Edited version of private advice

Authorisation Number: 1052299577469

Date of advice: 3 October 2024

Ruling

Subject: Residency

Question 1

Are you an Australian resident for tax purposes pursuant to subsection 6(1) of the Income Tax Assessment Act 1936(ITAA 1936)for the 20XX income year?

Answer

No.

Question 2

Are you an Australian resident for tax purposes pursuant to subsection 6(1) of the Income Tax Assessment Act 1936(ITAA 1936)for the 20XX income year?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A on XX XX 19XX and are a citizen of Country A.

You are not a citizen of any other country.

Prior to your arrival in Australia, you were renting an apartment in XX in Country A.

You gave most of your household effects in Country A to family and friends, with some stored at your parents' house.

You were granted an XX Visa on XX XX 20XX, and first entered Australia on XX XX 20XX.

When completing the incoming and outgoing passenger card you declared, your address was Address A, City A.

You were first employed in Australia working in XXXX, XXXX and under an agency XXXX. You then obtained full-time employment intending to pursue it as a career in Australia.

You met your partner, who was born in Australia, in XX 20XX.

From XX 20XX to XX 20XX, you rented a room at Address A.

From XX 20XX to XX 20XX, you rented a room at Address B.

From XX 20XX to XX 20XX, you and your partner rented an apartment Address C.

From XX XX 20XX to XX XX 20XX, you have entered into a joint tenancy agreement with your partner to rent property Address D.

On XX XX 20XX, you were granted a Relationship Certificate from an Australian State registry of births, deaths and marriages dated XX XX 20XX.

You intend to reside in Australia permanently and raise your family and grow your career. You and your partner are expecting a child in XX 20XX.

You only have an individual and joint bank account with your partner in Australia.

You do not have any assets outside of Australia.

You own a motor vehicle in Australia.

You have an Australian driver's licence which will expire on XX XX 20XX.

Since arriving in Australia, you have developed good friendships and professional connections in Australia. You are currently working at XXXXX.

Your family connections in Australia are with your partner and her family.

Your parents, siblings and related family all live in Country A.

Since arriving in Australia, you have maintained social and sporting connections from when you played rugby, tennis, and soccer in Country A.

You have not lodged any foreign income tax returns whilst you have been in Australia.

Your mailing address is Address D in Australia.

Neither you nor your spouse are Commonwealth of Australia Government employee for superannuation purpose.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not the spouse or a child under 16 of a person who is a member of the PSS or eligible employee in respect of the Commonwealth Superannuation Scheme (CSS).

You did not undertake any courses of study while in Australia.

On XX XX 20XX, you applied for a permanent visa, and you are currently on a bridging visa while your application is assessed.

You and your partner may travel to Country A in 20XX to visit your family so they can meet your child.

Relevant legislative provisions

Income Tax Assessment Act 1936subsection 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

You are not a resident of Australia under the resides test for the period XX XX 20XX to XX XX 20XXbased on the following:

Physical presence

•         For the 20XX income year, you will have been physically in Australia for XX days.

Intention

•         For the 20XX income year, your intention was to have a working holiday in Australia

•         When completing incoming and outgoing passenger cards you stated that you were on a XXXX visa and that visa does not allow you to stay in Australia permanently.

Behaviour

•         Your stated purpose to come to Australia is evident on the passenger card on entry that you are in Australia on a XXXX visa.

Family and business/employment ties

•         Your immediate family remained in Country A.

Maintenance and location of assets

•         You have an Australian bank account.

Social and living arrangements

•         Since arriving in Australia, you have developed professional, social connections in Australia

•         You rented a room through a friend for the first XX months of arriving in Australia.

You are a resident of Australia under the resides test for the period XX XX 20XX to XX XX 20XXbased on the following:

Physical presence

•         From XX XX 20XX, you will have been in Australia for the entire income year

•         You may make one trip to Country A in 20XX.

Intention or purpose

•         For the 20XX income year, your intention is to live in Australia and live here indefinitely

•         Your stated purpose to live in Australia is evidenced by your application for an XXX Visa.

Behaviour

•         You have severed your employment ties in Country A and have permanent employment in Australia

Family and business/employment ties

•         You initially worked for one employer as a XXXX as well as working as a XXXX. You then obtained full-time employment in XXXX intending to pursue it as a career in Australia

•         You have an Australian partner

•         You and your partner are expecting a child in XXX 20XX.

Maintenance and location of assets

•         You have an Australian bank account

•         You have a joint bank account with your Australian partner

•         You own a motor vehicle in Australia.

Social and living arrangements

•         You have entered a XX lease to rent a unit at Address D from XX XX 20XX.

•         Prior to that date you rented rooms in City A and then lived with your partner from XX 20XX.

•         Since arriving in Australia, you have developed professional, social connections in Australia.

•         You maintain social connections in Country A from your social or sporting teams in Country A.

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 arrived in Australia on XX XX 20XX on a temporary XX visa and have subsequently applied for an XXX visa with the intention to be an Australian citizen in the future.

At this stage you are on a bridging visa until your XXXX visa application is determined.

As such, it is considered that you did not abandon your domicile of origin and acquired a domicile of choice in Australia.

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

You have been 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 your usual place of abode was outside Australia from XX XX 20XX until XX XX 20XX.

•         During this time your intention was to travel to Australia for a working holiday

•         Prior to arriving in Australia, you lived in Country A renting an apartment. It was your usual place of abode.

However, the Commissioner is not satisfied that your usual place of abode was outside Australia for the 20XX income year based in the following:

•         You commenced employment at XXX in City A.

•         Purchased a vehicle.

•         You commenced living permanently with your partner in City A.

•         You took out a residential lease with your partner in XXX 20XX in City A.

•         You and your partner are starting a family.

•         You applied for a XXXX visa.

•         You commenced permanent employment with XXXXXX in City A.

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 did intend to take up residence in Australia for the 20XX income year because:

•         You have severed your employment ties in Country A,

•         You maintained stable employment as a XX and XXX, and have subsequently obtained permanent full time employment in Australia.

•         You lived in Australia in such a manner that you resided in Australia.

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 for the 20XX and 202XX income years.

Conclusion

You do not satisfy any of the four tests of residency and so you are not a resident of Australia for income tax purpose for the year ended XX XX 20XX.

However, you satisfy the Resides and the 183-day tests of residency and so are a resident of Australia for income tax purposes for the year ended XX XX 20XX.