Edited version of private advice

Authorisation Number: 1052298505030

Date of advice: 4 September 2024

Ruling

Subject: Residency

Question

From MM 20XX to DD MM 20XX are the taxpayers' residents of Australia for tax purposes under Australian Domestic Taxation Law?

Answer

No.

For tax purposes, you are a resident of Australia if you meet at least one of the following four tests. You are not a resident of Australia if you do not meet any of the tests:

•         The resides test (otherwise known as the ordinary concepts test)

•         The domicile test

•         The 183 day test

•         The Commonwealth superannuation fund test.

We have considered your circumstances, and conclude that both Person A and Person B are not residents of Australia for the relevant periods as stated in this private ruling application.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

XX November 20XX

Relevant facts and circumstances

Person A was born in Australia and is an Australian citizen. Person A was issued the Spouse of XXX Citizen visa on XX XXX 20XX (valid for 12 months).

Person B was born in XXX and has Australian citizenship. Person B has a XXX passport.

Person B departed Australia on XX XXX 20XX and Person A departed Australia on XX XXX 20XX. The couple intend to reside permanently in XXX into the foreseeable future.

Person B was not employed in Australia and is not employed in XXX.

Person A continues their employment as an XXX with XXX after relocating to XXX, completing the majority of their employment services in a 'work from home' capacity while based in XXX.

The motor vehicle was sold prior to leaving Australia and the majority of the household items shipped to XXX in XXX 20XX.

The couple own one Australian investment property at XXX. The property was leased on commercial teams to Person A's parent from XX XXX 20XX to XX XXX 20XX. During this rental period Person A temporarily stayed in the guest room of the property for a single visit from XX XXX to XX XXX 20XX. Person A engaged the services of a property agent to manage the property. According to the rental agreement the period is XX XXX 20XX until such time as the owners terminate the rental agreement.

Australian sourced income is received for the investment property. Australian bank accounts of Person A and Person B have been retained for the rental property income and expenses. The Australian banks have been advised that both their clients are residing overseas.

The Australian Electoral Office have been advised to remove both their names from the electoral roll.

The Australian private health insurance has been suspended for the couple until XXX 20XX.

Person A and Person B have never been Commonwealth Government of Australia eligible employees for superannuation.

Person A and Person B have no sporting or social connects in Australia.

Person A and Person B visit Australia, but on a holiday basis.

Since their departure in XXX 20XX Person A has resided in Australia for a total of XX days, working at the employer's office and visiting family and friends.

Person B has visited Australia for a short stay of XX days since relocating to XXX.

When visiting Australia, Person A and Person B say at hotels, Airbnb, or with family members.

The couple have resided at two different locations in XXX.

On XX XXX 20XX, Person B signed a contract to purchase a house at XXX in XXX. Person A and Person B moved into the property in XXX 20XX, and have since purchased furniture and undertaken renovations.

The Electricity Authority's electricity bill was issued to Person B at their home in XXX.

Non-XXX National Identification Card was issued to Person A on XX XXX 20XX with a ten year expiry date.

Bank accounts have been opened in XXX for 'day-to-day' living expenses.

The couple regularly attend a local church in XXX.

Person B has extended family that reside in XXX.

Assumptions

For the purpose of this ruling, it is assumed that:

•         Person A and Person B will not reside in Australia for a total of 183 days or more during the relevant ruling periods.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Does Part IVA apply to this private ruling?

No.

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

Person A and Person B are not residents of Australia under the resides test for the relevant ruling periods based on the following:

•         Physical presence

-        Person A's physical presence in Australia since departure was XX days in the 20XX income year. When Person A visits Australia, they stay with family or a temporary accommodation (such as hotels).

-        Person B's physical present in Australia was XX days in the 20XX income year.

•         Intention or purpose

-        Person A and Person B have stated it is their intention to live long-term in XXX.

-        Person A and Person B's motor vehicle was sold before leaving Australia

-        The Australia Electoral Office was advised to remove both their names from the electoral roll.

-        Person A and Person B's private health insurance has been suspended until XXX 20XX.

-        Person A and Person B's Australian financial institutions have been advised that they are both residing overseas.

•         Behaviour while in Australia

-        When visiting Australia, Person A and Person B use temporary accommodation such as hotels, Airbnb or stay with extended family on a temporary basis.

•         Family or employment ties

-        Person A and Person B reside together at the property they own and reside in within XXX.

-        Person A performs the majority of their employment related services in XXX.

-        Person B has extended family with them in XXX and has no other family, business or employment ties to Australia.

•         Maintenance and location of assets

-        Person A and Person B own a residential property located at XXX in XXX (purchased by Person B) which is their major asset.

-        Person A and Person B have and investment property in Australia, rented on commercial terms to an unrelated party.

-        Person A and Person B hold bank accounts with Australian banks for rental property income and expenses.

-        Person A and Person B hold a bank account in XXX for day-to-day living expenses.

•         Social connections

-        Person A and Person B do not have any permanent living arrangements in Australia, their permanent 'living arrangements' are based in XXX only.

-        Person A and Person B have suspended their Australian Private Health Insurance and they have both been removed from the Australian Electoral Roll.

-        Person A and Person B do have some friends and extended family who remain on in Australia, however, they also have many extended family members in XXX, are active members of their local church in XXX and enjoy the social connections that the church membership entails and the social connections generally that living in XXX brings.

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

Person A was born in Australia and Person B was born in XXX. Both have Australian citizenship.

It is considered that the domicile of both Person A and Person B 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 satisfied that your permanent place of abode is outside Australia as per the following factors:

•         Person A and Person B have severed the following ties with Australia:

-        Upon departure to XXX, Person A and Person B sold their motor vehicle in Australia and shipped the majority of their household effects on XX XXX 20XX.

-        The Australian Electoral Office has been advised to remove both of their names from the electoral roll.

-        The private health insurance has been suspended until XXX 20XX.

-        the Australian banks have been advised that they are both residing in XXX.

•         Person A and Person B have resided solely in XXX from XX XXX 20XX (Person A's arrival) and XX XXX 20XX (Person B's arrival).

•         Person A and Person B have resided solely in XXX from XXX 20XX.

•         Person A and Person B have no social or sporting connections in Australia.

Therefore, Person A and Person B's permanent place of abode is XXX.

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 the 20XX income year

According to the information provided for the 20XX income year, Person A and Person B resided in Australia for just under 183 days. Therefore, they are not residents 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

Person A and Person B have never been Commonwealth Government of Australia eligible employees, and therefore are not residents of Australia under this test.