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Edited version of private ruling

Authorisation Number: 1011486626307

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Ruling

Subject: Residency - working overseas

Are you a resident of Australia for taxation purposes while living in country A?

No.

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

1 July 2009

Relevant facts

You are a citizen of country B.

You hold the country B's passport.

You hold an Australian permanent resident visa which required renewing regularly.

You first left Australia to work in country A in 2007. This was your first personal contract with the overseas company.

Your current two years contract with the company commenced in 2009 and is due to expire in 2011. You may retire after your current contract expires. You intend to reside permanently in the foreign country A after your retirement.

You spend on and average XX months in a year in country A.

You pay income tax in country A.

You hold a country A's working visa normally valid for two years.

Your work contract states SS weeks on and UU weeks off work cycle. Your work pattern depends according to the project. You are not expected to follow the work cycle as per contract.

You have assets in country A.

You work for local organisations in country A. Also, you socialise with your friends and work mates in country A.

You have a permanent place to live in Australia which is available to you all the time.

You have a bank account in Australia.

You have various investment portfolios and shares in Australian companies.

You also have a private superannuation in Australia.

You do not have any social and sporting connection with Australia.

You and your spouse are not a Commonwealth Government of Australia Employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 995-1(1).

Reasons for decision

An Australian resident 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 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. 3rd 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'.

As you are not physically present in Australia during 2007 to 2011 income years, you are not considered to be residing in Australia.

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.

Although you maintained an association with Australia through your assets, your associations with country A is more significant for the following reasons:

Based on these facts, it has been determined that you have established a permanent place of abode in the foreign country A. Therefore, you are not deemed to be a resident under the domicile test.

The 183 day test

When a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the persons usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You do not satisfy this test as you have established a permanent place of abode outside of Australia.

The superannuation test

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

You are not a member of the PSS or CSS or a spouse of such a person. Therefore, you are not treated as a resident under this test.

Your resident status

As you are not deemed to be an Australian resident under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident for taxation purposes during the period of your stay in country A.

Note

Subsection 6-5(3) of the ITAA 1997 provides that foreign residents are liable to Australian tax on the ordinary income that has its source in Australia.

From the date you became a foreign resident, any franked dividends you receive are exempt from Australian income and withholding taxes. You cannot use the franking credit attached to those dividends to reduce your taxation liability or get a refund of the franking credits.

From the date you became a foreign resident, any unfranked dividends and interest income would be subject to withholding tax and exempt from Australian income taxes.

You need to advise your financial institution that you are a foreign resident of Australia for taxation purposes so that the appropriate withholding tax will be withheld.

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