Edited version of private ruling

Authorisation Number: 1011543151012

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Ruling

Subject: Residency status

Question and answers:

Are you an Australian resident for taxation purposes?

No.

This ruling applies for the following period

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commenced on

1 July 2007

Relevant facts

You were born overseas.

You are a citizen of Australia and your country of birth.

You were married with children.

As a result of a marriage breakdown, your principal place of residence was transferred to your ex-spouse under the separate deed submitted to the family court.

After the settlement of your family residence you decided to move permanently overseas.

You transferred substantially all your saving out of Australia.

You held an overseas employment pass.

You found employment with an overseas company.

As consequence of your employment, you were required to make marketing trips to Australian cities every 6-8 weeks. In all you made 5 Australian trips, staying for approximately one week at a time.

You were granted permanent overseas residency status, while working overseas.

Due to the world financial crisis, your employment finished.

After your employment ceased, you chose not to return to Australia but rather to remain overseas to seek employment opportunities overseas.

During this period you applied for employment in a number of overseas countries.

Your children visited you in the overseas country.

While you were living and working overseas you did not purchase a residence as houses were very expensive in the overseas country, and as being a new resident with no family, you were not entitled to government housing. As a result you stayed with a relative.

You have overseas assets.

You hold assets in Australia.

Your social connection is with the local church.

You have had no social or sporting connection with Australia since you left.

You are over 16 years of age as at 1 July 2007.

You or your ex-spouse have never been an employee of the Commonwealth of Australia.

You returned to Australia permanently due to family reasons.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

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. 3^rd 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 permanent place of abode 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, 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:

· have lived overseas since you left Australia,

· did not intend to return to Australia,

· stayed with a relative while living and working overseas due to expensive housing,

· do not own any land or dwellings in Australia,

· since moving overseas you have returned to Australia on several occasions for short periods of up one week for professional reasons,

· were granted permanent residency status overseas.

On balance, for the period that you were living overseas you are not considered to be a resident of Australia according to ordinary concepts under 'the resides' test as your ties to the overseas country were stronger than they were to 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.

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.

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 you:

· are separated from your spouse,

· have children living in Australia

· gained permanent employment in the overseas country,

· have lived and worked overseas for a number of years,

· have no social or sporting affiliations in Australia,

· have some social ties in the overseas country,

· do not own any land or dwellings in Australia,

· stayed with a relative while living and working in the overseas country due to expensive housing.

· were granted permanent residency status in the overseas country, and

· intended not to return to Australia, however due to family reasons you returned to Australia.

On the balance, based on the above, the Commissioner is satisfied that you had established a permanent place of abode outside of Australia and so considers that you were not a resident for taxation purposes under the domicile 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, fore example 183 days.

In your case, you left Australia to live and work overseas permanently. From the time that you left Australia, you have only returned on several occasions for periods of up to one week. As this does not exceed 183 days you were not present in Australia for a total of more than one half of the year of income in any of the income years covered by this ruling. Therefore, you are not a resident of Australia under the 183 day 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 only Commonwealth Government employees are eligible to contribute to the PSS or CSS.

This test is not applicable to your circumstances as you or your ex-spouse is not, or have ever been a member of a CSS or PSS. Further you were not aged under 16 years of age. Accordingly, you are not a resident under the superannuation test.

Your residency status

For the period that you were living and working overseas, as you are not a resident of Australia under any 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 a resident of Australia for taxation purposes for this period.

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