Edited version of private ruling

Authorisation Number: 1011853730723

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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 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You were born in Australia and you are a citizen of Australia.

You departed Australia with the intention of pursuing a career overseas.

Your first employment contract overseas was for a fixed number of years in foreign country A. After a period you realised that the position did not suit you and you decided to seek a new position.

You applied for another position in foreign country B. You were appointed to this position for an initial contract of a twelve months. You left foreign country A and commenced your new position in foreign country B. Your current employment contract lasts until a specified date but you are negotiating a two year extension of it.

In foreign country B, you have a working visa which can be renewed periodically.

You have no plan or intention to return to Australia to live in the foreseeable future.

You returned to Australia for two weeks in the summer. You have also returned on one other occasion for a few days to attend a conference.

You lease a residence in foreign country B. The lease is annual. You are looking for land to purchase with the intention of building a house. Your intention is to complete construction before the end of the lease term. Alternatively, you may take out a long term lease on a residence.

You have a bank account in foreign country A and another in foreign country B.

You and your spouse have separated and living apart by mutual consent. Your children live in Australia with your former spouse. Your former spouse and your children have not accompanied you overseas.

You have relatives who live in Australia but you have little interaction with them.

Your family home in Australia is being transferred to your former spouse's name. The mortgage on the house is being refinanced and will also be in your former spouse's name.

You have assets in Australia.

You have no social or sporting connections in Australia.

Neither you nor your spouse are members of a superannuation scheme established under the Superannuation Act 1990 nor are you an eligible employee for the purposes of the Superannuation Act 1976.

You are more than 16 years of age.

Relevant legislation provision/s:

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 provides 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

· are employed full time in the foreign country B

· maintain a residence there in rented accommodation

· maintained social connections there.

Based on the facts of your case, you are not considered to be a resident of Australia according to ordinary concepts under the resides test. Therefore, you were 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. 

In your case, as you are still an Australian citizen while living in the foreign countries A and B, your domicile is Australia.

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 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

· departed Australia the intention of pursuing a career overseas

· have no plan or intention to return to Australia to live in the foreseeable future

· have an employment contract which lasts until a specified date but you are negotiating an extension of it

· lease a residence in foreign country B. The lease is for a specified period. You are looking for land to purchase with the intention of building a house. Your intension is to complete construction before the end of the lease term. Alternatively, you may take out a long term lease on a residence

· and your spouse have separated and living apart by mutual consent. Your children live in Australia with your former spouse. Your former spouse and your children have not accompanied you overseas.

· have a family home in Australia which is being transferred to your former spouse's name

· have no social or sporting connections in Australia

· have a bank account in foreign country A and another in foreign country B.

Based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the period. Therefore, you are not a resident under the domicile 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 returned to Australia for two weeks and on another occasion for a few days to attend a conference. These visits do not exceed 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.

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 are members of a superannuation scheme established under the Superannuation Act 1990 nor are you an eligible employee for the purposes of the Superannuation Act 1976. As such, 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.

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.

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