Private ruling: Residency
Date of advice: 17 August 2023
Published: 3 October 2023
Ruling period: Year ending 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Will you be a non-resident of Australia for taxation purposes for the 20YY and 20YY income years? | A1: Yes.

Relevant facts and circumstances: You were born in Country X and are a Country X citizen. You have the following children: • Person A who has been studying at school in Country X and is expected to graduate in several years. They hold a permanent resident visa of Australia. • Person B, who was studying in Australia. Your spouse has a business in Country X and is a citizen and tax resident of Country X. You have elderly parents in Country X who you will take care of. Your main residence is in Country X. You have a property in Australia which you use for short term holidays. Your social connections are in Country X. Your family immigration agent advised that your entire family's permanent visa would be very hard to renew as your family had spent too little time in Australia previously and had no plans to return to Australia in the near future. You were of the belief that getting Australian citizenship was the easiest way to guarantee a visa renewal for your family. You came to Australia on DD MM 20YY for the purpose of finalising your Australian citizenship application, not planning to stay in Australia. On DD MM 20YY, you were provided with an Australian passport and then commenced applying for a Country X visa. On DD MM 20YY, you returned to Country X from Australia. You intend to remain in Country X for most of the 20YY-YY income years. You intend on making short visits to Australia; however, you do not intend on staying in Australia for more than 183 days as you wish to stay in Country X and spend time with your spouse and care for your child. You have been offered an employment position in Country X and are expecting to work for the 20YY-YY income years. You have received a private ruling stating that you were not a resident of Australia for tax purposes for the previous income year based of the facts that were previously provided.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision: Summary: 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 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: | Detailed Reasoning - 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... [W]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 not 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. | Detailed Reasoning - Application to your situation: We have taken the following into consideration when determining whether you meet the resides test: • Your main residence is in Country X. • You intend to spend most of your time in Country X. • You do not intend to spend more than 183 days in Australia. • Your family live in Country X. • Your child attends school in Country X. • You have been offered an employment position in Country X. • Your social connections are in Country X. You are not a resident of Australia under the resides test for the 2024-25 income years. 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). | Detailed Reasoning - 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. | Detailed Reasoning - Domicile: Whether your domicile is 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 acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must 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. | Detailed Reasoning - Application to your situation: In your case, you were born in Country X and your domicile of origin is Country X. You came to Australia on a permanent residency visa and obtained your Australian citizenship. It is considered that your domicile then changed from Country X to Australia. You returned to Country X from Australia in MM 20YY. When you returned to Country X, it is considered that you abandoned your domicile of choice in Australia and returned to your domicile of origin in Country X. Therefore, your domicile is Country X. Therefore, you are not a resident of Australia under the domicile test. | Detailed Reasoning - 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. | Detailed Reasoning - Application to your situation: You will not be present in Australia for 183 days or more during the 20YY and 20YY income years. Therefore, you will not be a resident under this test. | Detailed Reasoning - 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. | Detailed Reasoning - 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. | Detailed Reasoning - Conclusion: As you will not satisfy any of the four tests of residency, you will not be a resident of Australia for income tax purposes for the years ending 30 June 20YY and 30 June 20YY.