Edited version of private ruling

Authorisation Number: 1011819012200

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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2008

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is a foreign country.

You are employed by an international company.

You have an employment contract with the company, which can be extended annually.

You were transferred by the company to a foreign country to work for them there for not less than 3 years.

You moved from Australia to the foreign country. Since this date, your income has been assessed under and subject to the foreign country's tax laws.

You have a work visa which allows you to do paid work in the foreign country.

Your spouse has accompanied you to the foreign country.

You have a permanent place to live in the foreign country.

You have a bank account in the foreign country for your employer to pay your salary into.

You return to Australia each year for a few weeks.

You do not intend to reside overseas permanently.

You plan to return to Australia at some time in the future.

You own a house in Australia which you lived in until you moved to the foreign country and which remains vacant while you are there.

You are a member of an organisation in Australia.

Neither you nor your spouse are or have been employees of the Commonwealth Government of Australia.

You are more than 16 years of age.

Relevant legislation provisions:

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1936 Section 251

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the 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

· 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 satisfy 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'.

Taxation Ruling IT 2650 provide guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's residence include:

· 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.

In your case, you have lived and worked in the foreign country for some years. You have a permanent place to live in the foreign country. You maintained a bank account in the foreign country. Your spouse has accompanied you to the foreign country. You return to Australia for only short periods each year.

On balance, you are not considered to be a resident of Australia according to ordinary concepts under the resides test because your ties with the foreign country are stronger than they are to Australia and your normal, everyday activities are in the foreign country. Therefore, you are not a resident of Australia under the resides 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.

In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 

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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

In your case, you:

· are employed full time in the foreign country

· maintained a residence there

· have a bank account there

· maintain social connections there, your spouse having accompanied you.

Based on the above, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia. Therefore, you were not a resident under the domicile test during this period.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.  To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor your spouse has ever worked for the Commonwealth Government of Australia. As such, neither you nor your spouse is eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and that he or she does not intend to take up residence in Australia.

In your case, you return to Australia once a year for a few weeks. Therefore you are not present in Australia for a total period of more than half of any year of income, i.e. 183 days. Therefore, you are not a resident of Australia under the 183-day test.

Conclusion

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.

Medicare levy

Section 251S of the Income Tax Assessment Act 1936 (ITAA 1936) provides that the Medicare levy is payable by any person who was, at any time during the year, a resident of Australia. There is provision in section 251T of the ITAA 1936 which allows for prescribed persons to be exempted from the levy. Those prescribed persons are listed under section 251U of the ITAA 1936 and are as follows:

1. A person entitled to full free medical treatment under veterans' entitlement (repatriation) legislation;

3. A blind pensioner or sickness benefit recipient;

3. A non resident of Australia, or a resident of Norfolk Island;

3. A person who is attached to a diplomatic mission or consular post established in Australia, or a household member of the person's family; and

4. A person certified by the Health Minister as not being entitled to Medicare benefits.

Only those people listed as prescribed persons are eligible for a Medicare levy exemption. As non-residents are prescribed persons and you are a non-resident, you qualify for an exemption.

In your case, you fall within one of the above categories and therefore you are fully exempt from paying the Medicare levy for the time you are a non-resident.

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