Edited version of private ruling

Authorisation Number: 1011616351899

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Ruling

Subject: Residency

Question 1

Will you be considered a resident or resident of Australia in accordance with the definition in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) from the date of your last departure until you return to Australia in the 2010-11 income year?

Answer: No.

Question 2

Is the amount you received from the Country A Sports Club assessable in part or in whole on the basis that you are a resident of Australia from the date of your last departure until the date of your return to Australia?

Answer: Not applicable as you are not considered a resident of Australia for the period.

This ruling applies for the following periods:

1 July 2009 to 30 June 2010

1 July 2010 to 30 June 2011

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are a professional sportsperson.

You and your spouse are Australian citizens.

You moved overseas some time ago to participate in your sport.

You returned to Australia a number of years ago to play in Australia.

In the recent income year you signed a contract with Country A Sports Club to play in Country A.

You left Australia for Country A and began training immediately.

Your contract with the Country A Sports Club had a fixed term. Under the contract, you were paid a salary and were provided with a motor vehicle and accommodation.

Your spouse and children moved to Country A to live with you.

Shortly after moving to Country A, you and your spouse sold your family home and motor vehicles in Australia.

You and your spouse also closed your Australian bank accounts and transferred all of your savings to a bank account in Country A.

You both also had your names removed from the electoral roll and cancelled your private health insurance in Australia.

Just before moving to Country A, you withdrew your enrolment from a course of study.

From the time you arrived in Country A, you and your family lived in the provided accommodation in Country A.

Your children began school in Country A at the start of the school year in Country A.

You and your spouse took out membership with a local club and gym.

Shortly after playing for the Country A Sports Club, there were some problems and your contract with Country A Sports Club was subsequently terminated.

Country A Sports Club released you from your employment contract.

You were paid an amount of money by Country A Sports Club.

You and your family left Country A after your contract was terminated.

Whilst in Country A you agreed in principle to join Country B Sports Club to play in Country B. You were provided a copy of your contract just before you left Country A.

You spent a few weeks in Australia with relations while waiting for the Country B visa to be processed.

You left Australia for Country B and began training immediately. Your spouse and children moved to Country B with you.

Your contract with the Country B Sports Club was fixed with the club having an option to extend for a further period.

You and your spouse closed your Country A bank accounts and transferred all of your savings to a bank account in Country B.

You rent the family home in Country B. The lease extends into the recent income year with an option to renew.

Your children began attending school in Country B.

The Country B Sports Club has problems and the management indicated that they wish to trade you to another club.

However the Country B Sports Club appreciates your circumstances and has agreed to release you from your contract at the end of the year.

In order to minimise further disruption to your children, you plan to return to Australia with your family after your release.

You and your spouse are not members of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Question 1

The definition of the terms resident and resident of Australia in subsection 6(1) of the ITAA 1936 provides a series of tests to ascertain whether a person is a resident of Australia. 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, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia if they meet 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. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have 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'.

Taxation Ruling TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'resides' within the definition of resident in subsection 6(1) of the ITAA 1936. Paragraph 18 of TR 98/17 provides that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. An individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

In your case, since your last departure from Australia, you have sold your family home and cars in Australia and have closed all your bank accounts in Australia. You also removed your names from the electoral roll. You have been living overseas with your family firstly in Country A and then in country B You only returned to Australia for a short stay while waiting for your visa approval.

Your behaviour and actions since leaving Australia are not consistent with residing in Australia. Therefore you are not an Australian resident 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.

Taxation Ruling IT 2650 provides guidelines for determining the residency of individuals under the domicile test.

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 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 their home indefinitely in that country.

In your case, there is no evidence of an intention to make your home indefinitely in another country. You have advised that you have decided to return to Australia to minimise further disruption to your children. 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.

Paragraph 23 of IT 2650 provides some of the factors relevant for determining a taxpayer's permanent place of abode:

· the intended and actual length of the taxpayer's stay in the overseas country;

· whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

· whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

· the duration and continuity of the taxpayer's presence in the overseas country; and

· the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

Although you maintain an association with Australia through your family connection (your parent), your associations with Country A and Country B during the period under consideration are more significant as you have:

· obtained employment over there

· set up homes there in which you live with your family

· disposed of your family home in Australia

· removed your names from the electoral roll in Australia

· opened bank accounts with your spouse in these countries; and

· closed all your bank accounts in Australia.

Additionally if not for the problems with your employment contracts, you would have remained in these countries for the full term of the contracts or more.

Based on these facts, it is therefore considered that you have established a permanent place of abode overseas. Therefore, you are not considered to be a resident of Australia under the domicile test.

The 183-day test

Where 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.

This test is not applicable to you for the period under consideration.

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 the CSS or a spouse 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 a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident from the date of your departure from Australia until your return in the 2010-11 income year.

Question 2

The question is in regards to the assessability of the amount you received from the Country A Sports Club in Country A if you are a resident of Australia from the date of your last departure until the date of your return to Australia. As you are considered not to be an Australian resident for the period, no response is required.

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