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Ruling

Subject: Residency

Question 1

Are you considered a non-resident of Australia for taxation purposes?

Answer

Yes

This ruling applies for the following period

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 Jun3 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commenced on

01 July 2009

Relevant facts

Your country of origin is Australia and you are currently an Australian citizen.

You left Australia on 20 June 2010 on your current contract.

You are employed as a contractor in your contracted position with a particular company for a client on a specified project in another country.

Your position commenced on the starting date of the contract and is due to cease about 30 months later with the possibility of a further extension subject to the requirements of the client.

For the duration of your employment contract you are paid a daily salary and are employed for a specified number of hours each day for a certain number of days per week for a period of a number of weeks followed by some weeks of unpaid rest and recreation leave.

You have taken rest and recreation leave on a number of occasions to visit children and to arrange and finalise your divorce. You plan to visit Australia in the near future to visit children and submit application for divorce. Once your divorce is finalised, there will not be any future visits to Australia.

You have worked on various projects within and outside Australia for many years, including work performed in overseas locations such as shipyards and offshore platforms.

Your intention is to settle in the other country permanently and not return to Australia. To this end, you are in the process of obtaining permanent residency and citizenship in the other country.

The requirements for permanent residency and citizenship of the other country are a specified number of years residence in the other country, ability to support yourself, proficiency in the language of the other country (reading, writing and speaking), knowledge of the culture and history of the other country culminating in an interview and written test. This information was confirmed in an interview with the immigration authorities of the other country.

You currently hold a long term stay visa. As a foreigner you are also required to hold an Alien Registration Card (ARC). Extension of your visa and ARC is shown on your ARC and may be extended as required for working and residing in the other country. Your visa and ARC are regularly revalidated.

You are currently in discussions with two prospective employers for future contracts. If you secure one of these contracts you will forego your current contract and any associated retention pay.

You are provided with accommodation under the terms of your current contract. Your accommodation is an apartment located in the city of the other country where the project is located. Your address in the other country is shown on your ARC.

You have been advised that an accommodation allowance will be part of the terms and conditions of future employment. This allowance will be used for the lease of a residence in the other country or to purchase an apartment in the other country.

You separated from your spouse on at the start of your current project. You are required to be separated from your spouse for 12 months prior to submitting an application for divorce. In the divorce application, your residential address is shown as the other country and you have stated you have not lived in Australia for the 12 months prior to the lodging of the application and do not intend to live indefinitely in Australia.

On the date you separated from your spouse you left Australia permanently to establish residency in the other country. It is your intention to permanently reside in the other country.

Before leaving Australia, you lived with your separated spouse in a jointly owned property. This property will be transferred to your former spouse as part of the divorce settlement.

Your other Australian assets include 2 motor vehicles which have been transferred to your former spouse as part of the divorce settlement. A boat is currently listed for sale. If not sold, it will become part of the divorce settlement.

In the other country, you have a bank account with a bank in the other country and own a motor vehicle. Your drivers licence in the other country is valid for an extended period of time.

You have a gym membership in the other country and a season ticket for the local football club.

Your income is subject to tax in the other country.

You and/or your separated spouse are not eligible members of a Commonwealth superannuation scheme.

Relevant legislative provisions

Income Tax assessment Act 1936 Subsection 6(1)

Reasons for decision

Question 1

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 (ITAA1936). The definition provides four tests to ascertain whether a taxpayer is an Australian resident for income tax purposes. These tests are:

1. The resides test

2. The domicile test

3. The 183 day test

4. The superannuation test

The first two tests are examined in detail in Taxation Ruling It 2650.

Taxation Ruling IT 2650 states that the following factors need to be taken into account in determining the residency status of an individual:-

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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

1. The resides test

The ordinary meaning of the word 'reside', according to the dictionary definition is to dwell permanently, or for a considerable time, to have one's settled abode, to live in or at a particular place.

We may take into account the following factors in determining where you reside:

intention or purpose of presence - your stated intentions will be in contrast to your intentions as shown through behaviour and actions;

family and business/employment ties - presence of family (spouse and children) may indicate where you reside:

Maintenance and location of assets - purchase and maintenance of assets can also indicate where you reside. Such assets can include a dwelling, motor vehicles and household effects. However, maintaining a place of residence is not the same as actually residing in that place; and

social and living arrangements.

In your case, you departed Australia on a particular date to move to another country. At the time of your departure, it was your intention to settle in the other country permanently and not return to Australia. Since your departure, you have returned to Australia on a number of occasions on your rest and recreation breaks. The purpose of these visits was to visit your children and to finalise your divorce. Once your divorce is finalised, there will be no future visits to Australia. In the other country, you are living in an apartment as part of the terms and conditions of your contract. This is your permanent address in the other country as shown on your alien registration card.

As you have a permanent address in the other country where you reside, it is considered that you have a settled abode in the other country. Consequently, you are not considered to be an Australian resident under this test.

2. 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.

Domicile

Generally speaking, persons leaving Australia would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice.

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to demonstrate both a change of residence and an intention of making the change permanently or at least indefinitely in that country. If a person claims that he or she has acquired a new domicile of choice, the onus lies with that person to prove by clear evidence that the change has taken place. In this regard, it must be shown that the person has abandoned the previous domicile with the intention of remaining permanently or indefinitely in the country of the new domicile.

In your case, you have moved to the other country with no intention of returning to Australia. Your Australian assets of house and motor vehicles have been transferred to your former spouse. You hold a long term stay visa from the other country together with an alien registration card. You have established a permanent residence outside Australia, hold a long term drivers licence of the other country and have joined local sporting organisations of the other country.

As you have a permanent address in the other country and have no intention of returning to Australia once your divorce is finalised, it is considered that there has been a permanent change of residence from Australia to the other country. Consequently, you have abandoned Australia as your domicile of choice.

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.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode 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.

There are no hard and fast rules that can be used to determine your place of abode. Taxation Ruling IT 2650 outlines some relevant factors that are used by the courts, tribunals and the ATO in deciding such cases.

The relevant factors are:

Although your children and former spouse have remained in Australia, it is considered that your association with the other country is greater as you:

Based on these facts, it is considered that you have established a permanent place of abode outside of Australia. Therefore, you are not considered to be an Australian resident for taxation purposes under this test.

3. The 183 day test

When a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

Generally, a usual place of abode is the abode customarily or commonly used by a person when physically present in a country. You are not a resident under this test as it is considered that your usual place of abode in the other country is outside Australia and you do not intend to take up residence in Australia.

4. 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 Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

In your case, you and your spouse have not been employed by the Commonwealth of Australia Government and are not eligible to contribute to the PSS or CSS. Consequently, this test is not applicable in determining your residency status.

Your resident status

You are not considered to be a resident of Australia for taxation purposes as you do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936.

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