Is the taxpayer a 'resident of Australia' as defined in subsection 6(1) of the Income Tax Assessment Act 1936 for the income years ended 30 June 2023 and 30 June 2024?
Yes. This ruling applies for the following periods : Income year ended 30 June 20YY Income year ended 30 June 20ZZ
The taxpayer was born in an overseas country, Country A. They have been living in Australia for more than two decades. They have Australian citizenship. The taxpayer has a family in Australia which includes 3 children. The taxpayer's parents and sibling are also living in Australia. The taxpayer was employed by Company Australia, an Australian company, for more than XX years. In April 20XX, the taxpayer travelled to Country B. Immediately after arriving in Country B, the taxpayer married a citizen of Country B. The taxpayer resides with their spouse in Country B. In Country B, the taxpayer continued to be employed by their Australian employer, Company Australia. The taxpayer's work required that they travel to Australia. In the latter quarter of the following calendar year i.e. 20YY, the taxpayer was employed by Company B, a Country B company. Company B is a related company of Company Australia. The taxpayer's work in Company B requires that they travel to other countries including Australia and also within Country B. In early 20YY, the taxpayer acquired permanent residency status in Country B.
Since their departure from Australia in April 20XX, the taxpayer has spent the majority of time in Country B. The taxpayer has returned to Australia on three occasions. In Australia, they have stayed for varying periods ranging from a month to three months. The purpose of the taxpayer's stay was to visit their family and for work purposes. The taxpayer made also made four trips to visit other countries for work purposes. Apart from one trip which lasted a month, these trips were generally only for a few days. Australia connection The taxpayer owns a home, which is fully furnished, in Australia. When the taxpayer returns to Australia they stay in their home. The taxpayer has two children who are young adults. Both children live in the house. The other child lives with their former partner. The taxpayer has other family members and friends in Australia. The taxpayer has an investment apartment. Both properties are mortgaged. Currently, the taxpayer intends to retain both properties. The taxpayer has a credit card and bank account with an Australian financial institution, and also has a superannuation account in Australia.
The taxpayer is not a member of the Commonwealth Superannuation Scheme or Public Sector Superannuation Scheme. In the 20ZZ income year, the taxpayer anticipates that they will be travelling to Australia at a minimum of three times a year. The duration of each visit will range from two weeks to a month. The purpose of their visits is twofold: To visit and spend time with their children. For work purposes on behalf of Company B. The taxpayer's mailing address is in Australia. The taxpayer has an Australian driver's licence, and also a Country B driver's licence. They have not informed the Australian electoral commission or Medicare that they were departing Australia. The taxpayer has cancelled their Australian private health insurance as they no longer require it. The taxpayer's medical insurance during travel is covered by their work insurance. Country B connection As mentioned above, the taxpayer married a Country B citizen in April 20XX. The taxpayer has been living at their spouse's home in Country B. They have since acquired permanent residency status in Country B. No members from Australia have accompanied the taxpayer to Country B.
As mentioned above, in 20YY the taxpayer was employed by Company B. In their role, the taxpayer is expected to travel to other countries, including Australia. In the 20ZZ income year, there is an expectation that they will travel to more countries and more frequently for work. The details of their travel are not yet planned. The taxpayer's employment contract with Company B has no end date. When travelling in Country B for work, they will be staying in hotels in Country B. Since their employment with Company B, the taxpayer's salary is deposited into a bank account in Country B, however they are required to transfer that money into directly to their Australian bank account to make loan repayments towards their properties' mortgages and to provide for their children. Other than the Country B bank account, the taxpayer has no assets in Country B. The taxpayer states that they have has no set intention of returning permanently to Australia.
Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1997 section 995-1
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 term 'resident of Australia' is relevantly 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 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); and
The above definition of resident, in effect, provides 4 tests for determining whether an individual is a resident for taxation purposes. These tests are: 1. residency under ordinary concepts test in paragraph 6(1)(a) ('ordinary concepts test'); 2. the domicile (and permanent place of abode) test in subparagraph 6(1)(a)(i); 3. the 183 day test in subparagraph 6(1)(a)(ii); and 4. the Commonwealth superannuation fund test in subparagraph 6(1)(a)(iii). A taxpayer will be treated as a resident of Australia for an income year where it satisfies one of these tests. The tests of most relevance in the present case are the ordinary meaning of 'resides' test in paragraph 6(1)(a) and the domicile test in subparagraph 6(1)(a)(i) of the ITAA 1936. In relation to the 183 day test in subparagraph 6(1)(a)(ii), one of the requirements to be met to satisfy this test is that an individual must be present in Australia for more than 183 days during an income year continuously or intermittently.
The taxpayer was present in Australia during the 20YY income for almost five months, therefore the taxpayer was not a resident under the 183 day test for the 20YY income year. In relation to the 20ZZ income year, an assumption has been made that the taxpayer will not be present in Australia for more than 183 days and therefore will not be a resident under the 183 day test for the 20ZZ income year. The taxpayer is also not a resident under the Commonwealth Superannuation Fund test in subparagraph 6(1)(a)(iii). The taxpayer is not a contributing member of the Public Sector Superannuation Scheme or the Commonwealth Superannuation Scheme, a spouse of such a person or a child under 16 years of age of such a person. Ordinary Concepts test The term 'resides' in paragraph 6(1)(a) is not defined in the income tax provisions either the ITAA 1936 or ITAA 1997, and therefore it takes on its ordinary meaning. Taxation Ruling TR 2023/1 Income tax: residency tests for individuals (TR 2023/1) provides guidance on the Commissioner's interpretation of the ordinary meaning of the word 'resides'.
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 test is whether the person has retained a 'continuity of association' with the place, coupled with an intention to return to that place and an attitude that it remains home (see Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449 per Wilcox J). To determine an individual's residency status, it is appropriate to look beyond the period spent in (or out of) Australia. Factors from the entire income year and surrounding income years provide more information to help determine whether an individual meets one of the residency tests.
In TR 2023/1 at paragraph 20 it is explained that the ordinary concepts test is asking whether an individual's presence in Australia is usual and settled as opposed to temporary and casual. This is informed by both the nature, duration and quality of the person's 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/employment ties maintenance and location of assets social and living arrangements It is important to note that no single factor is necessarily decisive, and many are interrelated. The weight given to each factor varies depending on individual circumstances. Because the ordinary concepts test is asking 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. Application of the 'Ordinary Concepts test' In the present circumstances, the taxpayer, an Australian citizen, moved to Country B and immediately after arriving married a Country B citizen with whom they are residing with in Country B. Whilst in Country B, the taxpayer continued to be employed by their Australian employer, Company Australia. Their employer is now Company B, a related company. They have also acquired permanent residency in Country B. The taxpayer stays most of each income year in Country B. Whilst the taxpayer has established connections in Country B (as demonstrated above) and has expressed an intention not to return permanently to Australia, we consider that after taking into account the taxpayer's individual circumstances that the taxpayer is a resident of Australia under the 'ordinary concepts' test.
In reaching this decision, we have taken the following factors into account: Since their departure in April 20XX, the taxpayer, an Australian citizen, has returned to Australia in each income year for varying periods of times. In the 20YY income, they were in Australia on an intermittent basis for almost 5 months and in the 20ZZ income they will be visiting Australia at least 3 times for a period of 2 weeks to a month. However, although the taxpayer may be physically absent for some of the time, this does not mean that they will be a non-resident. Importantly, the purpose of the taxpayer's visits to Australia is to be with their children with whom they reside with in their home and for work purposes. Their job entails that they travel to Australia (amongst other countries). The taxpayer has an established abode in Australia which is occupied by their children. Their possessions are here. They also own an investment property and hold a superannuation account and a bank account in Australia, the latter from which they provide for their children and pays their loans. The taxpayer also has a social life in Australia.
Given that the taxpayer has ongoing ties to Australia and regularly returns to Australia to an established family life and for work purposes, it is considered that the taxpayer has retained a continuity of association with Australia. This is notwithstanding the taxpayer's absences from Australia and connections to Country B. Accordingly, the taxpayer is a resident of Australia under the 'ordinary concepts test' for the 20YY and 20ZZ income years as the taxpayer resides in Australia. For the sake of completeness, we will also consider the domicile test. Domicile Test Under the domicile test, if a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. Whether a person's domicile is in Australia is determined by the Domicile Act 1982 (Cth) and the common law rules on domicile. A person's domicile is generally their country of birth - referred to as the 'domicile of origin'. A person's domicile continues until a different one is acquired, either by choice or operation of the law.
In TR 2023/1 at paragraphs 59 to 62, the concept of domicile of choice is discussed where it is stated: 59. To acquire a domicile of choice you must have both lawful physical presence in a foreign country and an intention to make your home indefinitely in that country. 60. When considering intention, we have regard to objectively observable conduct. While assertions of intention will always be relevant, if there is a difference between that assertion and the conduct, we may rely on the conduct. 61. Obtaining a visa to migrate to a particular country would be consistent with an intention to make your home indefinitely in that country. A working visa, even for a substantial period of time, would usually not be sufficient evidence of an intention to acquire a new domicile of choice.
62. If you have an Australian domicile and you are living outside Australia, you will retain your Australian domicile if you intend to return to Australia on a clearly foreseen and reasonably anticipated contingency (for example, at the end of your employment contract), even if you stay overseas for a substantial period. This is because you lack the necessary intention to settle in that country indefinitely. On the other hand, if you only have in mind a vague possibility of returning to Australia, such as making a fortune or some sentiment about dying in the land of your forebears, such a state of mind is consistent with the intention required by law to acquire a domicile of choice in the foreign country. As the taxpayer was born in Country A, their domicile of origin is Country A. However, when the taxpayer emigrated to Australia over two decades ago, they acquired an Australian domicile as their domicile of choice.
In April 20XX, the taxpayer departed Australia and moved to Country B. Based on the facts presented, it is considered that the taxpayer has abandoned their Australian domicile of choice and acquired a domicile of choice in Country B. The taxpayer has said that they have no set intention of returning permanently to Australia. They have settled in Country B and married a Country B citizen, soon after arriving. They are based in Country B for their work and their employment contract with their Country B employer is open ended. Further, the taxpayer has been physically present in Country B for most of the time since their departure from Australia in April 20XX. Importantly, they have acquired permanent residency status in Country B. Accordingly, it is considered that the taxpayer's domicile of choice is now Country B. As the taxpayer's domicile is not in Australia, the taxpayer will not be a resident for tax purposes under the domicile test in subparagraph 6(1)(a)(i). As the taxpayer does not satisfy the first limb of the domicile test, there is no need to consider the exception regarding their permanent place of abode. Conclusion
The taxpayer is a resident of Australia for the 20YY and 20ZZ income years as they satisfy the ordinary concepts test of residency in paragraph 6(1)(a) as explained earlier in this document. This is notwithstanding that the taxpayer did not satisfy the 183 day test in subparagraph 6(1)(a)(ii), the Commonwealth superannuation fund test in subparagraph 6(1)(a)(iii) or the domicile test in subparagraph 6(1)(a)(i).