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Ruling

Subject: Residency

Question 1

Are you an Australian resident for income tax purposes for the period you were in Country X during the 2011-12 income tax year?

Answer

No

This ruling applies for the following periods:

1 July 2011 to 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You were offered a full-time permanent position in Country X for no fixed term for a period of 3 to 5 years domiciled in Country X which you accepted.

You found someone to look after your house in Australia for a minimum period of Y years.

You changed the utilities into the name of the house sitter and advised your insurance company of the change of tenancy.

You changed your electoral role address to your address in Country X

You changed your membership status with a local club to an international member

Your spouse resigned from their job to join you in Country X.

You had your elderly pet put down as you believed it would not adjust to life in Country X.

Share registries and banks were advised of the change of address and residency status.

Your employer executed a lease for an apartment in Country X for you to live in.

You spent over $20,000 purchasing furniture in Country X for your apartment.

You signed a Y year contract for telephone, mobile phone, television and internet subscriptions in Country X.

You joined local associations in Country X.

In late 2011 you were advised that the business you worked for would be sold.

Later in 2011 your role was terminated with one month's pay and airfares back to Australia.

You were required to vacate your apartment in Country X by the end of January 2012.

Your employer had no other positions available for you anywhere.

You returned to Australia after a shorter time than planned in Country X.

Relevant legislative provisions

Income Tax Assessment Act 1997 Income Tax Section 995-1(1) and

Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency for taxation purposes - general

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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 and permanent place of abode test,

· the 183 day test, and

· the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered.

If residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

Taxation Ruling IT 2650 Income Tax: residency - permanent place of abode outside Australia specifies that a person's place of abode is where they live.

In your case, you moved to Country X and resided there a period of X months. This is evidenced by the fact that you lived and worked there for that period.

The domicile and permanent place of abode test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's domicile of origin. A person's domicile of origin will not usually change but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a domicile by choice outside of their domicile of origin, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person becomes a citizen of a country outside of their domicile of origin.

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 your domicile of origin is in Australia. You have taken no steps to change your domicile - you have not become a citizen of another country or taken steps towards this.

However you have a permanent place of abode outside Australia. This is evidenced by your actions in moving to Country X, severing ties in Australia and taking steps to make your home indefinitely in that country. Your spouse resigned from his/her job in Australia to join you in Country X. You also left your home with a house sitter, putting utilities in his/her name. Furthermore you had your elderly pet put down as you believed it would not adjust to life in Country X. In establishing your home in Country X you bought a lot of furniture for your apartment which had a lease. Furthermore, you signed Y year contracts for telephone, internet, mobile phone and television in Country X. This suggests that you established a home in Country X.

The 183-day test

Where a person is present in Australia for 183 days during an income year, the person will be a resident of Australia for taxation purposes 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 will not be a resident of Australia for taxation purposes under this test in the 2011-12 income tax year because you will not be in Australia for more than 183 days during the 2011-12 income tax year.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

· they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

· they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

· they are the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

In your case, you are over the age of 16, and you are not a member of the PSS or an eligible employee for the purposes of the CSS.

You do not have a spouse who is a member of the PSS or an eligible employee for the purposes of the CSS.

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status

Based on the facts in this ruling, you will not be a resident of Australia for the period of your stay in Country X during the 2011-12 income year.

Further issues for you to consider:

Nil.

ATO view documents

Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia

Taxation Ruling IT 2650A (Addendum) - Income tax: residency - permanent place of abode outside Australia

Other references (Non ATO view - example court cases, etc):

Nil.

Does Part IVA or any other anti-avoidance provision apply to this ruling?

The application of Part IVA of the ITAA 1936 has not been considered as this topic is in the MEI low risk PART IVA list as specified in ORCLA.

Other relevant comments

I have complied with Practice Statements PS LA 2002/16 and PS LA 2003/9 in the completion of this report by checking the Technical Reference Search Engine, and using ORCLA.

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