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Edited version of private ruling

Authorisation Number: 1011597226268

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Ruling

Subject: residency

Is the taxpayer assessable as a resident of Australia for the purposes of subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997)?

No, the taxpayer is not a resident of Australia.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2009

Relevant facts and circumstances

The taxpayer is currently a citizen of Australia.

The taxpayer's country of origin is Australia.

The taxpayer departed Australia over six years ago.

The taxpayer intended to stay overseas and work for longer than two years when the taxpayer initially left.

The taxpayer currently has an employment contract which has over a year remaining.

The taxpayer intends to move onto another project in country X and expects to work in country X for at least four more years.

The taxpayer has returned to Australia since first leaving Australia. When the taxpayer is in Australia the taxpayer generally stays at the taxpayer's parents' home or stays in hotels. Within the next year the taxpayer's only return to Australia will be for two weeks around the end of the year.

The taxpayer has a permanent home address in country X - a rented apartment.

The taxpayer maintains a bank account in Australia. This is for the purposes of receiving income and paying for expenses in relation to rental properties which the taxpayer owns.

The taxpayer has a motor bike and bank account in country X.

The taxpayer owns a house in Australia. This home is currently being rented out as an investment property. The taxpayer also owns a block of land.

The taxpayer's family did not accompany the taxpayer on the travel overseas. The taxpayer's children remain living with the taxpayer's ex-spouse, however, this is continuation of the living arrangements (the taxpayer has been divorced and the children live with the taxpayer's ex-spouse) which existed prior to the taxpayer moving overseas to work.

The taxpayer has not maintained social or sporting connections in Australia.

While in country X, the taxpayer engages in the typically normal social activities with other expatriates.

The taxpayer is not a Commonwealth of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6-5(2)

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Summary

The taxpayer is not a resident of Australia.

Detailed reasoning

An individual is a 'resident of Australia' as defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) if the individual resides in Australia within the ordinary meaning of word 'resides'. Subsection 6(1) prescribes three additional tests in ascertaining whether an individual is a resident. These are the domicile test, the 183 day test and the Commonwealth Superannuation Fund test. The test of most relevance in the present case is the domicile test.

A person is a resident of Australia if his or her domicile is in Australia unless his or her permanent place of abode is outside Australia.

Section 10 of the Domicile Act 1982 provides that :-

At paragraph 10 of Taxation Ruling IT 2650 it is explained that a domicile of choice will be acquired if the person intends to make the other country his or her home indefinitely. Thus, a person with an Australian domicile who is living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency, such as, the end of his or her employment. On the other hand, if that person has in mind only a vague possibility of returning to Australia, such as, returning if he or she wins the lottery, the person will acquire a domicile of choice in the foreign country: see In the Estate of Fuld (No. 3) (1968) p. 675 per Scarman J at pp. 684-685 and Buswell v. I.R.C. (1974) 2 All E.R. 520 at p. 526.

In the present case, there is no evidence that the taxpayer has an intention to remain overseas permanently or that the taxpayer has acquired a domicile of choice in country X. However, it is not necessary to decide this point in light of the following comments.

The second issue is whether the taxpayer's permanent place of abode is outside Australia.

The Federal Court in FC of T v. Applegate 79 ATC 4307; (1979) 9 ATR 899 (Applegate's Case) stated that a permanent place of abode does not have to be 'everlasting' or 'forever'. It should be contrasted with a temporary or transitory place of abode outside Australia. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has his or her usual place of abode at that place. An intention to return to Australia in the foreseeable future to live does not prevent the person in the meantime setting up a 'permanent place of abode' elsewhere: See paragraph 14 of Taxation Ruling IT 2650.

In Applegate's Case the Federal Court considered that the solicitor's intention regarding the duration of his stay overseas was only one relevant factor to be taken into account. Of more importance is the nature and quality of use which the person makes of a particular place of abode overseas.

In Applegate's Case the solicitor, whose domicile was in Australia, had been sent by his employer to establish a branch office in New Hebrides. His absence was to be for an unspecified period but it was expected that it would be of a substantial length. It was also expected that later he would be recalled to Australia. In fact, he returned to Australia after 2 years, his stay being cut short by illness. The Court held that the solicitor had a permanent place of abode outside Australia.

In FC of T v. Jenkins 82 ATC 4098; (1982) 12 ATR 745 (Jenkins' Case) a bank officer had been transferred to the New Hebrides for three years. He returned to Australia after only 18 months because of ill health. The bank officer had tried to sell the family home before going overseas but was unable to find a buyer. The Australian home was eventually leased and the bank officer retained a bank account in Australia. It was held that the bank officer had a permanent place of abode outside Australia. It was considered that a stay of three years could not be regarded as 'temporary'. In addition, under normal circumstances, the bank officer and his wife would have applied for an extension after the three years had lapsed.

Taxation Ruling IT 2650 identifies a number of factors which are relevant in determining residency under the domicile test:

One of the factors listed above is the period of presence overseas. In Jenkins' Case it was considered that a three year period was not a temporary stay overseas. Taxation Ruling IT 2650 assumes that usually a two year absence is not a temporary stay overseas. As stated above, the period is not itself conclusive.

In the present case, it is an important factor that the taxpayer is divorced and that taxpayer's children are residing with the taxpayer's ex-spouse. It is significant that the taxpayer departed Australia over six years ago. The taxpayer intended to work overseas for longer than two years and expects to work in country X for another four years. Having regard to the length of stay overseas, the short period of presence in Australia each year, the fact that the taxpayer maintains a rental apartment in country X and the fact that the taxpayer has rented out the taxpayer's Australian home, it is considered that the taxpayer's permanent place of abode is overseas.

Hence, whether or not the taxpayer has retained an Australian domicile, the taxpayer will not be regarded as a resident of Australia in terms of the domicile test.

Future years

It is noted that private rulings are subject to changes in the law or the facts. If the law changes in the future or if there is a change in the facts in a material particular, this ruling cannot be relied upon to that extent.

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