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Edited version of private ruling

Authorisation Number: 1011498974103

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Ruling

Subject: Residency status for taxation purposes?

Are you an Australian resident for taxation purposes?

No.

This ruling applies for the following period:

1 July 2009 to 30 June 2010.

The scheme commenced on:

1 July 2009.

Relevant facts:

You were born outside Australia.

You became an Australian citizen.

You are not a citizen of any other country.

You left Australia and have been living and working in another country since that date.

You are in the other country on a work visa.

You intend to reside permanently in the other country for at least the next 10 years.

You reside in rental accommodation in the other country.

You have a driver licence issued by the other country.

You have advised that you do not have any social or sporting connections in the other country.

Your only assets in the other country are bank accounts.

You have paid tax in the other country.

You are employed in the other country under a two year renewable contract.

Your current contract expires in two years.

You are not eligible to contribute to a Commonwealth superannuation fund, and are not a member of such a fund.

Prior to leaving Australia you were residing with your family.

Since you left Australia to live in the other country you have only returned intermittently and for short periods of time to visit family and friends.

You own a residential property (your Australian property) and have a bank account in Australia.

You do not earn income on your Australian property.

You consider that your Australian property would be available to you as a permanent place to live if you ever decided to return to Australia.

You do not have any social or sporting connections with Australia.

You do not have a spouse, nor any children.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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:

Where one or more of the above tests is satisfied, a taxpayer will be an Australian resident for taxation purposes.

The primary test for determining the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual is not considered to be residing in Australia according to the ordinary meaning of the word, they will still be considered to be a resident of Australia for taxation 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. 3rd edition, The Macquarie Library Pty Ltd, NSW) is 'to dwell permanently or for a considerable time; have one's abode for a time' and (according to the Compact Edition of the Oxford English Dictionary [1987]) 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

In your case, you have been living and working in the other country and you intend to remain there for at least the next 10 years. As a result, you are not considered to be residing in Australia.

The domicile and permanent place of abode test

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a domicile of choice, a person must have, and be able to prove, an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person becomes a citizen of a country outside of their domicile of origin. This is the case regardless of whether or not the person later leaves the country they become a citizen of. It is the intention of the person at the time they are granted citizenship that is relevant in determining whether or not in such cases a domicile of choice has been acquired.

Taxation Ruling IT 2650 (which contains the Australian Taxation Office (ATO) view on whether individuals who leave Australia temporarily cease to be Australian residents for income tax purposes) specifies that a working visa which allows a person to live and work (even for a substantial period of time) in a country outside their domicile is not considered to be sufficient evidence of an intention to acquire a new domicile of choice.

In your case, your domicile of origin was outside Australia, however, you are considered to have obtained an Australian domicile by choice when you became a citizen of Australia. Although you have resided in the other country for some time and intend to remain there for at least the next ten years, you are not considered to have obtained a new domicile of choice in the other country because you are in the other country on a work visa.

Where a person is considered to have an Australian domicile, they will be considered an Australian resident for taxation purposes unless the Commissioner is satisfied the person has a 'permanent place of abode' outside of Australia.

IT 2650 specifies that a 'permanent place of abode' does not have to be everlasting or forever and does not mean an abode in which a person intends to live for the rest of their lives. In essence, a person's place of abode is where they live and is a question of fact to be determined in the light of all the factors in a particular case.

In your case, although you maintain an association with Australia through your family and through your ownership of assets including your Australian property and a bank account, we consider your associations with the other country to be more significant at the moment because you:

Based on these facts, we consider that you have established a permanent place of abode in the other country. Accordingly, you are not considered to be a resident of Australia under the domicile test and permanent place of abode test.

The 183-day test

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

In your case, as you are considered to have established a permanent place of abode in the other country and intend remain there for at least the next ten years, you are not considered to be a resident of Australia for taxation purposes under this test.

The superannuation test

Under this test, a person will be considered to be a resident of Australia for taxation purposes if they are eligible to contribute to, or are a member of, one of the Commonwealth superannuation funds.

A person will also be considered to be a resident under this test if they have a spouse who is eligible to contribute to, or is a member of, one of the Commonwealth superannuation funds, or if they are a child under 16 of such a person.

You are not eligible to contribute to a Commonwealth superannuation fund, you do not have a spouse, and you are over the age of 16. Accordingly, you are not a resident under this test.

Conclusion - your residency status

You do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Accordingly, you are not an Australian resident for taxation purposes.

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