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Ruling

Subject: Residency for income tax purposes

Were you a resident of Australia for income tax purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2008

The scheme commences on:

1 July 2007

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You left Australia with your partner to travel overseas in mid 200Y.

You started work in country X in late 200Y and stayed with the same employer until mid 200Z.

During the time you were employed in country X you shared rental accommodation with your partner.

You made a brief return visit to Australia in early 200Z.

When you left Australia you relinquished the rental accommodation you shared with your partner.

You undertook more travel with your partner in mid 200Z and returned to Australia a few months later.

Your Australian assets include part ownership of two rental properties, a small amount of shares, bank accounts and credit cards.

You did not accumulate any assets of note in country X.

You have family members living in Australia and have none in country X.

You have never worked for the Australian Commonwealth government and you do not have a spouse who has worked for the Australian Commonwealth government.

You have not lodged your Australian income tax return for the financial year ended 30 June 200Z.

Reasons for decision

Generally 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 within the tax provisions which provide four tests to ascertain residency status.

Relevant to your situation are the first two tests which are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia. In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests. A copy of this ruling is available from www.ato.gov.au.

The resides test

Whether an individual resides in Australia according to the ordinary meaning of the word resides.

In your case, you were engaged in full-time employment and living in rented accommodation with your partner in the country X from late 200Z until mid 200Y. You and your partner undertook more travel before returning to Australia in late 200Y. You were absent from Australia for the entire 2007-0Y financial year except for a brief return visit.

From the information provided, you were not residing in Australia according to the ordinary meaning of the word. Therefore, you did not meet the 'resides test' of residency and were not a resident under this 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.

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 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.

In your case, the Commissioner is satisfied that you had a permanent place of abode outside of Australia because:

· you stayed in rental accommodation with your partner in the one area of country X from late 200Z to mid 200Y;

· you worked with the same employer from late 200Z to mid 200Y; and

· you did not have a home available in Australia for you to live in during the period you were overseas.

Therefore, you did not meet the domicile test of residency and are not a resident under this test.

Your residency status

As you were not a resident under any of the tests of residency, you were not a resident of Australia for tax purposes for the financial year ended 30 June 200Y.

Further issues for you to consider

Non-residents of Australia for tax purposes are only required to lodge an income tax return if they derive income from within Australia such as net rental income, interest income and dividend income. The exception to this is income that has had non-resident withholding tax withheld from it. Foreign employment income does not have to be included on the tax return of a non-resident.

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