Edited version of private ruling

Authorisation Number: 1011832761095

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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:

Date A to Date B.

The scheme commenced on:

Date A.

Relevant facts and circumstances

Your country of origin is Australia and you are an Australia citizen

You departed Australia for a period in a foreign country and then returned to Australia.

Before leaving Australia you informed the ATO that you were leaving Australia and would become a non resident. You also withdrew yourself from the Australian Electoral role by notifying the Australian Electoral Office.

Your intention was to complete a contract of approximately one year, and on completion of the contract make a decision on whether to seek a further contract to work in a foreign country or return to Australia.

You entered into the contract to work in the foreign country.

You obtained a certificate confirming that you were a resident of the foreign country as it was a requirement to work in that country.

The type of visa you have in the foreign country is a multiple exit re-entry visa. 

In the foreign country you had a bank account for your pay from to be paid into.

You did not pay tax on your income in the foreign country. 

As part of the contract you were provided with accommodation which included power and water.

You had no social and sporting connections in the foreign country to begin with. While there, you made some friends and work acquaintances.

At the completion of your contract, you decided not to take out a further contract and returned to Australia.

You didn't own a property at the time of leaving Australia and had no current leases on any properties.

In Australia you have a savings account, a credit card, and an award saver account. You also had a personal loan.

At the time you left Australia you didn't have any health insurance.

You have family and friends in Australia. You are not married and have no children.

You returned to Australia for a short period of less of 183 days for a holiday to visit family and friends.

You were still a member of an Australian superannuation funds during your period of absence from Australia.

You have never been a Commonwealth Government of Australia employee.

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)

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 Income Tax: Residency - Permanent Place of Abode Outside Australia.

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.

In your case, you were working in the foreign country. You established a residence there in accommodation provided for you as part of your contract. You do not own or lease a residence in Australia.

Accordingly, you are not considered to be 'residing' in Australia and, therefore, were not a resident of Australia under the resides test during the period from Date A to Date B.

The domicile test

If a person is considered to have their domicile in Australia they will be considered to be 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.

In your case, as you were still an Australian citizen while living in the foreign country, your domicile was Australia and remained unchanged.

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.

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 permanent place of abode 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, during the period from Date A to Date B, you:

· lived and worked in the foreign country

· intended to stay for at least the period of your contract

· maintained a residence in the foreign country in accommodation provided for you

· had no residence in Australia

· were in the foreign country for the period of the ruling, except for one short period in Australia

· informed the ATO that you would become a non resident and you also withdrew your name from the Australian electoral roll.

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

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, during the period from Date A to Date B, you were in Australia for a short period of less than 183 days. Accordingly, you were not present in Australia for more that 183 days. Therefore, you were not a resident of Australia under the 183-day test during the period from Date A to Date B.

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 have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you have no spouse and are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation 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 during the period from Date A to Date B.

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