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Edited version of private advice
Authorisation Number: 1052347970807
Date of advice: 3 February 2025
Ruling
Subject: Australian resident for tax purposes
Question 1
Is the Taxpayer a resident of Australia as defined in section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the whole of the 20XX income year?
Answer 1
Yes.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commenced on:
In the year ending 30 June 20XX
Relevant facts and circumstances
Personal circumstances
The Taxpayer was born in Australia on DDMMYY and is an Australian citizen.
The Taxpayer completed their schooling and tertiary education in Australia.
In YYYY the Taxpayer married their now ex-spouse. They have multiple children, all of whom are now adults.
The taxpayer has worked in Australia for their entire career.
The Taxpayer is currently fully registered to perform their profession and has been registered for over XX years.
In the relevant income year, the Taxpayer has (and will continue to) work as part of a advisory board on a part time basis. They also continues to work on a part time basis in their trained profession.
The Taxpayer intends to continue working for another three to five years. This work will be undertaken in Australia.
The Taxpayer intends to maintain their professional registration in Australia after they retire.
Assets and lifestyle in Australia
In YYYY, the Taxpayer purchased a property (Property A). The Taxpayer purchased this property solely in their name, as at the time of purchase they were in the process of separating from their spouse (now ex-spouse).
The Taxpayer lived at Property A alone. After the Taxpayer's separation from their spouse and their move to Property A. While the children were still living as dependants with their parents, they primarily lived with their other parent but would stay with the Taxpayer at Property A from time to time.
In YYYY the Taxpayer and their spouse divorced.
In YYYY, through a trust that the Taxpayer controlled, the Taxpayer purchased a property (Property B).
As part of their financial settlement, the Taxpayer retained Property A and control of the trust that owns Property B.
The Taxpayer has a caretaker who cares for the day-to-day activities at Property B.
The Taxpayer visits Property B every few weeks when they are in Australia and keeps a working wardrobe at Property B available for their use when they visits.
When the Taxpayer visits Property B they stay for around X days at a time.
Property A has always been, and continues to be, available for the Taxpayer's use. Property B is also always available for the Taxpayer's use.
The Taxpayer is now semi-retired but maintains their registration to work in their profession. They currently hold, and will continue to hold, insurance for their profession and Australian private health insurance.
One of the Taxpayer's adult children live in Australia and some live overseas.
Current Assets in Australia
The Taxpayer currently owns (or controls entities that own) the following assets in Australia:
• Property A
• Property B
• Property C
• Property D
• Property E
• a car that is garaged at the Property A
• bank accounts
• assets held through a SMSF
The Taxpayer previously owned a boat which they recently sold. The Taxpayer had not planned to sell the boat but was incentivised by an off-market offer. The Taxpayer intends to buy a new boat in Australia.
The Taxpayer engages employees to maintain the houses and grounds at Property A and Property B when they are not there.
Most of the Taxpayer's personal belongings are kept at Property A and when the Taxpayer is in Australia they live at Property A.
When the Taxpayer is living at the Property A, now that they are semi-retired they spend their time:
• supplied list of activities.
Travel outside of Australia
In the past X years, the Taxpayer has travelled regularly overseas on holiday and to visit their adult children.
Between YYYY and YYYY, as the Taxpayer transitioned towards retirement, they spent part of each year travelling outside Australia.
The Taxpayer was unable to travel overseas in 2020 and 2021 due to the COVID-19 pandemic.
In YYYY, the Taxpayer holidayed in Country A and Country B. The Taxpayer decided that they was interested in investigating whether they could purchase a property in Country A and Country B where they could live when they was not in Australia. The Taxpayer was interested in these purchases because they were semi-retired, enjoyed the lifestyle in these countries, wanted to be closer to X of their adult children, and the taxpayer wanted to spend more time traveling outside of Australia.
In YYYY, the Taxpayer:
•through a related entity, purchased an apartment in Country A (Country A Apartment), which is available for their use at all times
•through a different related entity, purchased a house in Country B (Country B House), which is available for their use at all times
The locations of the Country A Apartment and the Country B House allow the Taxpayer easy travel to visit their adult children that live outside of Australia with their spouses, as well as to other holiday destinations.
The Taxpayer holds certain visas and permits that allow them to stay in Country A and Country B for extended periods, which can be renewed annually.
In the relevant income year, the Taxpayer:
• travelled to Country C for a family event
• spent from approximately Month A to Month B in Australia
• intends to spend the Christmas and New Year period Country C with their family
• will travel to the Country B in Month C to meet friends from Australia
• will travel to Country A and several other countries between Month D and mid-2025
• intends to return to Australia in mid-2025 for a medical procedure.
Other relevant facts
The Taxpayer
• has lodged all of their income tax returns as an Australian resident
• has not terminated or requested leaves of absence from any memberships in Australia
• is precluded from working in Country B by their relevant visa, however they have not undertaken, nor will they undertake, any employment in either Country B or Country A.
The Taxpayer continues to have the attitude that the Property A is their home.
The Taxpayer is considering selling the Property A.
If the Taxpayer sells Property A, they intends to move all of their personal belongings to the Property B and live there while they are in Australia.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1)
Income Tax Assessment Act 1997 section 995-1
Reasons for decision
Question 1
Is the Taxpayer a resident of Australia as defined in section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the whole of the 20XX income year?
Summary
The Taxpayer is a resident of Australia as defined in section 6(1) of the ITAA 1936 as they are a resident according to the ordinary concepts test contained in paragraph 6(1)(a), being a person 'who resides in Australia'.
Detailed reasoning
Statutory definitions
Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) provides the following definition of 'Australian resident':
"Australian resident" means a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936.
The Income Tax Assessment Act 1936 (ITAA 1936) defines 'resident' or 'resident of Australia' as:
6(1)
"Resident" or resident of Australia means:
(a) a person, other than a company, who resides in Australia and includes a person:
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;
(ii) who has actually been in Australia, continuously or intermittently, during more than one - half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii) who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or
(B) an eligible employee for the purposes of the Superannuation Act 1976; or
(C) the spouse, or a child under 16, of a person covered by sub - subparagraph (A) or (B); and
(D) ...
That is, the definitions of 'resident' and 'resident of Australia' in subsection 6(1) contain four alternative tests for residency of individuals:
• the 'ordinary concepts test' (paragraph 6(1)(a) of the definition)
• the domicile test (subparagraph 6(1)(a)(i))
• the 183-day test (subparagraph 6(1)(a)(ii))
• the Commonwealth superannuation fund test (subparagraph 6(1)(a)(iii))
Taxation Ruling TR 2023/1 Income Tax: residency tests for individuals
Taxation Ruling TR 2023/1 Income Tax: residency tests for individuals (TR 2023/1) explains these residency tests and provides guidance about when the Commissioner considers that a person will be a resident of Australia according to the tests.
An individual only needs to meet one of the tests contained in the subsection 6(1) definition to be considered a resident of Australia. An individual will be a non-resident if they do not meet any of the tests (TR 2023/1 paragraph 15).
TR 2023/1 explains that residency is about an individual's connection with Australia. Residency under the ordinary concepts, domicile and 183-day tests, is determined by considering all of the individual's relevant facts and circumstances. The significance of different facts varies from case to case and no single factor is determinative (TR 2023/1 paragraph 4-5).
The ruling contained in TR 2023/1 relevantly states:
Statutory definition of residency for tax purposes
10. Residency for tax purposes is a question of fact based on an individual's connection to Australia.
...
12. The ordinary concepts test is generally relevant when you are physically present in Australia and considers residency according to ordinary concepts. The other 3 tests (domicile test, 183-day test and Commonwealth superannuation fund test) expand the definition beyond the ordinary concept of residency.
13. The domicile and Commonwealth superannuation fund tests are generally relevant if you have been living in Australia but are not currently present in Australia, or present only intermittently during the relevant income year. The domicile test considers whether your domicile is in Australia and whether your permanent place of abode is outside Australia.
...
15. You are a resident if you meet any one of the tests. It does not matter if you do not meet any of the other tests. You are not a resident if you do not meet any of the tests. This means that you must consider all applicable tests before concluding you are a non-resident.
16. To determine your residency status, it is appropriate to look beyond the period you have spent in (or out of) Australia. Factors from the entire income year and surrounding income years provide more information to help determine whether you meet one of the residency tests.
Ordinary concepts test
As discussed above, paragraph 6(1)(a) of the definition of 'resident' or 'resident of Australia' in the ITAA 1936 contains the 'ordinary concepts test'. Under the ordinary concepts test, a person is a resident if they reside in Australia. The term 'reside' is not defined in the Australian income tax law and the term is taken to have its ordinary meaning. TR 2023/1 explains:
18. The term 'reside' is not defined in the Australian income tax law and has its ordinary meaning.
19. The ordinary meaning 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'.
20. The ordinary concepts test is asking whether your presence in Australia is usual and settled in contrast to temporary and casual. This is informed by both the nature, duration and quality of the person's physical presence and an intention to treat Australia as home. Factors that commonly inform the relevant association with Australia are:
• period of physical presence in Australia
• intention or purpose of presence
• behaviour while in Australia
• family, and business or employment ties
• maintenance and location of assets, and
• social and living arrangements.
21. No single factor is necessarily decisive. The weight given to each factor varies depending on individual circumstances.
22. Many of the factors outlined in paragraph 20 of this Ruling are interrelated. For example, continued family connections are often also accompanied by assets in Australia (such as a house, furniture or a motor vehicle) and behaviour consistent with a familiar routine while in Australia. Temporary visitors often have few social connections.
23. For these reasons, it is important to consider all the relevant connections together to inform the question of whether you reside in Australia.
TR 2023/1 also confirms that, when considering residency under the ordinary concepts test, because the test specifically asks whether the taxpayer resides 'in Australia', having a connection to, or being a resident of another country does not necessarily diminish any connection to Australia and does not exclude a taxpayer from being a resident under the ordinary concepts test. Physical absence from Australia does not necessarily result in non-residence - it is the individual's 'continuity of association' with Australia which is the relevant consideration. The ordinary concepts test is not about exclusivity or dominance of residence in one place. Therefore, the Taxpayer's connection with and time spent in Country A and Country B will not prevent them from being a resident of Australia under the ordinary concepts test (paragraph 24 and 25 of TR 2023/1).
Paragraphs 26 to 54 of TR 2023/1 provide guidance regarding the factors set out in paragraph 20 of TR 2023/1 which are said to inform the relevant association with Australia for the purposes of the ordinary concepts test. The guidance about these factors provided by TR 2023/1 and the application to the Taxpayer's circumstances is set out below.
Period of physical presence in Australia and intention or purpose of presence
Regarding the period of physical presence in Australia and the intention or purpose of the individual's presence, TR 2023/1 relevantly states:
Period of physical presence in Australia
26. The period of physical presence or length of time in Australia is an important factor when considering whether you reside here, but it is not a determinative factor. Importantly, there is a distinction between 'staying' in Australia and residing in it. Merely staying in Australia is normally insufficient. You must have some connection to Australia that characterises your presence as 'residing' in it. This will be informed by the other factors set out in paragraph 20 of this Ruling.
27. Where your physical presence overlaps more than one income year, consider the full period of your physical presence in Australia. ...
28. Any limitations on your stay in Australia that are imposed by visas are relevant. Shorter visits to Australia will be less consistent with establishing residency, particularly if you hold a short-term visa.
29. In many cases, a visit to Australia of less than 6 months is not sufficient time to be regarded as residing here. This is because a person does not usually establish a durable connection to Australia in this time.
30. This, however, can be contrasted with a situation where a person has previously spent a long time in Australia despite only spending short periods in Australia in the relevant income year. In such a case, the shorter period of physical presence in Australia assumes less relevance if the person has retained a continuity of association with Australia, or a particular place within Australia, together with an intention to return to Australia and an attitude that Australia remains their home.
Intention or purpose of presence
31. Your intention, purpose or reason for being in Australia helps to determine whether you reside here. While you may have multiple reasons, there is usually a main purpose to your presence.
32. A resident will usually have an intention to treat Australia, or a place within Australia, as a home at least for the time being, though not necessarily forever.
TR 2023/1 provides the following relevant example that considers these two factors:
Example 12 - person out of Australia for 6 months every year - resident
151. Corey has an Australian domicile and an established home in Noosa, when he and his spouse establish a second home in Valencia, Spain. Corey and his family spend just over 6 months at the Spanish home and the rest of each year in their Australian home.
152. Corey is a resident of Australia under the ordinary concepts test despite being absent for a large part of each year. This is because his intention and presence in Australia demonstrate a continued connection to Australia consistent with the regular order of his life.
153. Under the domicile test, Corey is also a resident of Australia. He has an Australian domicile and it is not possible to say that his permanent place of abode is outside Australia as he has not abandoned residing in Australia.
The Taxpayer was born in Australia in YYYY and completed both their schooling and tertiary education in Australia. They are an Australian citizen and have worked in Australia for the entire duration of their career. They has been registered for over XX years in their profession and is currently fully registered in their profession. The Taxpayer purchased Property A in YYYY and lived in the property as their home. In YYYY through a trust that they controlled, they purchased Property B. Both Property A and Property B are always available to the Taxpayer for their use.
In the past X years, the Taxpayer has travelled regularly overseas for holidays and to visit their adult children. Between YYYY and YYYY, as the Taxpayer transitioned towards retirement, they spent part of each year travelling outside Australia.
In YYYY, the Taxpayer holidayed in Country A and Country B and became interested purchasing a property in those countries where they could live when they were not in Australia. The Taxpayer was interested in these purchases because they were semi-retired, enjoyed the lifestyle in those countries, wanted to be closer to their adult children based overseas, and they wanted to spend more time traveling outside of Australia. In YYYY, through two related entities they purchased an apartment in Country A and a house in Country B.
The Taxpayer has had the attitude that Property A is their home, and they continues to hold that belief. If the Taxpayer sells Property A, they intend to retain a home in Australia and would move all of their personal belongings to Property B and live there while they are in Australia. The Taxpayer intends to continue working in Australia on a part time basis for the next three to five years. They have never undertaken work in either Country A or Country B and does not intend to.
In the relevant income year, the Taxpayer:
• travelled to Country C for a family event
• spent from approximately Month A to Month B in Australia
• intends to spend the Christmas and New Year period Country C with their family
• will travel to the Country B in Month C to meet friends from Australia
• will travel to Country A and several other countries between Month D and mid-2025
• intends to return to Australia in mid-2025 for a medical procedure.
While the Taxpayer has been absent from Australia for part of the relevant income year, the full period of their physical presence in Australia, since their birth, and the continuity of association with Australia throughout the Taxpayer's entire life and career indicates that the period of physical presence in Australia in the relevant income year is less relevant (paragraph 30 TR 2023/1). The Taxpayer has stated, and demonstrated, an intention to continue to return to Australia, with an attitude that Australia remains home (currently Property A and if sold, Property B). The Taxpayer continues to be registered to work in their profession and has continued to work in Australia exclusively. The reasons for their travel in and out of Australia in the relevant income year are consistent with a semi-retired individual traveling for their personal enjoyment and to spend time with family and friends who either live overseas or are also traveling overseas, while maintaining a continuity of association with Australia and an attitude that Australia remains their home.
Behaviour while in Australia and Social and living arrangements
In relation to an individual's behaviour while in Australia and their social and living arrangements in the context of the ordinary concepts test, TR 2023/1 states:
Behaviour while in Australia
41. Your behaviour relevantly includes the way you live as part of the regular order of your life. If the way you live reflects a degree of continuity, routine or habit, coupled with other factors such as intention, it may be consistent with residing in Australia.
42. For example, if you enter Australia and take up long-term accommodation, employment, enrol children in school and take part in regular extracurricular activities, this would demonstrate behaviour consistent with residing here, particularly when coupled with other factors such as an intention to make your home here.
43. Conversely, if you usually live overseas and, while in Australia, you travel around or display no settled routine or behaviour, or you have only a short period, or short periods, of settled routine or behaviour coupled with an intention to holiday in Australia before returning home to another country, you will likely not be regarded as a resident under the ordinary concepts test.
...
Social and living arrangements
53.Your social and living arrangements may indicate you are a resident, particularly when coupled with other factors. Social and living arrangements are the way you interact with your surroundings during your stay in Australia. These arrangements may include joining sporting or community organisations, enrolling children in school, redirecting mail to Australia or committing to a residential lease.
54. It is the routine and habit associated with the social and living arrangements that is indicative of residency rather than the existence of hobbies and recreational pursuits themselves.
As discussed above, the Taxpayer was born and educated in Australia and has worked their entire career in Australia. They are still working exclusively in Australia on a part time basis. The Taxpayer has no dependents, they are divorced, and their children are adults. As they have begun transitioning towards retirement, they travel overseas regularly and when they are in Australia, both Property A and Property B are always available to them for their use. The Taxpayer purchased the Property A in YYYY, and when they are in Australia the Taxpayer lives at Property A as their usual place of residence and visits Property B every few weeks for around X days at a time. Most of the Taxpayer's belongings are kept at the Property A and they maintain a working wardrobe at Property B. Now that they are semi-retired, their daily routine when they are in Australia living at the Property A, is consistent with a person who lives as a resident as part of a community. They utilises local facilities for regular exercise, shop locally, dine at a local café and restaurant multiple times a week and cook and exercise in their home.
The Taxpayer's behaviour and social and living arrangements while in Australia indicate that they are a resident in accordance with the ordinary concepts test, particularly when considered in the context of the factors previously discussed.
Family, and business or employment ties
TR 2023/1 states:
Family, and business or employment ties
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.
47. The term and type of employment or business association you may have will also be relevant, particularly as these will usually be accompanied by other factors such as physical presence and assets in Australia. For example, entering Australia to take up an employment contract or to set up a business often results in behaviour that indicates you reside here.
48. While the test is about whether you reside in Australia, the presence or absence of family, and the extent of business or employment ties in the overseas country will be relevant in giving context to your connection to Australia...
The Taxpayer is divorced, and their children are adults, and therefore the presence or absence of their family in Australia does not inform the nature of their connection to Australia. While the Taxpayer was married, they lived in Australia and for the years their children remained dependants after their divorce, they lived mainly with their other parent but stayed with the Taxpayer at Property A from time to time.
As previously discussed, the Taxpayer is semi-retired. In the relevant income year, the Taxpayer has worked and will continue to work as part of a specialist advisory board on a part time basis. They also continues to work on a part time basis in their trained profession. The Taxpayer has not (and does not intend to) work in Country A or Country B. They intend to work in Australia on a part time basis for the next three to five years before they fully retires. They intend to maintain their professional registration in Australia after they retires. The Taxpayer's employment ties are indicative of an individual who is a resident under the ordinary concepts test.
Maintenance and location of assets
In relation to the maintenance and location of assets TR 2023/1 states:
Maintenance and location of assets
51. Living in a property in Australia that you own or are purchasing suggests establishment of a home in Australia consistent with residing here. Other assets in Australia, such as motor vehicles, superannuation investments and bank accounts, add further weight to you having established behaviour consistent with residing here.
52. The relevance and weight given to assets must be considered in your individual context. Both the significance of the assets to you and the reasons why they were acquired or maintained will be relevant. For example, opening a bank account in Australia may be no more than a mere convenience in which to deposit locally acquired earnings to fund a holiday. Australian bank accounts held open while you are located overseas could be consistent with maintaining a continuity of association with Australia, but could also be the result of there being no pressing reason to close them.
The Taxpayer currently owns (or controls entities that own) the following assets in Australia:
• Property A
• Property B
• Property C
• Property D
• Property E
• a car that is garaged at the Property A
• bank accounts
• assets held through a SMSF
The Taxpayer's assets are significant, have been accumulated and held over time. They are not representative of assets obtained as a convenience and the Taxpayer has retained the assets even while spending portions of each year overseas. The Taxpayer's assets indicate they are a resident under the ordinary concepts test.
Conclusion
As discussed above, paragraph 15 of TR 2023/1 confirms that an individual is a resident if they meet any one of the tests residency tests contained in subsection 6(1) of the ITAA 1936. If an individual meets one of the tests for residency, it does not matter if they do not meet any of the other tests. Paragraph 20 of TR 2023/1 explains that the ordinary concepts test asks whether an individual's presence in Australia is usual and settled (as opposed to temporary and causal) and considers the nature, duration, and quality of the individual's presence in Australia, as well as their intention to treat Australia as home. Considering the Taxpayer's intention to treat Australia, and specifically Property A as their home, and the factors set out in paragraph 20 of TR 2023/1, as discussed above the Taxpayer is a resident under the ordinary concepts test contained in paragraph 6(1)(a) of the ITAA 1936 and is therefore a resident of Australia as defined in section 6(1) of the ITAA 1936. As the Taxpayer is a resident according to the ordinary concepts test, it is not necessary to consider whether the Taxpayer is a resident according to any of the other tests contained in subsection 6(1) of the definition.