Private ruling: Residency
Date of advice: 14 March 2023
Published: 1 May 2023
Ruling period: x XX 20XX to yy YY 20YY
Date scheme commenced: x XX 20XX

Ruling: Q1: Was the Taxpayer a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 ('ITAA 1936') for the financial year ended yy YY 20YY?? | A1: No.


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

Reasons for decision: Summary: All legislative references are to the Income Tax Assessment Act 1936 ('ITAA 1936') unless otherwise stated. The Taxpayer is not considered to be a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 for the financial year ended yy YY 20YY. | Detailed Reasoning - Residency for Tax Purposes: 42. Subsection 995-1(1) of the ITAA 1997 provides that a person is an 'Australian resident' if that person is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 ('ITAA 1936'). 43. The definition of 'resident' is outlined in subsection 6(1) of the ITAA 1936 as follows: (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 his 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 his usual place of abode is outside Australia and that he 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). 44. The definition in subsection 6(1) of the ITAA 1936 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These statutory tests are commonly referred to as: i. the 'residence according to ordinary concepts' test (the 'resides test') ii. the 'domicile and permanent place of abode' test iii. the '183 day' test, and iv. the 'Commonwealth superannuation fund' test. 45. 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'. 46. 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). 47. Consequently, only one of the above four statutory tests needs to be met for an individual to be considered an Australian resident for taxation purposes. The 'Resides according to ordinary concepts' Test 48. The term 'resides' is not defined in either the ITAA 1936 or the ITAA 1997. Taxation Ruling TR 2022/D2 "Income Tax: Residency test for individuals" ('TR 2022/D2') provides guidance on the Commissioner's interpretation of the ordinary meaning of the word 'resides' as set out in subsection 6(1) of the ITAA 1936. 49. Paragraph 10 of TR 2022/D2 states that the residency status of a taxpayer is a question of fact based on an individual's connection to Australia. 50. To determine the ordinary meaning of the word 'resides', dictionary definitions of the term can be relied on. The following definitions are provided in paragraph 19 of TR 2022/D2: The Macquarie Dictionary defines 'reside' 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'. 51. Paragraph 25 of TR 2022/D2 provides that the physical presence or length of time in Australia alone is not decisive of whether an individual resides in Australia and an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing in Australia. Similarly, the quality and character of a taxpayer's behaviour while in Australia assists in determining whether the individual resides here, as per paragraph 20 of TR 2022/D2. 52. Paragraph 20 of TR 2022/D2 provides that the following factors are useful in describing the quality and character of an individual's behaviour: • 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, and • social and living arrangements. 53. Paragraph 39 of TR 2022/D2 explains that when looking at an individual's behaviour, their behaviour relevantly includes the way they live as part of the regular order of their life. If the way they live reflects a degree of continuity, routine or habit, coupled with other factors such as intention, it may be consistent with residing in Australia. 54. Paragraph 30 of TR 2022/D2 states that an individual's intention, purpose or reason for being in Australia assists in determining whether an individual resides here. Paragraph 32 of TR 2022/D2 provides that a settled purpose, such as pre-arranged long-term employment or a course of education, may support an intention to reside in Australia. 55. The meaning of 'family and business/employment ties' is explained in paragraphs 44 to 48 of TR 2022/D2. Paragraph 46 of TR 2022/D2 states that the presence of an individual's family is a factor that may indicate that individuals are residing in Australia. 56. When considering the maintenance and location of assets, paragraph 49 of TR 2022/D2 provides that occupying a dwelling in Australia that the individual owns or is purchasing, suggests establishment of a home in Australia. The presence of other assets in Australia, such as motor vehicles, superannuation investments and bank accounts also add further weight to the individual having established behaviour consistent with residing here. 57. Paragraph 51 of TR 2022/D2 states that social and living arrangements can also be considered in determining whether an individual resides in Australia for tax purposes. This factor involves the consideration of the way individuals interact with their surroundings, which may include joining sporting or community organisations, or enrolling children in school, during their stay in Australia. 58. 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. 59. 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 the 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. 60. The Commissioner considers the following factors in relation to whether a taxpayer is 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. 61. 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. 62. 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 - The 'domicile and permanent place of abode' test: 63. An individual is a resident of Australia according to the domicile test if the individual is domiciled in Australia, unless the Commissioner is satisfied that the individual has a permanent place of abode outside of Australia. 64. As set out in paragraphs 54 - 60 in TR 2022/D2, 'domicile' is described by the Commissioner as follows: ""Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law..." 65. Accordingly, your domicile in Australia is determined by the Domicile Act 1982 and the common law rules on domicile. 66. 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. 67. A person acquires a domicile of choice in a country by being lawfully present there with the intention of remaining in that country indefinitely. The two elements of physical presence and intention must occur at the same time. 68. Davies and Steward JJ in Harding FFC stated as follows at [29] and [30] with respect to "domicile": 29. It is appropriate to deal with Mr Harding's appeal first. The primary judge adverted to a tension which he considered seemed to exist between the concepts of "domicile" and that of a "permanent place of abode". On one view, if a person chooses to make her or his permanent place of abode outside of Australia, one might also think that that person had ceased to be domiciled in this country. Some of the criteria for determining a person's domicile may now be found in the Domicile Act 1982 (Cth) (the "Domicile Act"). Section 10 of that Act provides: The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country. 30. Part of the tension observed by the primary judge may be the product of possible differences between the common law concept of a person's domicile and the consequences of the statutory changes made to that common law by the Domicile Act. In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307, where his Lordship said: ... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It 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 purchases and sales and other business transactions ... in their political or municipal status,-and in their 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. 69. If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined based on all the facts and circumstances of each case. 70. 'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory. 71. The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world. 72. The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are: • whether the taxpayer has definitely abandoned, in a permanent way, living in Australia. • whether the taxpayer is living in a town, city, region or country in a permanent way. 73. The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia: • the intended and actual length of the taxpayer's stay in the overseas country; • whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; • whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; • whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; • the duration and continuity of the taxpayer's presence in the overseas country; and • the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. 74. As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances. | Detailed Reasoning - The '183 day' test: 75. 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 - The 'Commonwealth Superannuation Fund' test: 76. 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 CIRCUMSTANCES: The 'Resides according to ordinary concepts' Test 77. We consider that the Taxpayer's circumstances are not consistent with residing in Australia. 78. This is because: • They maintain a family home with their spouse and child overseas. • upon their departure from Australia, they notified the relevant Australian based authorities that they were leaving the country and similarly contacted the relevant overseas based authorities upon their arrival. • they have no intention in returning to Australia permanently however may continue to make trips to see extended family. • they have sought and gained permanent residence overseas. • their physical presence in Australia for the 20YY income year was only for a total of xx nights and the conduct of their visit was not consistent with residing in Australia. 79. Therefore, they are not a resident of Australia under the Resides test. | Detailed Reasoning - The 'domicile and permanent place of abode' test: 80. The Taxpayer was born in Australia in 19XY, and continuously resided here until xx YY 20ZZ. On that date the Taxpayer, their spouse, and child departed Australia. 81. The Taxpayer moved to overseas on a visa and the visa was used until the Taxpayer, their spouse and child gained indefinite leave to remain in the overseas country. The Taxpayer intends to remain overseas indefinitely. 82. It is considered that the Taxpayer abandoned their domicile of origin in Australia and acquired a domicile of choice overseas. Therefore, the Taxpayer's domicile of choice is in the overseas country. 83. The Commissioner is satisfied that their permanent place of abode is outside Australia. This takes into account that: • they purchased an apartment which they initially leased in the overseas country in which they and the family reside. • they intended to live permanently overseas and their child went to school there. • they have no definite plans to return to Australia permanently or relocate to any other country. • they have no intention to return and reside in their family home in Australia despite the property remaining in 'caretaker mode'. • they advised all relevant government, medical places, and school for their child of their permanent departure from Australia. 84. Therefore, the Taxpayer is not a resident of Australia under this Domicile test. | Detailed Reasoning - The '183 day' test: 85. During the year ended yy YY 20YY, the Taxpayer visited Australia once, staying a total of xx nights. This visit was extended due to their parent's serious illness and subsequent passing in XX 20XX. 86. A passport check shows that the Taxpayer spent a total of xx nights in Australia in the 20XX income year. 87. The Taxpayer did not stay in the country for a period of 183 days or longer. Consequently, they did not satisfy the '183 day' test pursuant to subparagraph 6(1)(a)(ii) of the ITAA 1936. | Detailed Reasoning - The 'Commonwealth Superannuation Fund' test: 88. The Taxpayer is not an employee of the Commonwealth and states that this test is not relevant to their circumstances. The Taxpayer has not satisfied the Commonwealth Superannuation Test in subparagraph 6(1)(a)(iii) of the ITAA 1936. 89. The Taxpayer is not a resident of Australia under the Superannuation test. | Detailed Reasoning - CONCLUSION: The Taxpayer is not considered to be a resident of Australia for the purposes of subsection 6(1) of the Income Tax Assessment Act 1936 for the financial year ended yy YY 20YY.

RELEVANT FACTS AND CIRCUMSTANCES | Background Facts: 1. The Taxpayer was born on xx YY 19XY in XYZ. The Taxpayer lived in XYZ and ZYX until 20ZZ, when they moved overseas. | 2. The Taxpayer married their long-time partner in 19XX. | 3. They have one child, born on xx YY 20ZZ. | 4. The Taxpayer's spouse and child moved overseas in XX 20ZZ. | 5. The Taxpayer has siblings living in Australia. The Taxpayer's parent passed away in XX 20XX. The Taxpayer's spouse's family also live in Australia. | Move overseas: 6. On xx YY 20ZZ, the Taxpayer moved overseas. | 7. The Taxpayer was accompanied by their spouse and child. | 8. The visas of the Taxpayer, their spouse and child were originally valid until xx YY 20XY. The visas were continually renewed until 20YZ, when all members of the family were granted Indefinite Leave to Remain in the overseas country. | 9. The Taxpayer, their spouse and child live in an apartment in the capital city of the overseas country. | 10. The Taxpayer and their spouse signed an x-year lease in respect of their apartment and pre-paid the entire rent for the period. The Taxpayer and their family moved into the apartment on x YY 20ZZ. | 11. The Taxpayer intends to remain in the overseas country for the foreseeable future while their spouse pursues business opportunities in the region. | Australian assets and associations: 12. The Taxpayer had been in two senior management roles in one entity in Australia. The Taxpayer resigned from these positions upon their move to the overseas country, replaced by an individual who ordinarily resides in Australia. | 13. The Taxpayer had also been the sole director of that entity. While they continue to be a director of that company, two Australian resident directors were appointed ensuring compliance with the Corporations Act 2001 . | 14. The Taxpayer and their spouse had maintained a Self-Managed Superannuation Fund. As a result of their move, the Fund's assets were transferred to an APRA regulated fund and the Fund was wound up. | 15. The former family home in ZYX, which is owned by the Taxpayer, was not immediately placed on the market due to unfavourable market conditions in the wake of the Global Financial Crisis. | 16. Upon their departure in XX 20ZZ, the Taxpayer undertook an extensive number of actions to end their association with Australia, including: | • The Taxpayer wrote to a number of Australian professional service providers to inform them that they were moving overseas | • The Taxpayer's name was removed from the electoral roll | • The Taxpayer resigned their managerial positions of the Australian entity | • The Taxpayer cancelled their Medicare registration and their medical insurance when they departed Australia | • The Taxpayer advised their General Practitioner and medical specialists to remove them as a patient. | • Australia Post was notified that all mail addressed to The Taxpayer's home be redirected to a post office box which is emptied twice a week by a professional services firm. Important mail is shipped to The Taxpayer in the overseas country; unimportant mail is marked 'Moved Overseas' and returned to sender. | • The Taxpayer advised service providers to liaise with a professional services firm on all Australian-based assets. | 17. The Taxpayer's child attended their last day of school in Australia on y XX 20ZZ. The school was notified that the family was moving overseas. | 18. Since leaving Australia, the Taxpayer has disposed of two properties. | Overseas assets and associations: 19. The Taxpayer and their family live in an apartment. The Taxpayer and their family have no intention of living elsewhere whilst they continue to live in the overseas country. | 20. The Taxpayer's spouse works as a professional consultant to corporations based overseas. | 21. The Taxpayer's spouse has made significant investments in various corporations through a mixture of loans and equity holdings. | 22. The Taxpayer has opened bank accounts with various banks in the overseas country since arriving there. | 23. The Taxpayer obtained credit cards from various banks and debit cards from various banks in the overseas country. | 24. The Taxpayer registered as a voter with the Electoral Services in the overseas country. | 25. The Taxpayer applied for and received confirmation of their entry into the overseas country's taxation system; they have appointed a tax agent and lodges tax returns overseas. | 26. The Taxpayer, their spouse and their child took out private health insurance starting xx YY 20ZZ. This cover has since been cancelled. | 27. The Taxpayer attends a gym in the overseas country. | 28. The Taxpayer entered into engagements with an overseas accountant and lawyer. | 29. The Taxpayer applied for and received their overseas driver's licence. | 30. The Taxpayer registered with and has used the services of a doctor in the overseas country. | 31. The Taxpayer and their family became patients at an overseas dental practice. | 32. The Taxpayer's child attended a school overseas. The child has subsequently completed their schooling. | Visits to Australia: 33. After departing Australia on xx YY 20ZZ, The Taxpayer made a visit to Australia in the 20XY income year, visiting from xx to yy XX 20ZZ. | 34. In the financial year ending yy YY 20XY, the Taxpayer accompanied their spouse on a number of visits to Australia. | 35. In subsequent financial years, the Taxpayer's pattern of visits has varied - they visited Australia a number of times per year, and these visits have been of varying durations. | 36. In the financial year ending yy YY 20YY, the Taxpayer visited Australia once, staying a total of xx nights, this visit was extended due to their parent's serious illness and subsequent passing in YY 20YY. | 37. The Taxpayer may in the future continue to make trips to Australia to see their family. | 38. The Taxpayer and their spouse have arranged for Australian family members to visit them in the overseas country. | Previous private rulings: 39. The Taxpayer ceased to be a resident of Australia for the purposes of s 6(1) of the ITAA 1936 on xx YY 20ZZ. The Commissioner has previously issued to the Taxpayer a number of private binding rulings determining that they were not an Australian resident for tax purposes. | Information provided: 40. You have provided a number of documents containing detailed information in relation to the Taxpayer's application, including: | • Private Binding Ruling ('PBR') Application, dated y XX 20XY. | 41. We have referred to the relevant information within these documents in applying the relevant tests to your circumstances.