Edited version of private ruling

Authorisation Number: 1011579367293

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Ruling

Subject: Residency for tax purposes

Are you an Australian resident as defined by subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936) for the income tax year ended 30 June 2010?

Yes.

This ruling applies for the following period:

1 July 2009 to 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Australia to an Australian parent and raised in Australia. You hold Australian citizenship. Your domicile is Australia.

You have always resided in Australia except for several periods of a few months when you worked at various locations overseas.

You were living at your parent's address before you left Australia to work in country B.

You have a bank account in Australia that is earning interest income.

You have no other assets in Australia. Your personal belongings are stored at your parent's home.

You travelled to C in country B, on with your partner on a two year work permit.

Your two year work permit (visa) commenced on xx/xx/xx.

You stated that you intend to remain working and residing in city C until xx/xx/xx, six months short of the full two year period.

You have been employed in city C in various occupations.

You have rented two premises consecutively as your accommodation in C.

You have a bank account in country B into which your pay is deposited and which you have stated you will close when you depart the country. You hold no other assets there.

You had a short holiday in country D for two weeks and have another planned for the country E after you leave country B.

After that holiday you stated that you intend to return to Australia to live at your parent's house.

Aside from your partner who is travelling with you, all of your immediate and extended family reside in Australia.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Section 6(1).

Reasons for decision

An Australian resident is defined in subsection 995-1(1) of the ITAA 1997 to be a person who is a resident of Australia for the purposes of the ITAA 1936.

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936.

(a) a person, other than a company, who resides in Australia and includes a person-

(i)  whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia;

(ii)  who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or

(iii)  who is an eligible employee for the purposes of the Superannuation Act 1976 or is the spouse or a child under 16 years of age of such a person;

The definition provides four tests to ascertain whether an individual 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 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, 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.

Taxation Ruling IT 2650 Income Iax: residency - permanent place of abode outside Australia provides guidelines for determining whether individual who leave Australia temporarily to live overseas on temporary overseas work assignment cease to be Australian residents for income tax purposes during their overseas stay. The Ruling focuses on the first two tests as being the tests most widely applicable to persons who ordinarily reside in Australia but who leave Australia temporarily and are not actually living in Australia for the entire year of income.

1. The resides test

The ordinary meaning of the word resides, 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; have ones 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 ones settled or usual abode, to live in or at a particular place.

You were born and raised in Australia. You hold Australian citizenship and have only left Australia on four occasions for periods of a few months to work in other countries.

From the time you took up employment in country B until the end of the Australian financial year that is, 30 June 2010, you have been residing in rental accommodation in city C. However, you have dwelt permanently for a considerable period of your life in Australia not in country B.

2. The domicile test

Taxation Ruling IT 2650 explains the meaning of 'domicile' as a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her parent's permanent home. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law. To change to a domicile of choice, section 10 of the Domicile Act 1982 provides:

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his home indefinitely in that country.

You have a domicile of origin in Australia as you were born and raised there to an Australian parent and you hold Australian citizenship. You stated that your intention is to return to Australia to live at your parent's house before the conclusion of your two year working permit for country B. You do not intend to make your home indefinitely in country B and acquire a new domicile of choice. Your intent is to return to your domicile in Australia. You can only have one domicile at the one time, whereas you may be resident in two or more places.

Having established that your domicile is Australia, subparagraph (a)(i) of the definition of "resident" requires the Commissioner to be satisfied that your 'permanent place of abode' is not outside Australia.

The following meanings of 'permanent place of abode' have been established through case law:

· permanent does not have the meaning of everlasting or forever, but is used in the sense of being contrasted to temporary or transitory, and

· your place of abode is your residence, where you live with your family and sleep at night.

There are no hard and fast rules that can be used to determine your permanent place of abode. IT 2650 outlines some relevant factors that are used by the courts, tribunals and us in deciding such cases.

The relevant factors are:

· intended and actual length of stay overseas, including the continuity of that stay

· existence of an established home overseas

· existence of a residence in Australia (while overseas), and

· family and financial ties.

No single factor is decisive. It is the balance of factors that is relevant. In your case, you are currently living in city C in country B on a temporary two year work permit. While two years is a significant time, your permit is only temporary. You have also stated that you intend to leave country B six months before the two year permit lapses.

You have lived in two rental properties in city C with your Australian partner since arriving in country B. You have had a holiday in country D and intend to holiday in country E before returning to Australia. You have not purchased any assets while in country B, but have opened a bank account into which your wages are deposited. You have stated your intent to close that account when you leave B. You have no close family or friends in B, other than your partner.

In Australia, you have a bank account as an asset that is earning interest. You do not own property in Australia. Your parent's home was your home address before leaving Australia and you intend to live there again on your return to Australia. Your personal effects are stored there awaiting your return. Your family all reside in Australia.

On the balance of factors the Commissioner considers that your abode in city C, country B is not a permanent place of abode but is temporary. Your domicile and permanent place of abode remains as Australia.

You are a resident of Australia under the 'domicile' test outlined by subsection 6(1) of the ITAA 1936. Therefore, you are considered to be an Australian resident for tax purposes although you were living temporarily in country B.

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