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Ruling

Subject: Residency

Question:

Are you a resident of Australia for taxation purposes?

Answer:

No

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are a citizen of Australia.

You were born in Australia.

You left Australia to commence work in Country S.

You were on an employment pass in country S.

Your plans were to reside overseas for at least 3 years; however circumstances have made it such that you will return after one year.

Your family accompanied you to Country S.

You returned to Australia to attend a conference while you were working overseas.

You have a two year lease on a property in Country S. You will be breaking the lease at one year.

You have a bank account and credit card in Country S for living purposes but no other assets.

You own a house in Australia. This property is being rented.

You have a savings account and credit card in Australia.

Most of your social and sporting connections are in Australia.

You were employed by the Commonwealth Government but have ceased employment prior to taking up employment overseas.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection6(1).

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997. Subsection 995-1(1)

Reasons for decision

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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 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 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 Macquarie Dictionary 2001, rev. 3rd edn. The Macquarie Library Pty Ltd NSW is 'to dwell permanently or for a considerable time; have one's abode for a time', and according to The Compact edition of the Oxford English Dictionary 1987, Oxford University Press, Melbourne 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 will not be considered to be residing in Australia, as you and your spouse have been living in Country S for one with the intention to reside for at least three years. You have established a home which you are leasing in the foreign country and you have and established a bank accounts and credit card in the foreign country.

2 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.

Domicile

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

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

In your case, you are considered to have maintained your Australian domicile, as you intend to return to Australia in the future.

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 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.

Although you maintain an association with Australia through your bank account and the ownership of your home, your associations with the foreign country are more significant as you have:

Based on these facts, we consider that you have established a permanent place of abode in the foreign country. Therefore, you are not considered to be a resident of Australia for tax purposes under the domicile test.

3 The 183-day test

Where 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.

You do not satisfy this test as you have established a permanent place of abode outside of Australia.

4 The superannuation test

An individual is still 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.

You are not a member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you will not be treated as a resident under this test.

Your resident status

As you are not a resident of Australia under any of the tests of residency outlined in paragraph 6(1) (a) of the ITAA 1936, you are not considered to be an Australian resident for the 2011-2012 and 2012 - 2013 income year under subsection 995-1(1) of the ITAA 1997.

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