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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts

You were born in Australia and are an Australian citizen.

You have a spouse and children.

Your spouse is a government employee.

Your spouse received a short term overseas posting in country Z.

You and your children travelled to country Z to accompany your spouse during his posting.

You entered the country Z on a visa.

You did not return to Australia for any period during your spouse's posting.

You lived in rental accommodation in country Z.

Prior to leaving Australia you lived in rental accommodation.

The assets that you held in Australia consist of the following;

· rental properties;

· bank account; and

· shares

From your assets you received rental income, bank interest and were involved in a dividend reinvestment scheme.

Your overseas assets consist of a bank account.

You do not have any sporting or social ties in Australia or overseas.

While overseas you were on an Australian pension.

You did not pay any income tax in country Z.

Neither you or your spouse were members of the either the PSS or CSS.

You returned to Australia once your spouse's posting was complete.

Relevant legislative 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 Residency - permanent place of abode outside 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, your spouse is a member of the ADF who received a short term overseas posting in county Z. You and your children moved to country Z for this period to accompany your spouse.

As you were only in country Z with your spouse and children while your spouse was on temporary assignment and you intended to and did return to Australia at the end of the assignment, you were residing in Australia under normal concepts. You were not living in country for a considerable time.

Accordingly, you are a resident for taxation purposes under the 'resides test'.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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.  From the information that you have provided, you have did demonstrate an intention to become a citizen of country Z and were still a citizen of Australia. Therefore it is considered your Australian domicile 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 you;

· travelled to country Z with your children to accompany your spouse during a short term posting;

· intended to remain in country Z until the end of your spouses posting;

· lived in rental accommodation in country Z;

· lived in rental accommodation before you departed Australia, however you do own a number of rental properties; and

· own investment properties, bank accounts and shares in Australia that were maintained while you were overseas.

The Commissioner is not satisfied that you established a permanent place of abode outside of Australia.

Therefore you are a resident of Australia for income tax purposes under the domicile test.

As you are a resident of Australia under the domicile test there is no need to consider the remaining tests for residency.

Your residency status

As you are a resident of Australia under the 'resides test' and the 'domicile' test outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are an Australian resident for income tax purposes for the period 18 December 2009 to 10 January 2011.

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