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Edited version of private ruling

Authorisation Number: 1011505348386

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Ruling

Subject: Are you a resident 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 2012.

The scheme commenced on:

1 July 2009.

Relevant facts:

You are an Australian citizen by birth.

You are not a citizen of any other country.

You lived in Australia with your parents from the time of your birth until when you departed Australia to live in another country.

You entered the other country on a two year working holiday visa.

You have extended this visa.

You went to the other country to live with your spouse. Your spouse is a citizen of the other country.

You currently live in a house owned by your spouse and they are paying the mortgage. You contribute money towards utility bills, food and other living expenses.

The only assets you have in the other country are bank accounts.

You have a small social network of friends in the other country.

You have been working and paying taxes in the other country.

You are employed in the other country under a two year contract which expires in a couple of years but can be extended for an indeterminate time.

You are not a permanent or temporary employee of the Australian Public Service.

Neither you, nor your spouse are eligible to contribute to a Commonwealth superannuation fund, and are not members of such a fund.

Since you left Australia, you have only returned once for a visit.

You have not decided where you will reside in the future but you are 75% certain you will return to Australia.

Your only Australian assets are bank accounts and membership of a non government superannuation fund.

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 intend to remain there for at least two more years. As a result, you are not considered to be residing in Australia according to the ordinary meaning of the word 'reside'.

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.

To acquire a domicile by choice, a person must be able to prove an intention to reside permanently in a country outside their domicile of origin.

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, even for a substantial period of time, which allows a person to live and work temporarily in a country outside their domicile of origin is not sufficient evidence of an intention to acquire a domicile of choice.

IT 2650 also specifies that a person with an Australian domicile who is living outside Australia will retain their Australian domicile if they intend to return to Australia on a 'clearly foreseen and reasonably anticipated contingency' - at the end of a specific period of overseas employment for example.

In your case, your domicile of origin is Australia. We consider you have retained your Australian domicile because you are living and working in the other country on a working holiday visa which expires in a couple of years, after which you may to return to Australia.

Where a person is considered to have their domicile in Australia, they will be considered an Australian resident for taxation purposes unless the Commissioner is satisfied they have 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. An intention to return to live in Australia in the foreseeable future does not prevent a taxpayer setting up a 'permanent place of abode' elsewhere in the meantime.

In essence, IT 2650, specifies that 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 of a particular case.

In your case, although you maintain an association with Australia through your family, we consider your associations with the other country to be more significant at the moment because you:

Based on these facts, it is considered that you have established a permanent place of abode in the other country. Therefore, you are not considered to be a resident of Australia under the domicile 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.

As you are considered to have established a permanent place of abode outside of Australia and do not intend to take up residence in Australia for at least a couple of more years, you are not considered to be a resident 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.

Neither you, nor your spouse, are eligible to contribute to a Commonwealth superannuation fund, 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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