Edited version of private advice

Authorisation Number: 1052330546913

Date of advice: 12 November 2024

Ruling

Subject:Residency

Question

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

Answer

Yes. Under the law, meeting a single test suffices for being deemed a tax resident. In your case, you have satisfied the Domicile test. You are considered a resident for tax purposes of Australia.

This ruling applies for the following periods:

Year ended XX XXXX 20YY

Year ended XX XXXX 20YY

The scheme commenced on:

XX XXXX 20YY

Relevant facts and circumstances

You were born in Country A.

In 20YY, you commenced living in Australia and have been an Australian tax resident since this time.

You have been living and working in Australia in the construction industry.

In 20YY, you became an Australian citizen and were issued an Australian passport.

You and your spouse jointly own a property located in Australia. You and your spouse have two children, who live at the family home.

You have accepted an employment opportunity working as an employee on a construction project in Country B. The employer is a Country B company with no ties or connection to Australia. This contract is for a period of XX months which is subject to renewal annually. You have advised us that this contract period is standard protocol. The employment opportunity is currently a project with an expected time frame of XX years. You may receive an opportunity to work on an additional project with an expected time frame of an additional XX years.

Your stated intention is to remain in Country B for the entirety of both contracts, if the extension does not occur you intend to return to Australia.

You have sold your motor vehicle in Australia prior to leaving Australia.

You are allowed to enter Country B on a Visa which is granted for 1 year and renewed upon a yearly basis which is supported by your employer.

On XX XXXX 20YY, you departed Australia to commence employment with a Country B company.

Your spouse and children are remaining in Australia in the family home with your household effects. Your family will not relocate to Country B with you. Your personal effects have been taken with you to Country B.

Your children will remain in Australia and complete their secondary education and will likely complete apprenticeships or tertiary education. It is unlikely they will leave Australia in the foreseeable future.

You are renting an apartment in Country B. The rental agreement is for a period of XX months and is renewable every XX months. Your unit is located near your employment.

You will send a substantial portion of your net pay from Country B to Australia to pay for your family's expenses, specifically the mortgage over the property.

You will return to Australia XX times per a year to visit your family while on Annual leave for a maximum period of XX month/s each year. You will stay with your family in your residence in Australia during these visits.

You maintain the following Australian assets:

•         The family home.

•         Bank accounts.

•         Superannuation accounts.

When completing incoming and outgoing passenger cards you will state that you are a resident of Country B.

Your family may travel to visit you in Country B, although you foresee that it is more likely that you will meet in XXXX instead.

You will not maintain any professional, social or sporting connections in Australia.

You do not intend to apply for citizenship or permanent residency in Country B.

You will maintain a religious connection to a church in Country B.

You currently maintain an Australian driver's licence, which you will convert to Country B.

You have informed the Australian Electoral Commission that you departed Australia. You will inform Medicare that you have departed Australia.

Your mail will be directed to you electronically however, you can update relevant organisations of your address in Country B.

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 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 ordinary concepts test is 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: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence.... It is important that... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

TR 2023/1 Income tax: residency tests for individuals relevantly details at paragraphs 46, 49 and 50:

[46] The presence (or absence) of your family also informs the nature of your connection to Australia. The presence of immediate family in Australia is often accompanied by increased connections to Australia (including period of physical presence, assets such as a family home and motor vehicles, and an intention to return to a place you consider to be your home) and a settled routine consistent with residing in Australia.

[49] Generally speaking, working overseas but returning to Australia at intervals to an established family and social life will often mean you are still residing in Australia. This is the case even if you spend more time overseas than in Australia in any given income year. Usually, such an arrangement indicates you are residing in Australia and another country. Having an ongoing, deliberate connection to Australia even though you have a connection to another country through your work does not make you a mere visitor to Australia. In such a case, Australia is your home and you are properly regarded as residing here.

[50] This can be contrasted with a situation where you leave Australia to work overseas and shift your life overseas. For example, if you, and your family (if you have one), relocate overseas for work for some years establishing a permanent base and a routine overseas consistent with 'living' there, returning only occasionally for short stays while taking leave from work, then, depending on other facts and circumstances, you might not be a resident under the ordinary concepts test.

Application to your situation

You are not a resident of Australia under the resides test for the period 20YY- and 20YY-income yearsbased on the following:

•         you will be in Australia for approximately a month each year during your annual leave, with the exception of a possible holiday in Country C, while the remainder of the time you will be in Country B

•         your purpose of presence in Australia is to stay with your family

•         you will be living with your family while on annual leave in Australia

•         your family ties are to Australia through your spouse and children who continue to live in Australia in the family home

•         your children will remain in Australia and complete their secondary education and will likely complete apprenticeships or tertiary education, and it is unlikely they will leave Australia in the foreseeable future

•         your employment and business ties are towards Country B as your services are performed overseas

•         while in Australia you will be living in a property that you own with your spouse, maintaining a continuity of association with Australia, coupled with various assets including bank accounts and superannuation

•         you have a XX-month renewable lease in Country B and will attend a local church.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

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. You had a Country A passport however this has expired. You immigrated to Australia in 20YY and became an Australian citizen in 20YY.

It is considered that you abandoned your domicile of choice in Country A and acquired a new domicile of choice in Australia when you were granted citizenship in 20YY. You were not entitled to reside in Saudi Arabia indefinitely and while living there, you will only hold a work permit which is valid under a yearly renewal basis.

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 in this context does not mean forever. As Sheppard J said in Applegate v. FCT 78 ATC 4054 at 4060; (1978) 8 ATR 372 at 378 in discussing the meaning of permanent in the phrase permanent place of abode:

...permanent is used in the sense of something which is to be contrasted with that which is temporary or transitory. It does not mean everlasting. The question is thus one of fact and degree.

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] FCAFC 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.

TR 2023/1 Income tax: residency tests for individuals relevantly details at paragraphs 74 - 76 and 80 - 82:

[74] Generally, a departure from Australia with an intention to return to Australia after a finite period would not result in you having your permanent place of abode overseas. This is consistent with the legislative intent of the definition. However, if some time through the period overseas your intentions changed, all the factors would need to be reconsidered at that point to determine whether your permanent place of abode is overseas.

[75] Similarly, if you take up an employment opportunity overseas or commence living overseas with no fixed timeframe in mind but as a tentative venture, you are unlikely to have your permanent place of abode overseas. This is because you are likely to retain Australia as your home, for a time at least, maintaining connections that are not consistent with an abandonment of Australia as your place of residency. Again, as intentions and situations evolve, the circumstances may later point to you having your permanent place of abode overseas.

[76] On the other hand, if you depart for an unspecified or substantial period, pack up your home in Australia, set up a home in a foreign country and live there with your family returning only occasionally such as for cultural events, special celebrations or annual leave, you are likely to meet the description of someone who has abandoned Australia as a place of residency and commenced living permanently overseas. This is despite the fact that you may at some point intend to return to Australia.

[80] Retaining your dwelling in Australia does not necessarily mean that you remain a resident. It will depend on the circumstances and reasons for its retention. To illustrate:

•         where you retain your home but lease it out to an arm's length party, its retention will assume less significance

•         where you retain your home but only so your family can remain living in it while they make arrangements to join you overseas shortly, it will also assume less significance

•         however, the home in Australia will assume more significance where it is kept available for your use, you do in fact return to it and the accommodation overseas is consistent with a transitory stay.

[81] The relative strength of the connections established and maintained overseas and of those retained in Australia will be relevant. As noted in this Ruling, the retention of the family home and a consistent return to it may indicate behaviour inconsistent with abandoning Australia and commencing to live permanently overseas. The location of family and social ties and their significance to you will also be relevant.

[82] Other factors, such as the location and maintenance of bank accounts, location of other assets, maintenance of professional registrations and licences, and recreational activities, will be relevant as forming part of the matrix of circumstances to be considered.

Application to your situation

The Commissioner is not satisfied that your permanent place of abode is outside Australia because of the following interpretation of the facts you have provided in this ruling.

The following factors are considered favourable factors:

•         your intended period of stay in Country B is a substantial period exceeding XX years

•         you obtained a 12-month residential lease on a property located near your workplace in Country B and will be living there in a permanent way, with the lease being renewed after that time

•         you will establish religious connections in Country B through attending a local church and likely to form social networks and hobbies.

The following factors are considered unfavourable factors:

•         your employment contract is for XX months from XX XXXX 20YY to XX XXXX 20YY, you explained this contract is renewed annually and told us this is standard protocol

•         you intend to return to Australia either at the end of your contract (possibly after 3 years at the completion of stage one, and if employed for stage 2 after this timeframe)

•         your work residency visa in Country B is issued for XX months and renewed every XX months

•         when you stay in Australia on annual leave you will live in your home with your family

•         the retention and continued use of the family home by your family is a significant factor, as it kept available for your use, and it is where your family reside

•         while overseas you will be contributing a substantial portion of your employment salary paying for your family expenses including the mortgage on the family home

•         the location of your assets and family are stronger connections to Australia.

Your behaviour is inconsistent with definitely abandoning Australia in a permanent way and commencing to live permanently overseas as you are continuing to support your family and maintaining your mortgage over the family home. Therefore, you 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 your situation

You do not intend to be present in Australia for 183 days or more during the 20YY- and 20YY-income years. Therefore, in these circumstances 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 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 domicile test of residency, and so are a resident of Australia for income tax purposes for the years ended XX XXXX 20YY and 20YY.