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Edited version of private ruling
Authorisation Number: 1011860940384
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Ruling
Subject: Residency for tax purposes
Question and answer:
Are you an Australian resident for tax purposes?
No.
This ruling applies for the following periods:
Year ended 30 June 2009
Year ended 30 June 2010
The scheme commenced on:
1 July 2008
Relevant facts and circumstances
You were born in Australia and you are an Australian citizen.
You have resided in Country X since August 2007.
You currently are in the process of applying to become a permanent resident of Country X.
Since moving to Country X, you have returned to Australia for holidays three times, for about two weeks each time.
You do not have a residence in Australia.
You do not have any dependants.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.
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:
· the resides test,
· the domicile test,
· the 183 day test, and
· 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.
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 meet 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. 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'.
Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:
· whether the person is physically present in that country at some time during the year of income
· the history of the person's residence and movements
· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits
· if the person is outside the country for part of the relevant income year, the purpose of the absences
· the family and business ties which the person has with the particular country, and
· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.
Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residences, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.
In your case you departed Australia in August 2007 and have been living in Country X since then. You have only returned to Australia for a few short visits for holidays. You are intending to continue residing permanently in Country X and are applying permanent residency. The facts in your situation therefore show that you are not residing in Australia.
As you are not residing in Australia, you are not a resident of Australia under this test.
The domicile test
Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.
Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.
Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.
Although you were born in Australia and are an Australian citizen, you have moved to Country X permanently and are in the process of obtaining permanent residency in Country X. Therefore, your permanent home is now Country X and therefore your domicile is Country X.
Therefore, you are not a resident of Australia under this test.
The 183 day test
Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.
As you were not physically present in Australia for more than 183 days you are not a resident of Australia under this test.
The superannuation test
A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:
· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or
· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or
· the spouse or child under 16 of a person covered by either of the above funds.
As you have never been a Commonwealth government employee you are not able to contribute to the abovementioned superannuation schemes.
Therefore, you are not a resident of Australia under this test.
Your residency status
As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.
As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.
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