Edited version of private ruling

Authorisation Number: 1011646958793

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Are you a resident of Australia for income tax purposes?

No.

This ruling applies for the following period

1 July 2009 to 30 June 2010

Relevant facts and circumstances

You left Australia with the intention to live permanently in Country B.

You did not maintain a residence in Australia and your mail was directed to you via your parents address.

You have maintained two bank accounts in Australia.

You did not have any sporting affiliations in Australia but maintained contact with friends and family.

You held an employment permit allowing you to live and work in Country B but did not have an emigration visa.

You lived the first six months in B1 and you rented a property.

You were employed on contract at company 1 for six months.

You moved to B2, initially for six months, and rented a property.

You were employed on contract for six months with company 2 with an option to extend.

You extended your contract and lease for a further two months.

You hold and continue to hold a bank account in Country B.

You lodged an income tax return in Country B.

You were taxed as a resident of Country B.

You do not have a current lease on any property in Country B.

You have maintained your credentials in Country B.

You have an open invitation to return to company 2 at anytime.

You are single, have no dependants and no family accompanied you to Country B.

You have no sporting affiliations but maintain contact with friends in Country B.

You arrived back in Australia to visit family.

Since your return to Australia you have been seeking employment opportunities within in Australia.

You have decided not to return to Country B to live permanently.

You have a return airfare to Country B open for 12 months.

You have never been a Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Reason for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.

Are you an Australian resident for tax purposes?

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 an Australian resident for income tax purposes. These tests are:

1. The resides test

2. The domicile test

3. The 183 day test

4. 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

1. The resides test

The ordinary meaning of the word reside, according to the dictionary definition, is to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

As you have been living outside of Australia and have no intention to return to Australia to live permanently, you are not considered to be residing in Australia.

2. 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.

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 by operation of law.

In order to show that a new domicile of choice in a country outside of 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 rented a permanent place of abode in Country B, and you have stated your intention was not to return to Australia. Therefore, you are considered to have acquired a domicile of choice in Country B.

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 persons 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.

Although you maintained an association with Australia through family, close friends and bank account; your associations with Country B were more significant as you:

· Rented property in Country B

· Have a bank account in Country B.

· Have maintained your medical licence in Country B

· Did not maintain a residence in Australia

· Hold an open ticket to return to Country B

Based on your facts it is considered that you have established a permanent place of abode in Country B. Therefore, you are not considered to be an Australian resident under the domicile test.

The 183 day test

You qualify for residency under this test if you are physically present in Australia for 183 days or more in the year, unless your usual place of abode is outside of Australia and you don't intend to take up residence in Australia. This test is more applicable to persons arriving in Australia.

As you have not been present in Australia for more than 183 days, you do not satisfy this test for residency.

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 CSS or a spouse of such a person, or a child under 16 of such a person nor have you or your spouse ever been employed by the Commonwealth of Australia. Therefore, you will not be treated as a resident of Australia under this test.

Your resident status

As you are not an Australian resident 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 for taxation purposes for the financial year.

Additional Information

The difference residency makes is as follows:

Australian residents

If you are an Australian resident for tax purposes, you:

· Need to declare income earned from anywhere in the world in your tax return

· Are entitled to the tax-free threshold

· Can claim tax offsets

· Generally have lower tax rates than a non-resident.

Non-residents

If you are a non-resident for tax purposes, you:

· Need only declare income you derived in Australia

· Don't have to declare interest income if withholding tax has already been deducted

· Have a tax-free threshold of $1 (that is you pay tax on any assessable income you earn in Australia)

· Can't claim most tax offsets

· Don't pay the Medicare levy.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).