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Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

Your country of origin is Country X.

You are an Australian Citizen.

You arrived in Australia a number of years ago to study.

You have lived and worked in Australia since arriving here.

You have residential properties in Australia, for living in and as investment property.

You departed Australia to move to Country X for a three year employment contract.

You have left your Australian property vacant while you are overseas.

In Country X you rent a property.

You met your spouse in Country X and you have been married. Your spouse will return with you to Australia when your contact ends.

You have no dependant children.

Your employment in Country X requires you to travel frequently.

You will be returning to Australia when your employment contract ends.

You have no intention of staying overseas permanently and you intend to reside in Australia.

You have several Australian bank accounts.

Neither you nor your spouse are eligible employees in the CSS or PSS superannuation schemes.

Since first leaving Australia you have returned for short holiday visits.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 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, 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.

If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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'.

You have been living and working in Country X since you left Australia. Your spouse also lives with you in Country X. You have only had short visits back to Australia since first leaving. Accordingly you are not residing in Australia.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

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

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

You are a citizen of Australia. You have also made your intention clear that you intend to return to Australia once your employment contract is completed.

Therefore your domicile is Australia and you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· 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 relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

It is considered that your permanent place of abode is not outside Australia because:

· Your contract has a definite end date and you will not be extending the date

· You have made it clear that you will be returning to Australia to live at the end of your employment contract

· You own a house in Australia which you have left vacant ready for when you return to live in Australia with your spouse

· Although you rent a property in Country X you travel regularly for your work

· You have no intention to stay overseas on a permanent basis.

Therefore, the Commissioner is not satisfied that you have a permanent place of abode outside Australia and you are a resident of Australia for tax purposes under the domicile test.

Your residency status

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

Conclusion

You are a resident of Australia for income tax purposes for the year ended 30 June 2011.

Australian residents are taxed on their worldwide income.

Foreign employment income

Foreign employment income is derived by an Australian resident working overseas as an employee. Your foreign earnings include salary, wages, commissions, bonuses and allowances.

If you have assessable income from overseas, you must declare it in your Australian income tax return. If you have paid foreign tax in another country, you may be entitled to an Australian foreign income tax offset, which provides relief from double taxation.

For further information regarding foreign income tax offset rules please refer to our website www.ato.gov.au

Amendment to your 20XX Notice of Assessment

If you now wish to amend your 20XX NOA you have two years to do so from the date the notice was issued.

For information on how to amend please refer to our website www.ato.gov.au

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