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Ruling

Subject: Residency

Question and answer

Are you an Australian resident for taxation purposes?

No

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commences on:

15 October 2012

Relevant facts and circumstances

You are a citizen of Australia and country x.

You are Australian and have lived in Australia on and off over the years.

You are over 16 years of age.

After living and working overseas you worked in Australia for a period of time for the Australian Government.

While in Australia you lived in a rented apartment.

You were a member of the PSS superannuation fund but as you no longer hold a position with the Australian government you are not longer eligible to contribute to the fund.

You departed Australia in the recent year to live in country y.

Since then you have been employed in country y.

You hold a country y residency card.

You have an initial 12 month contract with the option to renew.

You are renting a place to live in country y.

You do not have a residence or assets in Australia other than bank accounts.

Your overseas assets are a country y bank account and a country x bank account.

You currently have no plans to return to Australia and intend to reside in country y for the foreseeable future.

You have no sporting connections with Australia or country y.

You have no immediate family members in either county y or Australia.

You have a wide circle of friends around the world including Australia and country y.

Relevant legislative provisions

Section 6-5 of the Income Tax Assessment Act 1997

Section 6(1) of the Income Tax Assessment Act 1936

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.

Are you an Australian resident for tax purposes?

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 (ITAA 1936). 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 Income Tax: Residency - Permanent Place of Abode Outside Australia (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 dictionary definition, 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 were living and working in Australia until you left in the recent year. As you have not and will not be living in Australia for the period covered in the ruling you are not a resident of Australia under the resides test.

 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 by operation of law.

In order to show that a new domicile of choice in a country outside of 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 have advised that you intend to remain living and working in county y for the foreseeable future and you have no plans to return to Australia.

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.

IT 2650 outlines the elements to be considered when determining whether a person has established a permanent place of abode outside of Australia. The ruling states that all of the circumstances of each case need to be considered and not one factor is determinative.

Factors to be considered include:

Although you maintain economic ties with Australia through your bank accounts you have established your life in country y through your long term employment contract which includes an option to extend past its current end date. You are renting a house in country y and although you have a wide circle of friends around the world-including Australia, it is considered that you have developed social networks and a way of life in your current location of country y that are consistent with residing there and therefore you are considered to have established a permanent place of abode outside of Australia. Therefore you are a non-resident of Australia under the domicile test.

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.

You do not satisfy this test as you did not spent 183 in Australia during the 2012-13 financial year before you left and you do not have any plans to return.

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 CSS or a spouse of such a person, or a child under 16 of such a person. You were a member of PSS however you are no longer eligible to contribute to the fund and it is not a relevant fund for the purposes of the superannuation test. Therefore, you will not be treated as a resident under this test.

Your residency status

You do not satisfy any of the tests for residency.. Therefore you are a non-resident of Australia for taxation purposes until you return to Australia to live. .

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