Compare documents

Did Person B and Person A commence being a resident of Australia for tax purposes pursuant to subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) from XX June 20XX?

Yes. This ruling applies for the following period : Income year ended XX June 20XX

Person B was born in the XXXXs. Their country of origin is Australia. They are an Australian citizen. Person A was born in country A. They are a country A citizen and lived there until 20XX. In April 20XX, they moved from country A to Australia. While studying at an Australian university, Person A decided to live in Australia indefinitely. They applied for a partner visa in 20XX and was granted a permanent residency visa in Australia in 20XX. Person B married Person A in 20XX. Person B and Person A have children together, C and D. Both children were born in Australia and are Australian and country A dual citizens. Person B worked in a family business since 19XX. Person A was never gainfully employed in Australia since they became pregnant with A right after graduating university. They have been a housewife, occasionally helping out in the family business. Person B and Person A decided to permanently relocate with their children to country A in 20XX. At the time they were already located in country A as part of a family holiday. Person B was on a temporary 2-year country A residence permit during this period.

Prior to this move to country A, Person B had resided in Australia their entire life and their family lived in a house in State 1 (the State 1 property). The State 1 property is owned by a discretionary trust controlled by Person B. Prior to moving in with Person B, Person A lived in various apartments whilst in Australia. Person B and Person A purchased a property in country A in September 2022 (the Country A property). Person B and Person A have a raft of property investments in Australia via multiple family trusts and related entities. When they acquired the property in country A in 2022 (prior to having made the decision to relocate there permanently), Person B was looking for new investment opportunities and, due to the high property prices in Australia, decided to diversify and invest in the Country A property. Person A's familiarity with the Country A property market and their family living close by to help manage the Country A property also contributed to this decision.

During the time that Person B and their family lived in country A, their furniture in Australia remained at the State 1 property which was rented out fully furnished to an unrelated party. This arrangement was put in place because it was more convenient than using storage facilities and incurring removalist fees. Person B and Person A have minimal attachment to personal belongings such as furniture and white goods. They bought new furniture and white goods in country A together with the house when it was acquired. Family photos and important documents are stored online. Their other personal belongings were taken along via checked baggage, gifted away or left in storage due to the high cost of shipping. Person B and Person A were not working in country A at any point in time. Person B continued to act as director of their Australian companies while they were in country A. In May 20XX, Person B and Person A decided to return to Australia for personal reasons, including the children's schooling, Person B's ability to work in Australia, their inability to speak language A and personal lifestyle preferences.

The children were formally enrolled in daycare in country A until the termination of their enrolment in June 20XX. On XX June 20XX, Person B, Person A and their children departed country A permanently on a one-way ticket to Australia. They arrived in Australia on XX June 2024. The same personal items that were taken to county A for the move were taken back to Australia via checked baggage. Furniture and white goods were left behind in the Country A property, which has since been rented out fully furnished on arm's length terms to an unrelated party. Some items such as bed sheets and towels were abandoned. No other personal belongings have been left behind in country A. Since the move back to Australia, all bank accounts held by Person B and Person A are in Australia except for 2 held by Person A in country A. These country A bank accounts exist to collect rent and pay property related expenses for the Country A property. All living expenses are paid from the Australian bank accounts. All other personal assets (such as clothes, trust deeds, family photos, jewellery), company shares, property investments (other than the Country A Property) are in Australia.

Person B and Person A submitted enrolment applications for school in State 1 in January 20XX. C commenced school in State B at the beginning of the term in July 20XX. They are still attending the school. D commenced childcare in State B around the same time. Person B resumed full time employment with their former employer located in State 1 in July 20XX. Since their return the family has resided in the State 1 property. Person B and Person A have no intention of moving back to country A due to the children's schooling, Person B's lack of language A skills and better income earning opportunities in Australia. Person Band Person A have never contributed, or had contributions made on their behalf, to either the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1936 paragraph 6(1)(a) Income Tax Assessment Act 1936 subparagraph 6(1)(a)(i) Income Tax Assessment Act 1936 subparagraph 6(1)(a)(ii) Income Tax Assessment Act 1936 subparagraph 6(1)(a)(iii)

Summary Person B and Person A commenced being a resident of Australia for tax purposes pursuant to subsection 6(1) of the ITAA 1936 from XX June 20XX. Detailed reasoning The terms 'resident' and 'resident of Australia', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936 to mean: 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 the person's 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 the person's usual place of abode is outside Australia and that the person does not intend to take up residency 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-paragraph (A) or (B)...

These definitions contain 4 alternative tests for residency of individuals. These tests are: •                     the resides test (also known as the ordinary concepts test); [1] •                     the domicile test; [2] •                     the 183-day test; [3] and •                     the Commonwealth superannuation fund test. [4] 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. It is sufficient for the individual to be a resident under one of the tests to be a resident for tax purposes. Guidance regarding the residency tests for individuals and when the Commissioner considers that a person will be a resident of Australia is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals (TR 2023/1) . To determine an individual's residency status, it is appropriate to look beyond the period they have spent in (or out of) Australia. Factors from the entire income year and surrounding income years provide more information to help determine whether they meet one of the residency tests (paragraph 16 of TR 2023/1). The resides test

Under the resides test an individual is a resident if they reside in Australia. The term 'reside' is not defined in the Income Tax Assessment Act and has its ordinary meaning, 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'. The resides test asks whether the individual's presence in Australia is usual and settled in contrast to temporary and casual, informed by both the nature, duration and quality of their physical presence and an intention to treat Australia as home. Factors that commonly inform the relevant association with Australia are: •                     period of physical presence in Australia; •                     intention or purpose of presence; •                     behaviour while in Australia; •                     family, and business or employment ties; •                     maintenance and location of assets; and •                     social and living arrangements. No single factor is decisive, and the weight given to each factor depends on the individual's circumstances. Paragraph 24 of TR 2023/1 relevantly explains:

Because the ordinary concepts test asks whether you reside in Australia, having a connection to, or being a resident of another country does not necessarily diminish any connection to Australia. For this reason, the ordinary concepts test is not about dominance or exclusivity of residence in one place versus another. Nonetheless, continued connections overseas will inform the nature of your connection to Australia. Paragraph 27 of TR 2023/1 relevantly adds: Where your physical presence overlaps more than one income year, consider the full period of your physical presence in Australia. For example, if you arrive in Australia on 1 April you may be regarded as a resident from the day of your arrival despite being in Australia for only 3 months of an income year if you exhibit the characteristics of a person residing here over the entire period of your physical presence in Australia. This may be the case where ... your behaviour supports your intention to settle in Australia from the day you arrived.

With regard to an individual's behaviour while in Australia, paragraph 42 of TR 2023/1 provides that an individual who enters Australia and takes up long-term accommodation, employment, enrols children in school and takes part in regular extracurricular activities demonstrates behaviour consistent with residing here, particularly when coupled with other factors such as an intention to make their home here. When behaviour consistent with residing in Australia is demonstrated over a considerable time, you are regarded as a resident from the time the behaviour commences (paragraph 45 of TR 2023/1). Person B and Person A are considered to have begun residing in Australia from the time of their arrival in Australia on XX June 20XX. Their behaviour has supported their intention to settle in Australia from the day they arrived and their presence in Australia from that day has been settled (as opposed to temporary or casual). This is reflected in the following: •                     their ongoing presence, together with their children, in Australia since their return;

•                     their living arrangements, i.e. living in the State 1 property, a property owned by a discretionary trust controlled by Person B and held for the exclusive use of them and their family; •                     the presence of all of their employment and investment ties in Australia, and the absence of any employment, business or investment ties overseas (except for the Country A property); •                     the organisation of the children's enrolment in school and day care prior to their return to Australia and the children's ongoing attendance at school and day care since shortly after arrival; •                     the holding of the majority of their assets, including bank accounts, company shares and real property, in Australia; and •                     the return of their personal possessions with them to Australia, and the absence of any personal possessions held overseas. Even though Person B and Person A did not qualify as an Australian resident until XX June 20XX under the resides test, they may still qualify as an Australian resident from an earlier time in respect of the 20XX income year if they satisfy one of the alternative tests.

The domicile test Under the domicile test, an individual is a resident of Australia when their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside Australia. Domicile considers whether there is a legal relationship between a person and Australia, and consists of 3 types: •                     a 'domicile of origin', which is attributed to each individual at birth and is generally the country of their father's permanent home; •                     a 'domicile of dependence', which is relevant where a person lacks capacity to acquire their own domicile and their domicile is determined by reference to someone else's domicile; and •                     a 'domicile of choice', which is the domicile a person acquires voluntarily.

A person always has a domicile and can only have one domicile at any point in time. A person's particular domicile continues until they acquire a different one, either by choice or operation of the law. A domicile of origin cannot be abandoned without replacement, and to acquire a domicile of choice a person must have both lawful physical presence in a foreign country and an intention to make their home indefinitely in that country (paragraphs 58 and 59 of TR 2023/1). An individual will have their permanent place of abode [5] overseas where they have retained their Australian identity (as reflected in their Australian domicile), but have definitely abandoned their residency in Australia, and commenced living permanently overseas (paragraph 63 of TR 2023/1). Relevant factors as to whether an individual's permanent place of abode is overseas include: •                     length of overseas stay; •                     nature of accommodation; and •                     durability of association.

While Australia was Person B's domicile of origin, that domicile of origin was abandoned when they acquired country A as their domicile of choice, having had both lawful physical presence there and, as of April 20XX, an intention to make their home indefinitely in that country. While country A was Person A's domicile of origin, that domicile of origin was abandoned when they acquired Australia as their domicile of choice, having had both lawful physical presence here and, as of December 20XX, an intention to make their home indefinitely in Australia, before abandoning that domicile of choice for country A in April 20XX, having had (at that point in time) both lawful physical presence there and an intention to make their home indefinitely in that country. Person B and Person A's domicile was not in Australia at any time in the 20XX income year before XX June 20XX. It was only at that time they commenced their lawful physical presence in Australia and had intended to make their home in Australia once again, thus demonstrating an intention to acquire a domicile of choice in Australia. The 183-day test

Under the 183-day test, an individual who is present in Australia for 183 days or more during the income year will be a resident, unless the Commissioner is satisfied that both their usual place of abode is overseas and they do not intend to take up residency in Australia (i.e. do not intend to make Australia their home). An individual's usual place of abode is the place they usually live or would live but for being absent from it due to temporary circumstances. Relevant factors in considering whether an individual's usual place of abode is outside Australia include: •                     where they lived before and after their time in Australia; •                     the availability of their overseas dwelling to them (if they have one) while they were in Australia; •                     where their possessions and assets are; •                     the type of visa they have and the length of their intended stay; •                     their purpose of coming to Australia; and •                     the travel arrangements they made, including whether they departed from and returned to the same place outside Australia (paragraph 90 of TR 2023/1).

The 183-day test under is not satisfied by Person B and Person A in respect of the year ended 30 June 20XX on the basis that they were present in Australia for less than 183 days during that year (among other reasons) . The Commonwealth superannuation fund test The Commonwealth superannuation test only applies to make resident members who are contributing, or are having contributions made on their behalf, to the PSS or the CSS (as well as the spouse and children under 16 years old of such members). The Commonwealth superannuation test is not satisfied by Person B and Person A in respect of the year ended 30 June 20XX on the basis that they are not a member (active or otherwise) of the PSS or CSS. [1] Paragraph 6(1)(a) of the ITAA 1936. [2] Subparagraph 6(1)(a)(i) of the ITAA 1936. [3] Subparagraph 6(1)(a)(ii) of the ITAA 1936. [4] Subparagraph 6(1)(a)(iii) of the ITAA 1936. [5] In this context, place of abode refers to the physical surroundings in which the individual lives, extending to a town or country.