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Edited version of private ruling

Authorisation Number: 1011544573641

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Ruling

Subject: Residency for tax purposes

Question and answer:

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You were born in Country X.

You are a citizen of Country X.

You have an Australian partner. Your partner currently works abroad itinerantly. Your partner intends to return to Australia when this work ends. You do not have any other family or social connections to Australia.

You are a permanent resident of Australia for immigration purposes.

You have an Australian Medicare card.

You use the address of an associate in Australia for correspondence for purposes such as immigration.

You have not permanently moved to Australia.

You were in Australia between date X and date Y.

From date X, you spent a number of months in a foreign country, followed by a shorter period in Country X, followed by nearly a year in another foreign country.

You intend to be overseas for at least the next 12 months.

You will not be working in Australia, although you will be employed by an Australian-based organisation.

You do not have a superannuation scheme.

You have the following assets in Country X:

You receive interest from your bank account in Country X.

You receive a monthly payment from your pension fund in Country X.

You do not currently receive income from your investment in shares in Country X.

You do not receive any income from the land you own in Country X.

You have the following assets in Australia:

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

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 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. 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

Although you have some ties to Australia, such as your immigration status as a permanent resident, this is outweighed by the factors that indicate you are not residing in Australia.

You do not reside in Australia under the 'resides test' for the following reasons:

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Country X because you are citizen of Country X, and you have not taken steps to become a citizen of Australia. Therefore you are not a resident of Australia under this test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

You are not a resident of Australia under this test as you will not be in Australia for more than 183 days in the income year.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

In your case, neither you, nor your partner, have ever been Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes. Therefore you are not a resident under this test.

Your residency status

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.

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