Private ruling: Residency
Date of advice: 29 March 2021
Published: May 2021
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XY

Ruling: Q1: Are you a resident of Australia for taxation purposes from late 20XY? | A1: Yes.

Relevant facts and circumstances: You were born in Australia. You are a citizen of Australia. You are not a permanent resident of any other country. You went to Country Z late 20XY to work. You worked for the same company in Australia and you got an internal transfer to Country Z. You entered Country Z on a residence permit for Country Z. You rented a property in Country Z with another tenant. The lease on the property was for 12 months. You took all personal and household items to Country Z with you. Prior to going to Country Z, you lived with your parent. You have an investment property in Australia. You travelled to Australia early 20XX for a family commitment and due to the pandemic, you were not able to return to Country Z. You worked remotely for your employer in Country Z in Australia. You paid tax in Country Z. It was your intention to return to Country Z as soon as you were able to. You maintained your rental property in Country Z until mid 20XX. You ended the lease and stored your property with a friend in Country Z. You delayed your return to Country Z due to a family member being ill. You were granted a travel restriction exemption on late 20XX and another wave hit Country Z, so you delayed your return further. Your intention was then to return to Country Z in early 20YX. Your employment has now been terminated in Country Z effective early 20YX. You do not have a spouse or any dependants. You suspended your private health insurance while you were in Country Z. You did not remove your name from the electoral roll. You did not notify your bank you were going overseas. You are not eligible to contribute to the relevant Commonwealth super funds.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997). The terms resident and resident of Australia, regarding an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia. These tests are: 1. the resides test 2. the domicile tests 3. the 183-day test 4. the superannuation tests The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - 1. The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant: (i) physical presence in Australia; (ii) nationality; (iii) history of residence and movements; (iv) habits and 'mode of life'; (v) frequency, regularity and duration of visits to Australia; (vi) purpose of visits to or absences from Australia; (vii) family and business ties with Australia compared to the foreign country concerned; and (viii) maintenance of a place of abode. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35): Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms. • you went to Country Z late 20XY. • your intention was to live a work there. • you lived in rented accommodation. • you return to Australia on early 20XX for a family commitment. Based on the information provided to us you were not residing in Australia according to ordinary concepts for the period you were working in Country Z. You are not a resident under this test during the period you worked in Country Z. However you will be treated as a resident under this test from the time you returned to Australia. Based on the facts, you effectively re-established your life in Australia upon your return. You have now been in Australia a significant period of time. While you wanted to return to the Country Z, this did not happen and your living arrangements from your return is line with someone residing here as opposed to visiting. Therefore you are a resident under this test upon your return to Australia on XX XXXX 20XX. | Detailed Reasoning - 2. The domicile test: If a person's domicile is Australia, they will be an Australian resident unless the Commissioner is satisfied, they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. The concept of Domicile was discussed in the Marriage of (1980) 5 Fam LR 662: A person may abandon his domicile of origin and acquire a domicile of choice but in order to establish a change of domicile there must be clear evidence of an intention to abandon the domicile of origin and to make a new permanent home in the country to which the person has removed. In my view a person cannot be said to acquire a new domicile until there has been a firm intention of establishing a permanent residence in another country and also the confirmation of that intention by actual residence in that country. Declarations as to intention are rightly regarded in determining the question of a change of domicile, but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression: The Commissioner's view on how a domicile of choice may be acquired can be found in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia , at paragraph 21: In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster... Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word - as an ancient proverb puts it: "what you do speaks so loudly that I cannot hear what you say." Further, in Fremlin v Fremlin (1913) 16 CLR 212; [1913] HCA 25 ( Fremlin v Fremlin ) Per Barton J: In Winans v. Attorney-General , Lord Halsbury L.C. said:-"Now the law is plain, that where a domicile of origin is proved it lies upon the person who asserts a change of domicile to establish it, and it is necessary to prove that the person who is alleged to have changed his domicile had a fixed and determined purpose to make the place of his new domicile his permanent home." In the much older case of Udny v. Udny Lord Westbury said: -"Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicile, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation. It is true that residence originally temporary, or intended for a limited period, may afterwards become general and unlimited, and in such a case so soon as the change of purpose, or animus manendi, can be inferred the fact of domicile is established." Lord Curriehill in the case of Donaldson v. M'Clure says: -"To abandon one domicile for another means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges and immunities which the law and constitution of the domicile confer on the denizens of the country in their domestic relations, in their business transactions, in their political and municipal status, and in the daily affairs of common life, but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence." Lord Halsbury, in Marchioness of Huntly v. Gaskell , expressed strong approval of Lord Curriehill's judgment, quoting this passage. Your domicile of origin is Australia. You have not taken any steps to change your domicile. Therefore, you will be a resident of Australia unless the Commissioner is satisfied your permanent place of abode is overseas. | Detailed Reasoning - Permanent place of abode: The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons: • you were only in Country Z for several months • you lived in rented accommodation in Country Z with another tenant • you came back to Australia for a family matter and never went back due to the pandemic • your stay in Country Z is not sufficient to of established the level of permanency required to have a permanent place of abode outside Australia. The Commissioner understands that you were not able to return to Country Z due to the pandemic, but the fact is that you did not return and therefore you are not considered to have a permanent place of abode in Country Z. You are a resident under this test. | Detailed Reasoning - 3. The 183-day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here. You were in Australia for more than 183 days in the 20XX income year. The Commissioner is of the opinion that you are a resident under this test. The Commissioner is not satisfied that your usual place of abode was outside Australia for the 20XX income year due to the fact that you were only in Country Z for such a short period of time. The pandemic meant that you were in Australia for more than 183 days in the 2020 income year. You did not spend significant amounts of time in Country Z. Therefore your usual place of abode was not in Country Z. You are a resident under this test. | Detailed Reasoning - 4. The superannuation tests: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: • 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 • the spouse, or a child under 16, of a person covered by either of the above. You are not a resident under this test. | Detailed Reasoning - Your residency status: You are a resident of Australia for taxation purposes for the 20XX income year.