Edited version of private advice

Authorisation Number: 1052292643375

Date of advice: 23 August 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the 20XX and 20XX income years?

Answer 1

Yes. You are a tax resident of Australia from XX XX 20XX until you return to Country A on XX XX 20XX under the resides test, and for completeness you are a resident under the 183 day test for the 20XX income year until you return to Country A on XX XX 20XX.

Question 2

Are you subject to tax in Australia on your worldwide income for the 20XX and 20XX income years?

Answer 2

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

On XX XX 19XX you were born in Australia, and you continue to be a citizen of Australia.

In XX 20XX, you moved to another country (Country A). You have lived in Country A for XX years.

You also hold Country A citizenship.

You own property in Country A.

You are employed in full time permanent position in Country A.

From XX XX 20XX to XX XX 20XX, you have taken unpaid leave from your Country A employer with permission to undertake paid work in Australia.

On XX XX 20XX, you arrived in Australia.

Until XX XX 20XX, you continued to receive a Country A salary.

You have secured a fixed term employment contract with a Government Department in Australia which ends on XX XX 20XX.

Whilst in Australia, you are staying with a relative.

You inherited $XXX,XXX in XX 20XX from a relative in which the Public Trustee was appointed executor. This money is held in an Australian bank account.

You have family, friends and are joining a church in Australia.

You continue to own your property in Country A. It is currently tenanted, and you intend to move back into your Country A property on your return.

You have bank accounts in Country A.

You are required to lodge Country A tax returns and believe you will be a non-resident of Country A for tax purposes from XX XX 20XX.

You hold both an Australian and Country A driver's licence.

You have connections with friends in Country A and continue to be a member of a church in Country A.

You are still registered on the Country A electoral roll.

On XX XX 20XX, you intend to return to Country A.

From XX XX 20XX, you will begin to receive your Country A salary again.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 6(1)

Income Tax Assessment Act 1997 section 995-1

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

You are a resident of Australia under the resides test for the period XX XX 20XX until you return to Country Abased on the following:

•         you have a settled purpose, as you are staying in one place with a family member.

•         while you maintain unpaid employment in Country A, you have secured a fixed term, full time employment position in Australia.

•         you have connections to family, friends and will be joining a church whilst in Australia.

•         your behaviour whilst in Australia reflects a degree of continuity, routine or habit that is consistent with residing here.

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 that although you have a domicile of origin in Australia, you since obtained a domicile of choice in Country A.

This is because you obtained citizenship in Country A, have lived there for 14 years and, you own a house in Country A as your permanent home.

As we consider you obtained a domicile of choice in Country A, 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 your situation

You have not been present in Australia for 183 days or more during the 20XX income year.

You will be in Australia for 183 days or more in the 20XX income year. 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 satisfied that your usual place of abode is outside Australia for the relevant 20XX and 20XX income years based in the following:

•         you have a permanent home in Country A

•         you have permanent employment in Country A

•         you maintain Country A bank accounts

•         you have family and church connections in Country A

•         you are registered on the Country A electoral roll

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 not satisfied that you did not intend to take up residence in Australia for the income year ended 30 June 20XX because:

•         you are an Australian citizen

•         you are living at one address have a settled purpose for being in Australia

•         you obtained fixed term employment with a Government Department.

Application to your situation - 183 day test

As you will be in Australia more than 183 days in the income year ending 30 June 20XX (until XX XX 20XX when you return live in Country A), you are considered a resident of Australia, even though the Commissioner is satisfied your usual place of abode is outside Australia, the Commissioner is not satisfied that you did not intend to take up residency during this period in the 20XX income year.

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

You satisfy the resides test of residency and so are a resident of Australia for income tax purposes for part of the 20XX, and 20XX year until XX XX 20XX when you return live in Country A. For completeness you are also a resident of Australia under the 183 day test for the 20XX income year until you leave Australia to resume living in Country A on XX XX 20XX.

As a resident of Australia, the rental income you receive from Country A will need to be declared at label 20R of the income tax supplement when you lodge your income tax return.

Where you are taxed on an amount in Australia, you should contact the relevant tax organisation in Country A to ask if you need to declare the income and to determine if you are eligible to claim a tax offset in Country A.