Edited version of private ruling

Authorisation Number: 1011813896448

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Ruling

Subject: Your 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 commences on:

1 July 2010

Relevant facts and circumstances

You were born in Australia and you are an Australian citizen.

You arrived in Country X in on a two year fixed term work contract.

You are employed by an Australian mission.

Your salary is deposited into a local branch of an Australian bank.

You do not have any other assets in Country X.

You are classed as a locally engaged staff, even though you had secured this job while you were in Australia.

You intend to return to Australia when your contract ends.

You pay tax to the Government in Country X.

You are renting a house on a six month lease basis.

Your spouse is living with you but not working in Country X.

You lived in your own house when you were in Australia. This house is now vacant.

You have investment properties in Australia that you co-own with your spouse and other Australians.

You plan to make approximately two short visits to Australia each year to see your family and to inspect your properties.

You do not have any social or sporting memberships in Australia or in Country X.

You and your wife are not members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) superannuation funds.

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 resides test,

· the domicile test,

· the 183 day test, and

· the superannuation test.

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. 3^rd 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:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

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.

As you have been residing in Country X, you are not considered to be residing in Australia.

Therefore, you are not a resident of Australia under this 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.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you were born in Australia and you are an Australian citizen.

Permanent place of abode

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

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

b. 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;

c. 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;

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

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

f. 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.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

It is considered that your permanent place of abode has not been established in Country X for the following reasons:

Your overseas stay is only for a limited period.

You intend to stay in Country X for two years and to return to Australia at the end of that period.

During your overseas stay, you are renting a place on a six month lease basis.

Your Australian home is available to be occupied by you any time you wish to come back to Australia.

You have substantial assets in Australia.

From the facts you have presented, we consider that your place of abode in Country X will be considered to be temporary or transitionary. It is considered that you have not established a permanent place of abode in Country X.

Therefore you are a resident of Australia under this test.

As you are a resident under this test it is not necessary to consider the other two tests.

Your residency status

As you meet the domicile 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.

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