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Edited version of private ruling

Authorisation Number: 1011732141608

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Ruling

Subject: Residency for tax purposes

Question

Are you a resident of Australia for tax purposes?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

The scheme commenced on:

1 April 2011

Relevant facts and circumstances

Your country of origin is Country X.

You area citizen of both Country X and Australia.

You intend to travel to Country X and base yourself there for approximately two years.

You intend to make short trips around Country X and surrounding countries during this time.

You will be travelling alone.

At the end of your trip, you intend to return to Australia.

You will live in rental accommodation in Country X.

You have no assets overseas.

You own a unit in Australia that you live in.

You will rent out your unit whilst you are in Country X.

You have bank accounts in Australia.

You are in receipt of Australian pension income.

You are retired.

You have no immediate family.

You have a sibling and friends in Australia.

You have friends in Country X.

You have previously been a Commonwealth Government of Australia employee.

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.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

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 will be in Country X for approximately two years. You then intend to return to Australia. The purpose of your trip to Country X is to travel around Country X and Europe. You will retain your unit in Australia. You have a sibling and friends in Australia and friends in Country X.

Based on these facts, you are a resident of Australia for tax purposes. This is because you are intending to return to Australia after your trip and you have retained your residence in Australia.

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. 

Your residency status

As you meet the 'resides' test, you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.

If you earn assessable income, you will be required to lodge an Australian income tax return even when you are travelling overseas.

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