Edited version of private ruling

Authorisation Number: 1011827664192

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Ruling

Subject: residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You, your spouse and children are Australian citizens.

You, your spouse and children relocated from Australia to a foreign country for your employment.

You, your spouse and children currently reside with you in the foreign country.

You are employed by a multinational organisation.

Your employment contract with them can be extended.

You were a resident for tax purposes in the foreign country and a non-resident for tax purposes in Australia.

You pay income tax in the foreign country on your employment income and on rental income from your investment properties in the foreign country.

You have also lodged a tax return in Australia where you are taxed as a non-resident.

On a future date your spouse and children will relocate to Australia. They will live in one of your investment properties. They will return to their home in the foreign country during holidays.

You intend to continue to reside and work in the foreign country.

You regularly travel to Australia due to work commitments. Each visit is for about several days. During these visits you stay in hotel accommodation provided by your employer. You may stay with you spouse occasionally, if your employer allows you time off.

You have assets in the foreign country. You own and live in your own residential property. You also own investment properties and bank accounts from which you receive rental income and interest income.

You have assets in Australia. You have several investment properties and bank accounts.

You are also an active member of the community in the foreign country. You are also a member of a club where you participate in social activities.

You have no social connections with Australia.

Neither you nor your spouse is or was an employee of the Commonwealth of Australia Government.

You are over 16 years of age.

Relevant legislation provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1)

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 resided in the foreign country for several years

· were a resident for tax purposes in the foreign country and a non-resident for tax purposes in Australia

· intend to continue to reside and work in the foreign country until a future date

· own and live in your own residential property

· pay income tax in the foreign country on your employment income and on rental income from your investment properties in the foreign country

· have also lodged a tax return in Australia where you are taxed as a non-resident

· live with your spouse and children in the foreign country, (though they will relocate to Australia for your children's education)

· have an employment contract which can be extended

· own investment properties and bank accounts from which you receive rental income and interest income

· are an active member of the community in the foreign country, being a member of a club, where you participate in social activities.

On balance you are not considered to be a resident of Australia according to ordinary concepts under the resides test as your ties to the foreign country are stronger than they are to Australia. 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 where you have an employment contract which can be extended

· intend to continue to reside and work there

· maintained a residence there

· maintained social connections there with your spouse and children (who will relocate to Australia for the children's education) and membership of a club

· have investment properties and bank accounts there.

Based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia.

Therefore, you were not a resident under the domicile test.

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 you and your spouse have never worked for the Commonwealth Government of Australia. As such, both of you were not 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 regularly travel to Australia due to work commitments periodically. Each visit is for about several days. However, you are not present in Australia for a total period of more than half of a 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 have been an Australian resident for taxation purposes.

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