Edited version of private advice

Authorisation Number: 1052251974322

Date of advice: 17 May 2024

Ruling

Subject: Residency

Question

Are you both an Australian resident for tax purposes under subsection 6(1) of the Income Tax Assessment Act 1936 for the income years ended 30 June XXXX, 30 June XXXX, 30 June XXXX and 30 June XXXX?

Answer

Yes.

Under the law, you must meet one of the four tests to ascertain whether you are a resident of Australia for income tax purposes. In both your cases, you have satisfied two of the tests. You are considered a resident for tax purposes of Australia.

This ruling applies for the following periods:

Year ended 30 June XXXX

Year ended 30 June XXXX

Year ended 30 June XXXX

Year ended 30 June XXXX

The scheme commences on:

X XX XXXX

Relevant facts and circumstances

This ruling is for both Person A and Person B.

In XXXX, Person A was born in Country A.

In XXXX, Person B was born in Country A.

Person B's parent and sibling live in Country A.

In XXXX, Person A migrated permanently to Australia.

In XXXX, Person A became an Australian citizen.

In XXXX, Person A became a Country A overseas citizen.

In XXXX, Person B migrated permanently to Australia.

Since XXX XXXX, Person A has been employed by Company A the Australian branch.

In XXXX, Person B became a Country A overseas citizen.

In XXXX, Person B became an Australian citizen.

An overseas citizen of Country A confers the right to stay and work in Country A indefinitely when the person has an overseas passport backing it. Both Person A and Person B both used their Australian passports.

Both of you cannot vote in Country A.

Both of you have Australian drivers' licences.

You both have two dependent children together.

In XXX XXXX, you both jointly purchased property A

From XXX XXXX to XXX XXXX, you both lived in the property A as your primary residence.

By XXXX, there was no mortgage on property A.

Company A the Australian branch wanted Person A to set up and run the first engineering team in their Country A office. Person A was to work within the team for 18 to 24 months until the team and office were well established.

From XXX XXXX to XXX XXXX, property A was rented out to unrelated parties.

Before moving to Country A, you both stored their furniture with Person A's parents who are Australian citizens. Person A also left their car with their parents.

Before moving to Country A, Person B was involved with organisation A as a volunteer teacher. You also volunteered at organisation B and organisation C.

On XX XXX XXXX, you both with your two children moved to Country A to establish the team for Company A.

When completing incoming and outgoing passenger cards, you both state you are Australian residents, and you are travelling overseas temporarily.

While overseas, all mail continued to be sent to the property A. A postal redirection service was set to redirect the mail to Person A's parents.

Between XX XXX XXXX to XX XXX XXXX, you both did not:

•         advise the Australian Electoral Office to have your name removed from the roll.

•         Inform Medicare of their departure.

•         Obtain Country A drivers' licenses.

Between XX XXX XXXX to XX XXX XXXX, you both rented an apartment in Country A. There were 11-month lease agreements with this property with no shorter terms or month to month lease agreements available. You surrendered this lease in XXX XXXX when you returned to Australia.

The rental agreements listed the property A as both of your normal residence.

Person A was employed with Company A, the Country A branch as any engagement over 3 to 6 months required employment with the Country A entity itself rather than the Australian entity as employer.

There were discussions with the Country A office and Person A's manager that they would return to Australia after their responsibilities were fulfilled with regard to the Country A office.

Person A's manager supervises staff both in Country A and Australia.

Person A's previous years of service for Australia were recognised in Country A and similarly the period of service for Country A would be recognised going forward by the Australia branch.

Between XX XXX XXXX to XX XXX XXXX, Person A flew to Australia for a work trip.

The following were the reasons which were attributable to why you both were delayed in returning to Australia in late XXXX or early XXXX:

•         Covid and border closures; and

•         Person B's aging parent who lived in Country A was unwell.

Person B's parent moved cities within Country A to stay with your family during the pandemic.

From XX XXX XXXX to XX XXX XXXX, property A was not rented out because you both intended to return to Australia.

From XXX XXXX to XXX XXXX, property A was rented out to an unrelated party under a six-month lease.

In XXX XXXX, you both purchased property B.

Between XX XXX XXXX to XX XXX XXXX, Person A flew to Australia to prepare for their family's permanent return to Australia. This included school admissions and checking the properties.

In XXX XXXX, you both started the process of selling property A.

In XXX XXXX, Person B's parent was granted a three-year tourist visa in Australia.

In XXX XXXX, you both booked a return ticket to Australia, but due to health scares of Person B's parent this was delayed by a couple of months.

Between XX XXX XXXX to XX XXX XXXX, Person B did not have employment in Country A and did not make any trips to Australia.

On XX XXX XXXX, property A settled.

Person A lodged tax returns in Country A over the ruling period.

Person B did not lodge any Country A tax returns.

On XX XXX XXXX, your family permanently returned to Australia and moved into property B.

Person A chose to cease their employment with Company A upon returning to Australia.

While overseas Person A developed professional connections with their Company A colleagues and still maintains contact with them.

Person A holds the following overseas assets:

•         Bank account in Country A.

•         Company A shares that are listed in the Country B.

You both hold the following assets in Australia:

•         Australian bank account with Bank A and Bank B.

•         Jointly own property B.

•         Jointly own the investment property, property C.

•         Person B owns property D.

•         Person B owns a share portfolio.

•         A car registered under Person A's name.

Upon returning to Australia, Person B resumed their involvement with the organisation A as a volunteer teacher.

Neither of you advised any Australian financial institution that they were foreign residents.

Neither of you, together or separately financially support any family still in Country A.

Neither of you were Commonwealth of Australia Government employee for superannuation (super) purposes.

Neither of you were members of the Public Sector Superannuation Scheme (PSS).

Neither of you were an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1).

Income Tax Assessment Act 1997 section 995-1.

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 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 both your situations

Both of you are a resident of Australia under the resides test for the period XX XXX XXXX to XX XXX XXXXbased on the following:

Physical presence

•         Person A permanently migrated to Australia in XXXX with their parents when they were a child, becoming an Australian citizen in XXXX.

•         Person B permanently migrated to Australia in XXXX and became an Australian citizen in XXXX.

Intention or purpose

•         Both of you are citizens of Australia

•         When completing incoming and outgoing passenger cards, you both state you are Australian residents, and you are travelling overseas temporarily.

•         Before moving to Country A, you both stored your furniture with Person A's parents who are Australian citizens. Person A also left their car with their parents.

•         You did not record a deemed disposal of assets when you left Australia because you intended to return.

•         The agreement between Person A and their employer was to temporarily move to Country A to establish the Company A branch in Country A and to return to Australia after 18 to 24 months.

•         The rental agreement which was in place Country A was the shortest term available and you both surrendered the lease to return to Australia.

•         The rental agreements in Country A listed property A as your normal residence.

•         Between XX XXX XXXX to XX XXX XXXX, property A was not rented out because you both intended to return to Australia.

•         From XXX XXXX to XXX XXXX, property A was rented out to an unrelated party under a six-month lease. This shorter lease was entered into because you both had the intention to return to Australia.

•         When departing Australia in XXXX, you did not:

                        i.        advise the Australian Electoral Office to have your names removed from the roll.

                      ii.        Inform Medicare.

                     iii.        Obtain drivers' licenses in Country A.

                     iv.        Sell your Australia assets.

Behaviour

•         During the period in Country A, Person B did not lodge tax returns or gain employment.

•         Your children were enrolled in school in Australia and subsequently enrolled again when you returned.

•         Person B did not have any social connections in Country A.

•         Before moving to Country A in XXXX, Person B was involved with organisation A as a volunteer teacher. You also volunteered at organisation B and organisation C. Upon returning to Australia, you volunteered with organisation A again.

•         Person A ceased employment with Company A upon returning to Australia.

Family or employment ties

•         Person A's parents lived in Australia as Australian citizens and Person B's parent and sibling lived in Country A.

•         In XXX XXXX, Person A commenced work for Company A Australia. They wanted you to set up and run the first engineering team in their Country A office. You would work within the team for 18 to 24 months until the team and office were well established. The following was also agreed upon:

                        i.        You were employed with the Country A office as any engagement over 3 to 6 months required employment with the Country A entity itself rather than the Australian entity as employer.

                      ii.        You would return to Australia after your responsibilities were fulfilled with regard to the Country A office.

                     iii.        Your manager managed staff both in Country A and Australia.

                     iv.        Your previous years of service for Australian were recognised by Country A and similarly the period of service for Country A would be recognised going forward by Australia..

•         The following shows Person B employment ties are closer to Australia:

                       i.        Your last salaried employment was in Australia in XXXX.

                      ii.        You volunteer in Australia.

                     iii.        You did not complete any tax returns or have any employment in Country A.

                    iv.        While in Country A you earned income from Australian assets.

Maintenance and location of assets

•         Person B holds the following overseas assets:

                       i.        Bank account in Country A, held solely by Person A.

                      ii.        Company A shares listed in Country B.

•         You both hold the following assets in Australia:

                       i.        Australian bank account with Bank A and Bank B.

                      ii.        Jointly own property B.

                     iii.        Jointly own the investment property, property C.

                    iv.        Person B owns property D.

                     v.        Person B owns a share portfolio.

                    vi.        A car registered under Person A's name

Social and living arrangements

•         Person B's volunteer work

•         Your children are enrolled in school in Australia

•         You both rented in Country A and owned properties in Australia.

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 Person A's situation

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in XXXX and became an Australian citizen in XXXX.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. You obtained permanent residency and citizenship in Australia, and you intend to live there indefinitely.

Therefore, your domicile is Australia.

Application to Person B's situation

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in XXXX and became an Australian citizen in XXXX.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. You obtained permanent residency and citizenship in Australia, and you intend to live there 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
• 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 both your situations

The Commissioner is not satisfied that your permanent place of abode is outside Australia because:

•         You both did not abandon, in a permanent way, living in Australia.

•         Whilst you both were in Country A, you rented with the shortest lease available.

•         When renting in Country A, you both indicated in the agreement that property A was your normal residence.

•         You both maintained property A and did not rent it out for the full period, this was because you had the intention to move back.

•         While in Country A, all mail continued to be sent to property A. A postal redirection service was set to redirect the mail to Person A's parent.

Therefore, you both 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 both your situations

You both have not been present in Australia for 183 days or more during the XXXX to XXXX 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 both your situations

Both of 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 both are not a resident under this test.

Conclusion

You satisfy the resides and domicile tests of residency and so are a resident of Australia for income tax purposes for the years ended 30 June XXXX to XXXX.