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Edited version of private ruling

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Ruling

Subject: Residency

Question 1

Are you an Australian resident for taxation purposes?

Answer:

No

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

01 July 2010

Relevant facts

You are a paramedic.

You are taking long service leave for about eight months. Your long service will be paid at half your salary.

You have been offered a three year contract in another country. The contract starts in a few weeks. The contract will be signed after you arrive in the other country. A standard contract has been provided. The contract can be extended for a further three years. You intend to return to Australia on completion of the contract.

You will depart Australia on the day before your contract commences.

You will be accompanied to the other country by your spouse for the duration of the contract.

Your home in Australia will be rented to a family member during your absence from Australia.

You have two bank accounts in Australia, one into which your long service payments will be deposited.

You have no investments or assets in the other country, but will be opening a bank account once you arrive in the other country into which your salary will be deposited.

You will be provided accommodation by your employer according to your position and marital status.

Neither you nor your spouse is a member of or eligible to contribute to Australian Government superannuation.

You expect to resign from your employment at the end of your long service leave.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

Question 1

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. These tests are:

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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

1. The resides test

The ordinary meaning of the word 'reside', according to the dictionary definition, 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.

As you will be residing outside of Australia for a considerable time at a particular place, you will not be considered to be residing in Australia under this test.

2. 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.

Domicile

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice by operation of law.

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 home indefinitely in that country.

In your case, you have advised that you will be returning to Australia on completion of the contract. Therefore, you are considered to have maintained your Australian domicile.

Permanent place of abode

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 will be provided with accommodation by your employer according to your position and marital status. Your spouse will be accompanying you to the other country and you will be opening up a bank account in the other country into which your salary will be deposited. It is considered that you will be establishing a permanent place of abode in the other country. Therefore, you are not considered to be an Australian resident under the domicile test.

The 183 day test

When a person is present in Australia for 183 days during the year of income the person will be a resident, 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.

You do not satisfy this test as you will be establishing a permanent place of abode will be outside of Australia.

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

Your resident status

As you are not deemed to be an Australian resident under any of these tests of residency outlined in subsection 6(1) of the ITAA 1936, you will not be considered to be an Australian resident from the date you depart Australia for the other country.

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