Edited version of private advice

Authorisation Number: 1052232442076

Date of advice: 15 March 2024

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes for the 20XX and 20XX income years?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You lived in Country X from 20XX until 20XX and then from 20XX until 20XX and from 20XX onwards.

In XX/20XX, you purchased a property in Country X. You refinanced this property in 20XX.

You held a Country X permanent residency visa from 20XX until 20XX. You became a citizen of Country X in 20XX. During this time, you were working as a Country X based expat for a company in Australia and as you were working for a Country X based company on an overseas assignment, you were eligible to become a citizen of Country X

Your ex-spouse is a citizen of Country X.

You have children who are both citizens of Australia and citizens of Country X.

You are a foreign resident of Country X and you have lodged tax returns in Country X since 20XX.

In 20XX, due to limited work in your industry being available to you, you accepted a full-time position in Country X.

In July 20XX, you rented out your property in Australia and your family moved to Country X with the intention to live there permanently. You rented an apartment in Country X with a X year lease. You purchased a vehicle and enrolled your children in schools.

In late XX/20XX, you returned to Australia. One of your children remained in Australia to commence boarding school due to not adapting well to school life in Country X.

In XX/20XX, you and your then spouse and your other child returned to Country X. You also relocated your pet to Country X.

In XX/20XX, when borders closed due to Covid-19, your then ex-spouse and your child returned to Australia as your child at boarding school could not remain there. Your family stayed with friends until the lease on your property had ended and they could move back in. You remained at your home in Country X.

Due to Covid-19 travel restrictions, it was difficult for your family to leave Australia and difficult for you to travel to Australia.

In XX/20XX, you were mainly working offshore and rented out your property in Country X. When you weren't working offshore, you stayed with friends, and you also rented a room from a work colleague in another location in Country X.

Your employment position in Country X was the only source of income for your family.

In XX/20XX, you discovered that there was no work in your field in Australia and that you were also ineligible for an Australian Covid assistance payment.

In XX/20XX, you returned to Australia and undertook mandatory quarantine. You did not have ongoing work in Australia, you did not leave your employer in Country X or actively look for work in Australia as you did not intend to remain in Australia.

In XX/20XX, you returned to Country X to undertake work offshore.

During 20XX, you continued to reside in Country X. You paid the mortgage for your property in Australia and paid the mortgage for your property in Country X. You also made payments for your car and looked after your pet.

On XX/XX/20XX, you returned to Australia to visit your family and undertook mandatory quarantine.

In early 20XX, due to the emotional and financial strains of family separation, and differences on where your family should live and work, you and your spouse separated. Your spouse chose to remain in Australia.

You undertook some casual work in Australia as you could not return to Country X due to state border closures.

On XX/XX/20XX, you returned to Country X and continued to work there.

On XX/XX/20XX, you returned to Australia to see your children. You left for Country X on XX/XX/20XX.

In XX/20XX, you sold your home in Country X.

In XX/XX/20XX, you purchased another residential property in Country X. You rented out part of this property.

During the 20XX calendar year, you continued to live and work in Country X as well as work offshore.

During the 20XX income year, you returned to Australia on X occasions to see your children.

When you returned to Australia, you stayed in the guest room in the family home or at your parents' house.

Your ex-spouse commenced studying in Australia in XX/20XX and is expected to finish studying in XX/20XX; therefore you are required to financially support your children who live at home.

You did not develop any professional, social, or sporting connections in Australia.

You are a member of a club in Country X.

You have not removed yourself from the Australian electoral role.

You have not removed yourself from Medicare.

You have a driver's licence in Australia and a driver's licence in Country X.

You notified your health insurer that you were departing Australia in 20XX, however you resumed your family health cover in 20XX when your ex -spouse and your children returned to Australia from Country X.

When completing incoming and outgoing passenger cards, you state that you are a visitor or temporary entrant.

You have a bank account in Country X and a bank account in Australia.

You own a property in Australia with your ex-spouse.

You are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990 as a result of your employment in a federal government department which ended in 20YY.

You have not advised 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 can be deducted.

You lodged your Australian income tax returns for the 20XX income year as a non-resident.

You lodged Australian income tax returns for the 20XX and 20XX income years as a resident for tax purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(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.

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

Although your situation is not clear cut, it is considered that you are not a resident of Australia under the resides test for the 20XX and 20XX income years based on the following:

•        You have spent the majority of the ruling years living and working in Country X.

•        You owned a residential property in Country X.

•        You purchased another residential property in Country X in XX/20XX after you sold your previous property.

•        You separated from your spouse in XX/20XX.

•        You do not have a fixed time frame to return to Australia to live.

•        You are a member of a club in Country X.

•        You have a bank account in Country X.

As you are not a resident under the resides test, it must now be determined whether you are a resident under the domicile 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.

In Harding v Commissioner of Taxation [2019] FCA 29 the Court stated, at paragraph 30,...In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307, where his Lordship said:

... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges, and immunities which the law and constitution of the domicile confer on the denizens of the country,-in their domestic relations ... in their purchases and sales and other business transactions ... in their political or municipal status,-and in their daily affairs of common life; but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence.

Application to your situation

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

It is considered that you did not abandon your domicile of origin in Australia and acquire a domicile of choice in Country X.

You were living in Country X primarily for work purposes from 20XX until 20XX and then again from 20XX until 20XX and then from 20XX onwards. These periods indicate that you did not remain in Country X on an ongoing basis and in recent years, you have divided your time between Australia and Country X. Your remaining ties to Australia are evidence that you have not abandoned your Australian domicile.

Although you obtained citizenship in Country X and are entitled to reside in Country X indefinitely, we consider that your domicile has not changed from Australia to Country X.

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 is outside Australia because:

•        Your children live in Australia, and you financially support them.

•        In the 20XX income year, you returned to Australia on two occasions to see your children and spent X days in Australia.

•        In the 20XX income year, you returned to Australia on X occasions and spent X days in Australia.

•        You own a property in Australia with your ex-spouse in which you sometimes stay during your return visits here.

•        You have not removed yourself from Medicare.

•        You have not removed yourself from the Australian electoral role.

•        You have a driver's licence in Australia.

•        You have maintained an Australian bank account.

•        You have maintained private health cover in Australia.

Although you have spent the majority of each of the ruling years outside of Australia, your remaining ties to Australia and fairly regular return visits here indicate that you have not definitely abandoned in a permanent way, living in Australia.

Therefore, you are a resident under this 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 20XX and 20XX 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 were a member of the Public Sector Superannuation Scheme (PSS) from your previous employment which ended in 20YY. Consequently, 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

You satisfy the domicile test of residency and so are a resident of Australia for income tax purposes for the years ended 30 June 20XX and 30 June 20XX.