Edited version of private ruling

Authorisation Number: 1011497624457

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Ruling

Subject: Residency - working outside Australia

Question 1

Are you a resident for tax purposes for the 2008-09 and 2009-10 income years?

Answer

Yes.

Question 2

Is your income for the 2008-09 and 2009-10 income years exempt income?

Answer

Withdrawn by applicant.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on:

1 July 2008

Relevant facts and circumstances:

You were born in Australia and you are a citizen of Australia.

You were seconded to another country by your employer and you were there for the full 2008-09 financial year except for short visits to Australia.

You conducted employment activities for your employer in that country and you did not work in Australia.

You stated that "You did not always intend to return to Australia on completion of your secondment."

You were living in an apartment which was supplied by your employer.

You did not rent out your home in Australia while overseas; you own it jointly.

You were seconded overseas for a number of years for a particular construction project.

The secondment could have been extended for a further few years on another project however the project did not start on time.

Your spouse, who is not an Australian, accompanied you overseas for the duration of the project.

Neither you nor your spouse are Commonwealth Government of Australia employees.

You were away from Australia for more than 91 days.

You have been issued with an Australian payment summary showing all income received and no Australian tax withheld.

You have been provided with a separate statement showing the amount of tax paid to the foreign country's authorities.

Your employer has contributed the statutory superannuation payment to an Australian compliant superfund.

You will be leaving Australia again in the 2010-11 income year for a period some years to take up overseas employment but not with the same employer.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

Reasons for decision

Section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) explains that resident of Australia means:

a) a person who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia;

(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or

(iii) who is:

(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B) an eligible employee for the purposes of the Superannuation Act 1976; or

(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B).

Resides

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'.

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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

Some of the factors contained in Taxation Ruling IT 2650 have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal. These factors are used by the ATO 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 your case:

- you were absent from Australia for most of the 2008-09 income year, apart from a few short return trips;

- your intention was not to return to Australia at any definite point in time but to move on to other overseas assignments, not necessarily with the same employer;

- you and your spouse were living in an apartment provided by your employer; and

- you maintained your joint share in an investment property in Australia while you were overseas.

The determining factors in your case would be:

- the actual length of your stay overseas for the 2008-09 income year;

- your intention not to return to Australia to live at any definite point in time;

- your intention to move on to other overseas employment opportunities, not necessarily with the same employer;

- you have family in Australia; and

- you have a joint share in a property in Australia.

On balance you are not considered to be a resident of Australia under the 'resides' test.

If a person does not reside in Australia within the ordinary meaning of 'reside', that person may nevertheless be a resident of Australia for tax purposes if any one of three additional statutory tests in the definition of 'resident' in section 6(1) of the ITAA 1936 is satisfied.

Domicile

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 domicile outside of Australia.

There are three types of domicile:

- domicile of origin;

- domicile of choice; and

- domicile by operation of law.

The primary common law rule is that you acquire a domicile of origin at birth. You retain that domicile of origin unless and until you acquire a domicile of choice in another country, or until you acquire another domicile by operation of law. For example, a child's domicile changes when the parents' domicile changes. In practice, an individual who has always lived in Australia will retain a domicile here when absent overseas, unless they choose to permanently migrate to another country.

Your domicile is the place that is considered by law to be your permanent home. You may in fact have no fixed place of abode but the law requires you to have a domicile.

Taxation Ruling IT 2650 points out that in order to show that a new domicile of choice in a country outside Australia has been adopted, you must be able to prove an intention to make your home indefinitely in that country, for example through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

IT 2650 advises further that if an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another or moves constantly within the same country (for example, from town to town or even from suburb to suburb) any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or a permanent place of abode outside Australia.

In such circumstances, if the person could not be said to have acquired a domicile of choice outside Australia, the taxpayer would be considered to be a resident of Australia under subparagraph 6(1)(a)(i) of the definition of 'resident' in the ITAA 1936.

The determining factors in your case are:

- you are an Australian citizen;

- you were born in Australia;

- you went to overseas on secondment for the 2008-09 income year;

- you did not intend to return to Australia on completion of your secondment and you intend to secure further overseas employment opportunities, not necessarily in the same country or with the same employer;

- you and your spouse were living in an apartment supplied by your employer;

- you jointly own a property in Australia; and

- you held a working visa for the duration of your secondment overseas in the 2008-09 income year.

Taking the facts provided into consideration you have not acquired a new domicile of choice, rather, the periods you are overseas are transitory. In addition, in retaining your joint share of property in Australia the Commissioner considers you are maintaining your Australian domicile and is not satisfied that you have established a permanent place of abode outside Australia. You are thus considered to be a resident of Australia for tax purposes under the domicile test.

As you are deemed to be a resident of Australia under the domicile test there is no need to examine the remaining tests.

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