for the 20YY-YY income year?

Answer

Yes.

Under the law, meeting a single test suffices for being deemed a tax resident. In your case, you have satisfied both the ordinary concepts and domicile tests. You are a resident for tax purposes of Australia.

This ruling applies for the following period:

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

You are a Country A citizen.

You arrived in Australia with a permanent stay visa.

You graduated from an Australian University in 20YY.

You applied for Australian citizenship before the Covid-19 Pandemic occurred.

You lived in the property that you owned.

On XX XXXX 20YY, you received Australian citizenship.

Your parent became sick and was admitted to a hospital in Country A during the Covid-19 pandemic.

You received an exemption for travel through the border restrictions and entered Country A on XX XXXX 20YY.

You utilised your Country A passport as you had not yet applied for your Australian passport due to the Covid-19 border restrictions.

In XXXX 20YY, you began to lease the property you owned through a real estate agent.

On XX XXXX 20YY, you began to work for an Australian company and performed remote working arrangements while you were in Country A.

You continued to pay the mortgage while you were overseas.

You had your mail sent to a friend's address while you were in Country A.

In XXXX 20YY, you married your spouse and your parent recovered from their illness.

You lived with your spouse at their apartment during your stay in Country A.

You and your spouse planned to move to Australia and applied for a partner visa for your spouse.

A partner visa was granted to your spouse after you applied for your Australian passport.

On XX XXXX 20YY, you returned to Australia with your spouse.

You intend to reside in Australia and have no intention for leaving for a foreign country.

Your parents remain in Country A.

You have a bank account in Country A.

You have a bank account with an Australian Financial Institution to deposit your salary and another for your mortgage.

You have Australian investments.

You left your household effects in your property to be leased as a furnished dwelling.

You left your personal effects to a friend to hold for you while you were in Country A.

You did not advise any of your financial institutions or investments that you were a foreign resident for tax purposes.

You lodged income tax returns as a tax resident of Australia for the 20YY-YY income years.

You do not believe you are a tax resident of Country A in the 20YY-YY income year.

You intend to renounce Country A citizenship this year.

You have a driver licence in both Australia and Country A.

You did not advise the Australian Electoral Commission and Medicare that you were departing Australia as you were not aware of the requirement.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(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.

Relevant facts within your circumstances occurred in surrounding income years to the period which this ruling relates. Therefore, we have considered facts in the surrounding income years to assist us with determining your residency status as detailed by paragraph 16 of TR 2023/1:

To determine your residency status, it is appropriate to look beyond the period you have spent in (or out of) Australia. Factors from the entire income year and surrounding income years provide more information to help determine whether you meet one of the residency tests

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 each individual's circumstances.

Because the ordinary concepts test is 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: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•         Physical presence - you were physically absent from Australia during the 20YY-YY income year

•         Intention or purpose - you departed Australia with the intent to eventually return and reside here

•         you departed Australia with the intent to eventually coming back to reside here permanently

•         Maintenance of assets - you have stronger ties to Australia through your investment property and other assets

•         Employment ties - your employment ties are towards Australia through your Australian employer

•         Family ties - your spouse applied for a partner visa after your marriage in XXXX 20YY and moved with you to Australia in XXXX 20YY.

You are a resident of Australia under the resides test for the period XX XXXX 20YY to XX XXXX 20YY.

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.

We also considered that a relevant example within TR 2023/1 applies to your circumstances as set out below.

Paragraph 62 of TR 2023/1 states:

If you have an Australian domicile and you are living outside Australia, you will retain your Australian domicile if you intend to return to Australia on a clearly foreseen and reasonably anticipated contingency (for example, at the end of your employment contract), even if you stay overseas for a substantial period. This is because you lack the necessary intention to settle in that country indefinitely...

Application to your situation

In your case, you were born in Country A and your domicile of origin is Country A. You became an Australian citizen on XX XXXX 20YY.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. You obtained citizenship on XX XXXX 20YY, and you intend to live here indefinitely. 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; and

•         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

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         Your stay overseas is not considered a substantial period

•         You stayed in your spouse's property in Country A

•         You retained your investment property in Australia

•         You have multiple bank accounts with Australian Financial Intuitions and other Australian investments

•         Your spouse applied for a partner visa, and you moved to Australia in XXXX 20YY

•         You departed Australia with the intent to eventually return and reside here.

The Commissioner is not satisfied that your permanent place of abode was outside Australia.

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 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 were not 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.