Edited version of private ruling

Authorisation Number: 1011821790439

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Ruling

Subject: residency

Question

Were you a resident of Australia for income tax purposes for the income years ended 30 June 2008, 30 June 2009 and 30 June 2010?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2007

Relevant facts and circumstances

You have been a permanent resident of Australia for immigration purposes since 19XX.

Your country of origin is Country A.

You were seconded to City X in Country A by your Australian employer to work on a project in City X and you left Australia in 200X.

Your assignment in City X ended at the end of 200Y.

During your assignment in City X, you stayed in hotels. However, during that time, you travelled frequently to City Y in Country A.

You had a permanent place to live in in City Y with your spouse and your immediate family.

Your spouse only stayed with you in City X for a few months.

After your assignment in City X ended, you moved to City Y and lived in your permanent place with your spouse and your immediate family.

You worked for a Country A employer for one year until just before you returned to Australia in 2011.

Your spouse did not return to Australia with you and they continue to live in Country A.

You own a unit in Australia.

When you were living in Country A, you visited Australia about twice a year usually for a week "for the upkeep of [your] unit in Australia".

You have a mortgage in Australia, savings accounts and shares in Australian companies.

You have bank accounts and fixed deposits in Country A.

You did not have any social or sporting connections with Australia while you lived in Country A.

You had extensive social connections with relatives in Country A.

You and your spouse were not and are not Commonwealth Government of Australia employees.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

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:

1. The resides test (residence according to ordinary concepts)

2. The domicile and permanent place of abode 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay.

1. 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'.

As you were residing outside of Australia for the relevant periods, you are not considered to have resided in Australia for the purposes of the resides test.

2. The domicile and permanent place of abode 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.

IT 2650 in paragraph 8 states that a person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country or until he or she acquires another domicile by operation of law.

IT 2650 in paragraph 21 states that "in order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country e.g. through having obtained a migration visa." 

Your country of origin is Country A. However, you have been a permanent resident of Australia for immigration purposes since 1991.

Applying IT 2650 to your circumstances, your domicile of origin was Country A but you acquired an Australian domicile by operation of law.

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.

IT 2650 states in paragraph 14 that 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.

IT 2650 states in paragraph 23 that a person's permanent place of abode is a question of fact to be determined in the light of all the circumstances of each case. Some of these factors which have been considered relevant include:

a) the intended and actual length of the individual's stay in the overseas country;

b) any intention either to return to Australia at some definite point in time or to travel to another country;

c) the establishment of a home 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 individual's presence in the overseas country; and

f) the durability of association that the individual has with a particular place in Australia.

IT 2650 states in paragraph 24 that the weight of each factor will vary with the individual circumstances and no single factor is decisive. However, "greater weight should be given to factors c) the establishment of a home outside Australia, e) the duration and continuity of the individual's presence in the overseas country and f) the durability of association that the individual has with a particular place in Australia than to the remaining factors".

In relation to factor a) the intended and actual length of the individual's stay in the overseas country, IT 2650 states in paragraph 25 that "a period of about two years or more would generally be regarded by [the ATO] as a substantial period…however…[this] is not conclusive and needs to be considered with all of the factors in paragraph 23 above." IT 2650 further states in paragraph 26 "if, however, an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another or moves constantly within the same country (for example, from town to town or even from suburb to suburb) any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or a permanent place of abode outside Australia."

In relation to factor c) the establishment a home outside Australia, IT 2650 states in paragraph 28 that "the fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent".

In relation to factor f) durability of association with a particular place in Australia, IT 2650 states in paragraph 29 that the maintenance of bank accounts in Australia is relevant.

Actual length of stay and continuity of presence in Country A

You left Australia in 200X for your assignment in City X which ended at the end of 200Y.

During your assignment in City X, you stayed in hotels. However, during that time, you travelled frequently to City Y where you stayed with your spouse and your immediate family in a permanent place.

After your assignment in City X ended, you moved to City Y and lived in your permanent place with your spouse and your immediate family until you returned to Australia in 2011.

Applying IT 2650 to your circumstances, it follows that during your assignment in City X, you moved from one city to another as you travelled frequently to City Y. Nonetheless, as you lived in City Y in a permanent place for more than two years, it follows that you had continuity of presence and your actual length of your stay in Country A was substantial.

Establishment of a home outside Australia

During your assignment in City X, you stayed in hotels. Your spouse only stayed with you in City X for a few months.

However, you had a permanent place to live in in City Y with your spouse and your immediate family.

After your assignment in City X ended, you moved to City Y and lived in your permanent place with your spouse and your immediate family.

Thus, you established a home outside Australia in Country A because you had a permanent place to live in Country A where you lived with your spouse.

Whether any place of residence exists in Australia

You own a unit in Australia.

When you were living in Country A, you visited Australia about twice a year for usually a week at a time "for the upkeep of [your] unit in Australia".

Thus, you had a place of residence in Australia because you had a permanent place to live in Australia.

Durability of association with a particular place in Australia

You have a mortgage in Australia, two savings accounts and shares in Australian companies.

You have bank accounts and fixed deposits in Country A.

You did not have any social or sporting connections with Australia while you lived in Country A. Conversely, you had extensive social connections with relatives in Country A.

Thus, you had a reasonable durability of association with a particular place in Australia.

Weight of all factors

Weighing all the factors above in light of your individual circumstances, it is considered that your actual length of stay and continuity of presence in Country A and establishment of a home outside Australia outweigh the factors that you had a place of residence in Australia and that you had a reasonable durability of association with a particular place in Australia.

Therefore, it is considered that you established a permanent place of abode outside of Australia in Country A after you left Australia and for the relevant periods. 

As the Commissioner is satisfied that you have a permanent place of abode outside of Australia, you are not a resident of Australia for income tax purposes under this test for the relevant periods.

3. The 183-day test

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that your usual place of abode is outside Australia and you have no intention to take up residence here.

You were not present in Australia for more than 183 days continuously or intermittently during the income years ending 30 June 2008, 30 June 2009 and 30 June 2010 respectively.  Therefore, you were not a resident under this test.

4. 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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

You and your spouse were not and are not Commonwealth Government of Australia employees.

Therefore, this test does not apply to you as you and your spouse were not employees of the Commonwealth Government of Australia.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you were not an Australia resident for income tax purposes after you left Australia in 2007 and for the relevant periods.

Note:

As a foreign resident of Australia for income tax purposes for the relevant periods, you must lodge income tax returns in Australia and report all your:

· Australian income, except any income from which non-resident withholding tax has been withheld - that is, interest, unfranked dividends or royalties; and

· franked dividends

You are eligible to claim a credit for Australian income tax paid under the double tax agreement between Australia and Country A if you are also assessed by Country A on the Australian sourced income. However, this credit cannot exceed the Country A tax payable on that income.

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