Edited version of private ruling

Authorisation Number: 1011415229445

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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on:

1 July 2006

Relevant facts and circumstances

Your country of origin is Australia of which you are also a citizen.

You have been working overseas for several years, first in foreign country A and then in foreign country B to the present and on-going.

You have work visas to work in these countries. Your work visa in foreign country B allows you to stay for a fixed period. You cannot renew this visa without first leaving the country.

You had an employment contract for your job in foreign country A. When you initially took up this contract you intended to remain in foreign country A for several years or more. Your intention was then to transfer to another overseas project. This is how you have been employed for the majority of the past several years.

You have an open ended employment contract for your job in foreign country B. You plan to continue working with your present employer. You pay tax in foreign country B on your wages.

At present you plan to work for several more years outside Australia. You have no plans to return to Australia permanently. Your intention is to reside overseas permanently and visit Australia.

You have returned to Australia on several occasions.

These occasions were to visit people. While in Australia you stayed with different people. Between working in foreign country A and foreign country B you lived in Australia at someone's place and another place.

Your family has not accompanied you overseas. You are separated from your spouse.

You have a business in Australia. This is an investment which you aim to expand then sell. It is currently for sale. Your role is that of silent partner. The other partner manages the business.

You have the additional assets in Australia investments from which you derive income and a bank account.

You also own a dwelling in Australia which is rented out while you reside overseas. You are not related to the tenant. The residence was let unfurnished.

While in foreign country A you rented an apartment which you obtained through an agent. You leased it annually. It was mainly furnished. In foreign country B, you rent a furnished apartment which you lease on an annual basis.

You have no assets in foreign country A. You have a bank account in foreign country B which is paid interest.

You have no social or sporting connections with Australia or foreign country B.

Neither you nor you spouse is or was a Commonwealth Government of Australia employee.

You were over 16 years of age.

Relevant legislation provision:

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

· the resides test

· the domicile test

· the 183 day test

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650 (IT 2650).

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 considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

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'.

IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's residence include:

· 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 bank accounts 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.

In your case:

· you resided in foreign country A and then in foreign country B until the present and on-going

· you have no plans to return to Australia

· you had/have rented apartments first in foreign country A and now in foreign country B

· your dwelling in Australia has been rented out and when you visit Australia you stay with people; and

· you have a child who lives with your former spouse in Australia

On balance, your ties to foreign country A or foreign country B are stronger than your ties to Australia. You are not considered to be residing in Australia. Therefore, you are not a resident of Australia under the resides test.

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.

In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 

In your case, as you are still a citizen of Australia, it is considered your domicile is unchanged.

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

In your case:

· you have been living and working overseas for several years years, first in foreign country A and currently in foreign country B

· you had/have work contracts first in foreign country A and currently in foreign country B

· you lived/live in rented apartments first in foreign country A and currently in foreign country B

· you pay tax in foreign country B

· you have a bank account in foreign country B

· your intention is to work and reside overseas permanently

· you return to Australia for brief visits only

· your dwelling in Australia has been rented out and when you visit Australia you stay with people

· you have no other social or sporting connections with Australia.

Based on the facts, your associations in foreign country A and foreign country B are more significant than your associations with Australia. On balance and based on the above, the Commissioner is satisfied that you have established permanent place of abode outside of Australia. Therefore, you are not a resident of Australia under the domicile test.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

You have stated that neither you nor you spouse is or was a Commonwealth Government of Australia employee. Therefore you are not eligible to contribute to the PSS or CSS and, as you are over 16 years of age, you are not a resident of Australia under the superannuation test.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, that is, 183 days.

You have been working overseas for several years. You were not present in Australia for a total period of more than half of any of the years of income covered by this ruling. Therefore, you are not a resident of Australia under the 183-day test.

Conclusion

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.

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