Private ruling: Residency
Date of advice: 6 June 2022
Published: August 2022
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes. | Q2: Are you entitled to the CGT 50% discount on the sale of the property? | A2: Yes.

Relevant facts and circumstances: You were born in Country Z. You are a citizen of Country Z. You are a permanent resident of Australia. You went to Country Z to care for your sick parents-in-law. Your spouse and children remained living in Australia. You have a home in Australia where your spouse remained for the period you were in Country Z. You have a variety of income and assets in Australia and Country Z. While in Country Z you stayed in your home in the capital city, which you have now sold and have purchased a smaller home elsewhere, and you stayed with your parents-in-law's home. You have friends living in your home in Country Z to take care of it when you are in Australia. These friends do not pay rent. It was your intention to return to Australia where your family and home is. You returned to Australia earlier in the year. You have no social or sporting connections in Australia. You have no social or sporting connections in Country Z. Neither you nor your spouse are eligible to contribute to the PSS or the CSS super funds. You purchased a property (the Property) in 20XX. You sold the Property earlier this year.

Relevant legislative provisions: Income Tax Assessment Act 1936 | Income Tax Assessment Act 1997 section 115-10 | Income Tax Assessment Act 1997 section 115-25 | Income Tax Assessment Act 1997 section 115-105 | Income Tax Assessment Act 1997 section 115-110 | Income Tax Assessment Act 1997 section 995-1

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, • the domicile test, • the 183-day test, and • the superannuation tests. The primary test for deciding the residency status of an individual is whether they reside 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. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'resides', according to the Macquarie Dictionary, 2001, rev. 3rd 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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679). 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. Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: • Physical presence • Intention or purpose of presence • Family and business/employment ties • Maintenance and location of assets, and • Social and living arrangements These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia (IT 2650) and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17). 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. We consider that your circumstances are consistent with you not residing in Australia according to ordinary concepts. This is evident from the following: • You normally live with your spouse in Australia. • You and your spouse have a home in Australia. • You went to Country Z to care for your sick parents-in-law. • It was always your intention to return to Australia to live. • You were a resident of Australia immediately before you departed. • It was never your intention to be in Country Z for an extended period of time beyond the care of your parents-in-law. • You stayed with your parents-in-law and in a home you own in Country Z. • You have friends who live in this home in Country Z rent free to look after it for you. • You returned to Australia earlier in the year. You are a resident under this 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. You are not an Australian citizen. You are a Country Z citizen and your domicile is Country Z. You are not a resident under this test. | Detailed Reasoning - 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia, and the person does not intend to take up residence in Australia. You were not in Australia for more than 183 days during the relevant income years. You are not 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. You and your spouse are not a contributing member of 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. You are not a resident under this test. | Detailed Reasoning - Conclusion: You are a resident of Australia for taxation purposes. | Detailed Reasoning - Discount capital gain: Section 115-10 provides than an individual can make a discount capital gain. Subsection 115-125(1) provides that to be a discount capital gain, the capital gain must result from a CGT event happening to a CGT asset that was acquired at least 12 months before the CGT event. Subdivision 115-B outlines how the discount percentage is determined. Section 115-100 provides that the discount percentage will be 50% if you are an individual and neither section 115-105 nor 115-110 apply to the gain. Section 115-110 relates to individuals with trust gains. Section 115-105 provides that if you were a foreign resident or temporary resident at any time after 8 May 2012 during the period where you held the asset, then you must adjust your discount percentage according to the formulas in section 115-115. Section 995-1 defines a foreign resident as "a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936 ". You acquired the Property in 20XX. You sold the Property in 20XX. The Commissioner is satisfied you were an Australian resident for the entire time you held the Property You are entitled to apply the 50% discount capital gain on the Property.