Private ruling: Residency
Date of advice: 23 July 2021
Published: September 2021
Ruling period: Year ended 30 June 2020
Date scheme commenced: 1 July 2019

Ruling: Q1: Are you a resident of Australia for taxation purposes for the 2020 income year? | A1: No.

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. Your spouse is working in Country Y. You enter Country Y on an entry visa which allows you to be in Country Y for 12 months at a time before it must be renewed. Your spouse commenced working in Country Y in the 20XX income year. You accompanied them to Country Y on XXXX 20XX. Your spouses' contract is for 3 years with a 12-month extension. Your spouses' contract is due to end in XXXX 20XX. You live in an apartment in Country Y which is paid for by your spouses' employer and is available for you to live in for the duration of their contract in Country Y. You work for an Australian company. You have rented your family home out in Australia. In addition to the family home in Australia you have a rental property. You have no assets in Country Y. When you return to Australia you stay with your spouse's parents in their home. You work remotely in Country Y for your Australian employer. In the 20XX income year you spent less than 183 days in Australia and greater than 183 days in Country Y. In the 20XX income year you spent greater than 183 days days in Australia and less than 183 days days in Country Y. In the 20XX income year you spent less than 183 days in Australia and greater than 183 days in Country Y. You were in Australia for longer than other income years in the 20XX income year due to the pandemic. You arrived in Australia on XX XXXX 20XX. This visit was for a holiday and it was your intention to stay longer to complete some training you needed to do. The COVID-19 pandemic meant that you could not leave Australia and go back to Country Y due to Government restrictions. You and your spouse were able to return to Country Y on X XXXX 20XX and you have remained their ever since. It was your intention to return back to Australia, but this has not been feasible due to the pandemic. You and your spouse 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: 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 - 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 and your spouse have been living in Country Y since X XXX 20XX. Your spouse is working in Country Y and you work remotely for your Australian employer in Country Y. The bulk of your time is spent in Country Y. In the 20XX income year you spent greater than 183 days in Australia which was due to the pandemic. You arrived on XX XXX 20XX in Australia and you were not able to leave until X XXX 20XX to return to Country Y. While in Australia you stayed with your spouse's family in their home as you have rented out your family home in Australia. You work remotely in Country Y for your Australian employer. Based on the information provided to the Commissioner you have not been residing in Australia according to ordinary concepts since leaving Australia in 20XX. You were only in Australia for XXX days due to the pandemic and therefore were not carrying out your daily life and duties as someone who is residing in Australia. You are not a resident under this test. | Detailed Reasoning - 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 Hall (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 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 such as 2 years, would not be enough 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, your domicile is Australia. | 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. 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 Full Federal Court in Harding stated at 41 that it favoured the construction of the phrase 'permanent place of abode' as used at first instance in Applegate v Commissioner of Taxation [1978] 1 NSWLR 126 at 134: "place of abode" may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in s. 6(1.) of the Act. The Full Federal Court at 40 summarised its thoughts on 'permanent place of abode' as follows: • the word 'place' in the context of the phrase 'outside Australia' involves a consideration of the town or country in which a person is physically residing 'permanently'; • so long as the taxpayer has 'definitely abandoned' his or her residence in Australia, it is not necessary for the taxpayer to be permanently located at a particular house or flat in a particular town within a foreign country or for the person to live in one particular town, suburb or village within a given country; • the word 'place' should accordingly be read as including a reference to a country or state; • the words 'permanent place' require the identification of a country in which the taxpayer is living permanently. Consequently, it is considered that the Full Federal Court in Harding provides two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia. These are: (1) whether the taxpayer has abandoned, in a permanent way, their Australian residence, and (2) whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries. The Commissioner is satisfied that you set up a permanent place of abode outside Australia for the following reasons: • you accompanied your spouse to Country Y • you live in a property provided to your spouse as part of their work in Country Y • you rent your home out in Australia The Commissioner is satisfied that you have abandoned your home in Australia and that you are not a resident of Australia. The home in Country Y provided to your spouse as part of their work does not need to be everlasting and is therefore permanent in nature for the period of their contract and permanent enough that you spend a considerable amount of time in Country Y living in this home. You are not a resident under this test. | Detailed Reasoning - 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. In the previous income year, you were outside Australia in Country Y for most of the income year. In the 20XX income year you were also in Country Y for most of the income year. You were only in Australia for more than 183 days in the 20XX income year due to the pandemic as you were not able to re-enter Country Y. The property in Country Y shared with your spouse might not be long term but is your usual place of abode until you and your spouse move back to Australia. The property in Country Y is where you live your day to day life at present and carry out your work and day to day life activities. Your family home in Australia is not available for you and your spouse to use at present due to it being rented out. The Commissioner is satisfied that your usual place of abode is in Country Y and you are therefore not a resident under this test. | Detailed Reasoning - 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 not a resident of Australia for taxation purposes for the period you are in Country Y.

This ruling applies for the following period periods : | moving between foreign countries is not the same as being permanently in one country; and