Edited version of private ruling

Authorisation Number: 1011485177830

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Ruling

Subject: residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You are a citizen of Australia.

You were born in Australia.

You do not own property or assets in Australia.

While in Australia you lived with your parents.

You have no social or sporting connections in Australia and you belong to no organizations.

You worked for a government agency.

You no longer contribute to superannuation schemes.

You do not derive any benefits from Medicare.

You have some bank accounts in Australia but derive no other income from Australia.

You reside in a foreign country.

You resided outside Australia for a period of greater than 183 days during the financial year.

You have a visa which enables you to live and work there.

You are employed as a locally engaged staff member at an Australian Consulate. You have supplied copies of letters from them confirming this.

Your employment is subject to laws of the foreign country.

Your contract for employment in the foreign country is for a number of years with the possibility of extension.

You intend to remain in the foreign country and become a permanent resident. You do not plan to return to Australia to reside in the near future and your intention is not to return to live in Australia.

You have a residence in the foreign country. You have a lease in your name only and only you live in it. You have supplied a copy of the lease.

You have three bank accounts in the foreign country from which you derive interest

You have no spouse or children.

You are older than 16 years of age for the full financial year.

You belong to a gym in the foreign country.

Relevant legislation provision/s:

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

Income Tax Assessment Act 1997 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.

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'.

Taxation Ruling IT 2650 provide 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:

· have resided in the foreign country for a period of time.

· intend to remain in the foreign country and become a permanent resident and have no intention to return to live in Australia

· have leased a residence in the foreign country

· have established bank accounts in the foreign country from which you derive interest

· have established social and sporting connections in the foreign country

· have no residence or place of abode in Australia

· have no spouse or children in Australia

· and have no social or sporting connections with Australia.

On balance you are not considered to be a resident of Australia according to ordinary concepts under the resides test as your ties to the foreign country are stronger than they are to 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 resided in the foreign country and have not returned to Australia since moving there

· intend to remain in the foreign country and become a permanent resident

· have a contract for employment in the foreign country for a number of years with the possibility of extension.

· have a residence in the foreign country. You have a lease in your name only and only you live in it

· have a number of bank accounts in the foreign country from which you derive interest

· have established social and sporting connections in the foreign country

· have no residence in Australia

· do not own property or assets in Australia.

· have no social or sporting connections with Australia

Based on the facts, your associations in the foreign country are more significant than your associations with Australia. On balance and based on the above, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia. Therefore, you are not a resident 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 you worked for a Commonwealth Government agency for a period. However, as you no longer work there you are not eligible to contribute to the PSS or CSS superannuation schemes. Further, you have no spouse and are more than 16 years of age. Therefore, 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, i.e. 183 days.

In your case you worked in Australia for a period that did not six months in the financial year. As this does not exceed 183 days, you were not present in Australia for a total period of more than half of the year of income. 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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