Edited version of private advice

Authorisation Number: 1052336218450

Date of advice: 28 November 2024

Ruling

Subject: Assessable income - residency

Question

Are you a resident of Australia for tax purposes under subsection 6(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for the 2023 and 2024 income years?

Answer

No.

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

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

On XX XX 20XX, you were granted an Australian Permanent visa.

On XX XX 20XX, you arrived in Australia. You were accompanied by your spouse and children.

In XX 20XX, you purchased a property (Property A) in Australia.

In XX 20XX, you returned to Country X with your family. Property A remained vacant.

On XX XX 20XX, you engaged with a real estate and leased out Property A to unrelated parties.

On XX XX 20XX, your Australian Permanent visa expired.

On XX XX 20XX, you were granted a further Australian permanent visa.

You have retained Australian bank accounts.

You suspended your Australian private health insurance when you left Australia.

Most of your household effects from Property A, were sold or given away to friends. Some of your personal effects were taken back to Country X.

You are currently paying non-resident withholding tax in your Australian income tax return.

You are not a member of the Public Sector Superannuation Scheme or the Commonwealth Superannuation Scheme, in Australia.

You have relocated to Country X indefinitely, due to a focus on overseas business operations.

You hold the position of Shareholder and Managing Director of a company in Country X.

You lodge income tax returns in Country X.

You hold bank accounts in Country X, and an owner-occupied property (Property B).

You reside in Property B in Country X.

Your family and business connections are exclusively in Country X.

During the 20XX income year, you spent XX days in Australia.

During the 20XX income year, you spent XX days in Australia.

On XX XX 20XX, your Permanent visa will expire.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 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 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 20XX and 20XX income tax years, based on the following:

•         during the 20XX income year, you spent XX days in Australia

•         during the 20XX income year, you spent XX days in Australia

•         you have demonstrated a settled pattern of living, maintaining a transitory nature of travel to Australia

•         if you travel to Australia, you intend to depart shortly after to return to your home in Country X and to continue your employment in Country X

•         your family resides with you in Country X

•         you have no intention to settle in Australia on a permanent basis

•         you have not social or professional connections in Australia.

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 X and your domicile of origin is Country X. You arrived in Australia in 20XX after being granted a permanent visa. You then departed Australia in XX 20XX.

It is considered that you did not abandon your domicile of origin in Country X and acquire a domicile of choice in Australia. Whilst you may have obtained a permanent visa to remain in Australia, your domicile of origin in Country X has not changed to a domicile of choice in Australia, as you did not have an intention to make Australia your home indefinitely.

Therefore, your domicile is Country X, 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 in Australia for 183 days or more in the 20XX or 20XX income years. Therefore, 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

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the 20XX and 20XX income years.