Edited version of private ruling

Authorisation Number: 1011541954757

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: residency

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

The scheme commenced on:

1 July 2006

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is foreign country A.

You have not worked in Australia for several years.

Your intention is to live permanently overseas until employment circumstances change.

Your overseas employment is indefinite.

You may return to Australia in several years time.

You had a permanent place to live in foreign country B.

You have an overseas bank account which receives interest.

You own a residential dwelling in Australia. You live in it when you are in Australia. It is not rented in your absence.

You have no assets in Australia other than some properties and your residence.

You have returned to Australia on a few occasions to visit friends and attend to rental property issues and sundry investments.

You have had permanent residency status in foreign country B for some years.

Prior to this you lived in foreign country C.

You lived in rented accommodation in each country.

Your spouse accompanies you overseas. The only time they returned to Australia was for a short stay only; otherwise they spend all of their time with you overseas.

You have no dependant children.

You are paid in a foreign currency and income tax is deducted in foreign country B.

You have no sporting connections in Australia.

Your social connections overseas are mainly with business associates.

You and your spouse are not Commonwealth Government employees.

You are over 16 years of age.

You were not present in Australian for more than 183 days in any of the years of the ruling.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 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. 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'.

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, that is, 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.

You have stated that:

· you have not worked in Australia for several years

· you have had permanent residency status in foreign country B for some years

· previous to this you lived in foreign country C

· you lived in rented accommodation in both foreign countries

· your house in Australia is not rented in your absence

· your intention is to live permanently overseas until your employment circumstances change

· you have an overseas bank account, and

· your spouse accompanies you overseas (except for a short stay in 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 foreign country B and, before that, foreign country C, are stronger than your ties 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 stated that:

· you have had permanent residency status in foreign country B for some years

· you have a permanent place to live in foreign country B

· you have a bank account there

· prior to living in foreign country B you lived in foreign country C for some years

· you lived in rented accommodation in foreign country B and foreign country C

· your intention is to live permanently overseas

· your spouse accompanies you overseas

· you have social connections overseas with your business associates.

Based on the facts, your associations in foreign country B and, before that, foreign country C, 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, firstly in foreign country C and then in foreign country B. 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 neither you nor your spouse is a Commonwealth Government employee. You are not eligible to contribute to the PSS or CSS superannuation schemes. You are also over 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, that is, 183 days.

You were not present in Australia for a total period of more than half of any of the years of income covered by the ruling. 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.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).