Edited version of private advice

Authorisation Number: 1052276925909

Date of advice: 17 July 2024

Ruling

Subject: Residency

Question

Are you a tax resident of Australia pursuant to subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) from the date of your arrival in Australia?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June XXXX

Year ended 30 June XXXX

The scheme commences on:

X XX XXXX

Relevant facts and circumstances

This ruling applies to person A and person B (jointly referred to as you).

Your country of origin is country A.

You are a country B citizen.

You are no longer a citizen of country A.

You have two dependent children.

You jointly own a bank account in country B.

You jointly own the following properties in country B:

•         Property A

•         Property B

•         Property C

•         Property D

In XXXX 20XX, you started renting out the property D to an unrelated party.

In XXXX 20XX, you started renting out the property C to an unrelated party.

In XXXX 20XX, you started renting out the property B to an unrelated party.

In XXXX 20XX, person A ceased their employment in country B.

On XX XXXX 20XX, person A moved to Australia. This is person A's date of arrival.

In XXXX 20XX, person A started a full-time permanent position with employer A in Australia.

You used property A as your main residence until you moved to Australia.

In XXXX 20XX, you started renting out property A to an unrelated party.

You still use the property A as your mailing address. The tenants collect your mail and send it to you.

In XXXX 20XX, person B ceased their employment in country B.

On XX XXXX 20XX, person B and your kids moved to Australia. This is person B's date of arrival.

The only income you received from sources overseas is from the country B rental properties.

When completing incoming and outgoing passenger cards you state you are country B residents and your address as property A.

You sold most your household and personal effects prior to arriving in Australia and brought the rest with you when you moved.

You entered Australia on a visa, issued to country B citizens arriving on a valid country B passport.

The visa allows you to stay in Australia permanently.

As a holder of the visa, you will be able to apply for Australian citizenship once you meet the following criteria:

•         have been living in Australia on a valid visa for XX years immediately before the day you apply

•         hold a permanent visa or an XXX for the last XX months immediately before the day you apply and

•         not have been absent from Australia for more than XX months in total in the past XX years, including no more than XX days in total in the XX months immediately before applying.

In XXXX 20XX, your kids started at the local public school.

In XXXX 20XX, person B started a permanent position with employer B in Australia.

You do not own any properties in Australia.

You jointly own an Australian bank account.

From XX XXXX 20XX to XX XXXX 20XX, you entered into a tenancy agreement to rent property E.

Since arriving in Australia, you have not developed any professional, social or sporting connections in Australia.

Since arriving in Australia, you did not maintain any professional, social or sporting connections in country B.

You obtained private health insurance for your family in Australia.

You have a driver's licence in both country B and Australia.

You plan on making one to two trips to country B in future years.

You will stay at an Airbnb when you visit country B.

From XX XXXX 20XX, you will reside in Australia for 183 days or more in an income year.

You are not members of a superannuation scheme established by deed under the Superannuation Act 1990 (the Public Sector Superannuation Scheme).

You are not eligible employees for the purposes of the Superannuation Act 1976 (the Commonwealth Superannuation Scheme).

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

Person A, you are a resident of Australia under the resides test for the period XX XXXX 20XX to XX XXXX 20XX. Person B you are a resident of Australia under the resides test for the period XX XXXX 20XX to XX XXXX 20XX based on the following:

•         Physical presence

o   From XX XXXX 20XX, you will reside in Australia for 183 days or more in an income year.

o   You plan on making XX trips to country B in future years.

o   You entered Australia on a visa, issued to country B citizens arriving on a valid country B passport. This visa entitles you to stay in Australia permanently.

o   You have stated your intention is to become an Australian citizen, which requires you to meet the criteria outlined in the facts.

•         Intention or purpose

o   You have stated your intention is to have your kids study university in Australia.

o   You have stated your intention is to become Australian citizens.

o   You have stated that you may move back to country B after your kids attend university.

•         Behaviour

o   You have severed your employment ties in country B and have permanent employment in Australia.

o   You have entered a XX-year lease to rent property E.

o   You still use property A as your mailing address. The tenants collect your mail and send it to you.

o   When completing incoming and outgoing passenger cards you state you are country B residents and your address as property A.

o   You obtained private health insurance for your family in Australia.

•         Family or employment ties

o   In XXXX 20XX, person A ceased their employment in country B.

o   In XXXX 20XX, person A started a full-time permanent position with employer A in Australia.

o   In XXXX 20XX, person B ceased their employment in country B.

o   In XXXX 20XX, person B started a full-time permanent position with employer B in Australia.

o   You and your children moved to Australia.

•         Maintenance and location of assets

o   You jointly own four properties in country B, which are being rented to unrelated parties.

o   The only income you received from sources overseas is from the country B rental properties.

o   You have a country B bank account.

o   You have an Australian bank account.

o   You do not own any properties in Australia.

o   You sold most your household and personal effects prior to arriving in Australia and brought the rest with you when you moved.

•         Social connections

o   Since arriving in Australia, you have not developed any professional, social or sporting connections in Australia.

o   Since arriving in Australia, you did not maintain any professional, social or sporting connections in country B.

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 country A and your domicile of origin is country A. You immigrated to Australia on XX XXXX 20XX and are intending to become an Australian citizen in the future.

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

Therefore, your domicile is not Australia, and you are not 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 person A's situation

You have been in Australia for 183 days or more in the 20XX income year. From XX XXXX 20XX, you will reside in Australia for 183 days or more in the income year ended 30 June 20XX. Therefore, you will be a resident under this test 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.

Application to person B's situation

You have not been present in Australia for 183 days or more during the 20XX income year. Therefore, you are not a resident under this test for the 20XX income year.

From XX XXXX 20XX, you will reside in Australia for 183 days or more in the income year ended 30 June 20XX. Therefore, you will be a resident under this test 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 relevant income years based in the following:

•         From XX XXXX 20XX to XX XXXX 20XX, you entered into a tenancy agreement to rent property E.

•         Property E is always available to you.

•         The properties you own in country B are rented and not available to you.

•         You live in Australia with your family.

•         You commenced permanent employment in Australia.

•         Your children attend school in Australia.

Intention to take up residency

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here.

Application to your situation

The Commissioner is satisfied that you do intend to take up residence in Australia for the relevant income years because:

•         You live in Australia with your family.

•         You commenced permanent employment in Australia.

•         Your children attend school in Australia.

•         You intend to become an Australian citizen.

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.

Conclusion

Person A, you satisfy the resides test and 183-day test of residency and so are a resident of Australia for income tax purposes for the income years ended 30 June 20XX and 20XX.

Person B, you satisfy the resides test for the income years ended 30 June 20XX and 20XX. You also will satisfy the 183-day test in the income year ended 30 June 20XX. You are only required to meet one test, therefore are a resident of Australia for income tax purposes for the years ended 30 June 20XX and 20XX.