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Edited version of private ruling

Authorisation Number: 1011611251870

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Ruling

Subject: Residency for tax purposes

Questions and answers:

Are you a resident of Australia for tax purposes for period 1?

No.

Are you a resident of Australia for tax purposes for period 2?

Yes.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You are a citizen of Australia and your country of origin is Australia.

You moved to Country X in 2008 with your spouse.

You had permanent residency in Country X.

You returned to Australia in May 2010.

You intend to remain in Australia permanently.

You moved to Country X with your spouse, intending to live there for a number of years. Due to a lack of work you decided to return to Australia earlier than you anticipated.

You purchased a home in Country X, which you sold prior to departing Country X.

You have no assets in Country X, all your bank accounts were closed when you left.

You live in a rental property in Australia. You have never owned a home in Australia.

You opened new bank accounts when you returned to Australia.

Neither you, nor your spouse, have ever been Commonwealth Government of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

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.

Residency status for period 1

The resides test

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.

In your case you and your spouse were living in Country X. You were a permanent resident of Country X. You owned the house you lived in. You did not have a home or any assets in Australia.

Given these facts, you were not a resident of Australia under the resides test.

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.

In your case, your domicile is Australia as it is your country of origin and you are a citizen of Australia.

However, the Commissioner is satisfied that you had a permanent place of abode outside of Australia as you purchased a house in Country X, you lived in Country X with your spouse. You had no home or assets in Australia.

Therefore, you were not a resident of Australia under the domicile 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.

This test does not apply to you because as discussed above, as we consider that you have a permanent place of abode outside of Australia.

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.

In your case, neither you, nor your spouse, have ever been Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes.

Therefore, this test does not apply to you.

Conclusion

You do not meet any of the tests of residency. Therefore, you are not a resident of Australia for taxation purposes for this period.

Residency status for period 2

The resides test

In your case, you returned to Australia to live permanently. You moved into a rental property. You closed all your bank accounts in Country X and sold your house. You opened new bank accounts in Australia.

Therefore, you are a resident of Australia under the resides test.

As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency.

Therefore, you are a resident of Australia for taxation purposes for this period.

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