Edited version of private ruling

Authorisation Number: 1011544535318

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Ruling

Subject: Residency - Foreign Resident

Question:

Were you an Australian resident for income tax purposes for a certain period of the 2009-10 income year?

Answer:

No.

This ruling applies for the following period/s:

Year ended 30 June 2010.

The scheme commenced on:

1 July 2009.

Relevant facts and circumstances

You are an Australian citizen.

You are single with no dependants.

In an earlier income year you lived and studied in Country A. Although you returned to Australia after your studies, you were keen on returning to Country A to work and reside. Accordingly, you retained a bank account, friends and professional connections in Country A.

At the beginning of the recent year you were considering leaving your job in Australia and seeking to work and reside in Country A. You particularly wanted to find work in your profession with an international organisation, or consultancy.

You were planning to be away from Australia for an indefinite period of time. Accordingly, you gave up the lease on your accommodation.

You didn't have any physical assets worth more than one-hundred dollars to dispose of, except for one asset which you had given away.

You maintained some financial investments in Australia which you believed would have greater returns in comparison to overseas.

You intended to resign from your Australian employment. Instead, your employer offered you indefinite leave without pay. This was offered in case you ever returned to Australia; however, you were not expected or obliged to return to the job.

In order to lawfully work in Country A, you obtained a specific Country A Visa. You also applied for a Country B passport (based on your Country B heritage), knowing that you would need the passport to remain in Country A after your visa expired. You were officially recognised as a Country B citizen in the subsequent year and obtained a Country B passport..

You left Australia for Country A early in the recent income year. Prior to this date, you were an Australian resident for income tax purposes.

While in Country A you took out a one-year lease on a property, and obtained a Country A SIM card for your phone.

You socialised with old friends as well as making some new friends at the same time.

You applied for a number of permanent jobs; however, because of the financial crash, the limited duration of your visa, and your inability to work in your profession - you found it difficult to obtain permanent employment.

Finally later in the recent income year, you obtained work in Country A. You stayed in that position for a few months.

Then later for another period in that income year, you worked in Country C.

While in Country C, you took out a lease on a property. You also made friends, opened a bank account and generally tried to settle into life in Country C.

Whilst in Country C, you did try and keep your contacts in Country A with a view to returning there on the cessation of your contract.

Your employment in Country C ceased later in the recent income year due to lack of funding. You were then faced with the option of remaining in Country C and looking for work, or returning to Country A and looking for work there. However, at the same time your Australian employer contacted you and offered you a promotion.

You decided to take up the Australian job offer and returned to Australia later in the recent income year. You also became an Australian resident for income tax purposes from this day forward.

You were not a Commonwealth Government of Australia Employee.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (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 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. 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'.

You were residing in Country A and Country C as evidence by renting an apartment and working full time. In Country A, you stated an intention to stay there indefinitely.

Therefore, you were not considered to be residing in 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 a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

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.

In your case,

you have advised that it was your intention to make your home indefinitely in Country A;

· you only maintained an association with Australia through some family and investments,

· you were residing and working full time in Country A and Country C,

· you had created social ties in Country A and Country C.

· Therefore, you are not considered to have maintained your Australian domicile.

Based on these facts, the Commissioner is satisfied that you had established a permanent place of abode overseas.

The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode was overseas.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident under subsection 995-1(1) of the ITAA 1997 for a specific period in the 2009-10 income year.

Note:

During the period you were a foreign resident, any interest income and/or dividend income derived by you from sources in Australia will be subject to foreign resident withholding tax.

You are considered to be a foreign resident for Australian income tax purposes for only a period in the 2009-10 income year. Therefore, if you need to lodge a return for the 2009-10 income year you will be eligible to a pro-rated tax-free threshold. For more information, please refer to page 96 in Taxpack 2010.

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