Edited version of private ruling

Authorisation Number: 1011476628300

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Ruling

Subject: Residency for tax purposes

Question and answer:

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following period:

Year ending 30 June 2011

Year ending 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You were born in Country Y.

You are a citizen of Australia.

You moved from Country Y to Australia when you were a child and have lived in Australia ever since.

You have been offered employment in Country X. If you accept this offer, you will depart Australia shortly.

If you accept the offer, you will be working in Country X for two years. You expect that after this time, further employment will be offered, although there is no option to renew the employment contract. The total time you expect to be in Country X is between two and five years.

You intend to visit your family in Australia once a year.

Your spouse will accompany you to Country X. They intend to visit Australia two to three times a year to visit family.

While in Country X you will be staying in accommodation provided for by your employer.

You will retain ownership of your residence in Australia and it will not be leased out whilst you are in Country X.

You own rental properties in Australia. You will continue to own and lease out the properties.

You will maintain a bank account in Australia.

Neither you, nor your spouse, are, or have been, Commonwealth government of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

The terms 'resident' and 'resident of Australia', in regard to 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 for income tax purposes. These tests are: 

· the resides test,

· the domicile test,

· the 183 day test, and

· the superannuation test.

The first two tests are examined in detail in Taxation Ruling 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 meet 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In your case, although you will be physically present in Country X for most of the income year, and your spouse will accompany you to Country X, you will remain a resident of Australia for the following reasons:

· you will be in Country X only for work purposes

· you will return to Australia every year for holidays

· your spouse will return to Australia several times a year

· you will be staying in accommodation provided for by your employer

· you do not intend to remain in Country X permanently

· you will retain your residence in Australia

· your family will remain in Australia

· you will retain your two rental properties in Australia

· you will retain your bank accounts in Australia

· you will retain your superannuation investments in Australia

These facts show that you have a much stronger connection to Australia than to Country X. You will be in Country X only for work purposes. You will continue to be residing in Australia even while working in Country X.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you are an Australian citizen, and although your country of origin is Country Y, you moved from there to Australia permanently when you were a child, and have lived in Australia ever since.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· 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 relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

In your case, the Commissioner does not consider that you have a permanent place of abode outside of Australia for the following reasons:

· you will be staying in accommodation provided for by your employer

· you will retain your residence in Australia

· you will return to Australia to visit your family

· you do not intend to remain in Country X permanently

· you have strong family ties to Australia

· you will retain your investments in Australia

As your domicile is Australia, and the Commissioner does not consider that you have a permanent place of abode outside of Australia, you are a resident of Australia under this test.

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 permanent of abode is outside of Australia and they have no intention of taking up residence here.

In your case you will be a resident of Australia for tax purposes in the years that you are in Australia for more than 183 days in the income year as you do not have a permanent place of abode outside of Australia.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

· the spouse or child under 16 of a person covered by either of the above funds.

In your case, neither you, nor your spouse, have ever been Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes.

Your residency status

As you meet the resides test and the domicile test, you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia and will therefore include the income you receive from working in Country X.

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