Residency – the domicile test

What is the domicile test

The domicile test is the first statutory test. You're an Australian resident if your domicile is in Australia, unless we're satisfied that your permanent place of abode is outside Australia.

What is a domicile?

Your domicile is the place that is:

• considered by law to be your permanent home
• usually something more than a residence.

You may have no fixed place of abode but under the law you'll always have a domicile. You can only have one domicile at the one time, whereas you may be resident in 2 or more places.

There are 3 basic types of domicile, as established by common law and statutes:

• Domicile by origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex-nuptial child that of its mother.
• Domicile by choice, which will be inferred by law, if there is both a change of residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice.
• Domicile by operation of law, which is imposed by law. For example        
  • an infant's domicile is that of its parents and changes when the parent's domicile changes
  • a married woman can acquire her own domicile, independent of her husband
  • the age of capacity to have an independent domicile is fixed at      
    • 18 years old
    • when the person marries.

In practice, if you're a resident who has always lived in Australia, you'll retain a domicile here when you're absent overseas, unless you choose to permanently migrate to another country.

Permanent place of abode

The following meanings have been established through case law:

• permanent does not have the meaning of everlasting or forever, but is used in the sense of being contrasted with temporary or transitory
• your place of abode is your residence, where you live with your family and sleep at night.

When does this test apply?

The domicile test of residency usually applies where an Australian resident goes to work in an overseas country for an extended period of time.

In this situation:

• you may fail the resides test as you'll be away for a lengthy period
• the absence would raise considerable doubt as to whether you're residing in Australia during that period
• it is a reasonable assumption that you'll be overseas for a lengthy period you'll normally set up some form of abode there
• unless there are other significant factors, such as family and financial ties remaining in Australia, it is usually a foregone conclusion that you don't reside in Australia.

However, you would normally have a domicile in Australia (unless you choose to change it) and therefore the domicile test can be applied. In doing so, the most important consideration will therefore be determining if you have a permanent place of abode abroad.

Determining your permanent place of abode

There are no 'hard and fast' rules that can be used to determine your permanent place of abode. TR 2023/1 Income tax: residency tests for individuals outlines some relevant factors that are used by the courts, tribunals and ATO in deciding such cases.

The relevant factors are:

• intended and actual length of stay overseas, including the continuity of that stay
• existence of an established home overseas
• existence of a residence in Australia (while overseas)
• family and financial ties.

You would not be considered to have adopted a permanent place of abode outside Australia if you have no fixed or habitual place of abode overseas but move from one country to another.

You would therefore be considered an Australian resident under the domicile test.

How the test works

There are 2 steps to this test:

1. Determine your domicile    
   • If not in Australia, the domicile test is not satisfied.
   • If in Australia, go to step 2.
2. Determine your permanent place of abode    
   • If not in Australia, the domicile test is not satisfied.
   • If in Australia, you're considered an Australian resident for income tax purposes.

What to read or do next

For more general information about residency, read Your tax residency.

For information on the other 3 residency tests, read:

• Residency – the resides test
• Residency – the 183 day test
• Residency – the superannuation test
• Australian and foreign residents examples.

TR 2023/1 outlines some relevant factors that are used by the courts, tribunals and ATO in deciding which country is your permanent place of abode.

If you need help applying this information to your own situation, you can contact us.