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Edited version of private ruling

Authorisation Number: 1011577241810

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Ruling

Subject: Residency - working overseas

Will you be a resident of Australia for taxation purposes while working in country A?

Yes.

This ruling applies for the following period

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on

1 July 2010

Relevant facts

You are a citizen of Australia.

You have been offered a position in country A for couple of years.

You are expected to leave Australia and start work in country A.

Your intention is to return to Australia after two year period.

You do not intend to reside permanently in country A.

You will be living in an employer provided accommodation in country A.

You have a permanent residence in Australia.

Your intension is not to rent out your residence whilst working in country A.

You will return to Australia between two to four times a year for duration of one to two weeks at a time.

You stated that, you have various bank accounts and other assets in Australia. This shows that your economic ties are closer with Australia than country A.

You will be paid into your country A bank account.

You did not mention of having any social and sporting connection with country A.

You are not a Commonwealth Government of Australia Employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 995-1(1).

Reasons for decision

An Australian resident 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 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'. 

For the period that you will be physically present in country A, you are not considered to be residing in Australia according to ordinary concepts under this 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.

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 or 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 her home indefinitely in that country.

In your case, you are an Australian citizen and you have been offered a position in country A to work for two years and then return to Australia. There is no evidence of an intention to make your home indefinitely in country A. Accordingly, you are considered to have maintained your Australian domicile.

Permanent place of abode

Where the taxpayer's domicile is in Australia, it is necessary to consider whether or not the taxpayer has established a permanent place of abode outside of Australia.

In Re Shand v. FC of T 2003 ATC 2080; (2003) 52 ATR 1088, the taxpayer who lived in Australia for almost 20 years and then spent the majority of the next three years working overseas, predominantly in Kuwait, did not abandon his domicile of choice and did not have a permanent place of abode in Kuwait. It was held that the taxpayer's personal effects and emotional ties were within Australia, whereas the only factor which tied him to Kuwait was his business.

Taxation Ruling IT 2650 sets out the factors that are used to determine a taxpayer's permanent place of abode. These are summarised at paragraph 5 in the Ruling as:

Although you will be away working in country A, your association with Australia considered being more significant for the following reasons:

Based on these facts, it is determined that you have not established a permanent place of abode in country A. Therefore, you are deemed to be an Australian resident under the domicile test.

Your resident status 

As you are deemed to be an Australian resident under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936, you are considered to be an Australian resident for tax purposes while working in country A.

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