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Ruling

Subject: Residency

Question and answer:

Were you a resident of Australia for income tax purposes while you were employed overseas?

No.

This ruling applies for the following periods:

Year ended 30 June 2008

Year ended 30 June 2009

The scheme commenced on:

1 July 2007

Relevant facts and circumstances

Your country of origin is Australia and you are an Australian citizen.

You left Australia in 200Y to take up an employment contract in country X.

The employment contract was for an initial period of three years with the possibility of renewal.

You intended to remain in country X for the full period of the employment contract and for any period of renewal.

Your spouse and child did not initially accompany you overseas however, your spouse intended to join you in country X with the children later in the year.

At the time of gaining the employment contract you and your family moved out of the home you owned which was then rented out.

Your family rented another property with the expectation of joining you in country X later on.

Prior to you leaving Australia for country X you sold one of your motor vehicles, closed bank accounts and consolidated credit cards.

You rented accommodation in country X on a monthly basis pending the availability of suitable family accommodation.

Your family did not end up joining you in country X.

You returned to Australia twice while you were working in country X.

You were made redundant by your country X employer in 200Z.

After you were made redundant you stayed in country X for a few more weeks looking for alternative employment. You were unsuccessful and returned to Australia.

Your assets in Australia at the time of your departure for country X included a residential house property, a share portfolio, a motor vehicle, a bank account and a credit card.

There was a mortgage loan over your property.

Your only asset in country X was a bank account used for receipt of salary payments.

You transferred a portion of your salary to Australia to assist with home mortgage repayments and family living expenses.

You maintained health insurance in Australia.

You advised the Australian Electoral Commission you were working overseas.

You and your spouse have never been employed by the Australian Commonwealth government.

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. 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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three 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'.

Although the question of whether a person resides in a particular country is a question of fact and degree, the courts have referred to and taken into account various factors considered to be relevant. These include:

· whether the person is physically present in that country at some time during the year of income;

· the history of the person's residence and movements;

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits;

· if the person is outside the country for part of the relevant income year, the purpose of the absences;

· the family and business ties which the person has with the particular country; and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

In your case, you left Australia with the intention of living and working in country X for an extended period of time and established accommodation for yourself in that country. From early 200Y to early 200Z you were not physically present in Australia apart from two brief return visits.

On balance, it is considered that you were not residing in Australia according to the ordinary meaning of the word for this period and you did not meet the resides test. Therefore, you were not a resident of Australia under this test for the period early 200Y to early 200Z.

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 a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

In your case, your domicile is Australia because your country of origin is Australia and you are an Australian citizen.

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.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia provides a number of factors to be considered in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· the intended and actual length of the individual's stay in an overseas country;

· any intention to return to Australia or travel elsewhere;

· the establishment or abandonment of any residence;

· the duration and continuity of the taxpayer's presence in the overseas country; and

· the durability of association that the individual maintains with a particular place in Australia.

IT 2650 states that where a taxpayer leaves Australia for an unspecified or a substantial period and establishes a home in another country, that home will represent a permanent place of abode outside Australia, subject to a consideration of the other factors mentioned above. As a broad rule of thumb, a substantial period of time for the purposes of a person's stay in another country is considered to be two years or more.

In your case, your family remained in Australia and you had significant financial ties to Australia while you were in country X. However, on balance the Commissioner is satisfied that you had a permanent place of abode outside of Australia because:

· you left Australia with the intention of living working in country X for three years or even longer if your work contract was extended;

· it was also the intention of you and your wife that she would join you in country X with the children later in the year, however this did not eventuate due to reasons beyond your control;

· you and your family moved out of your family home in Australia and rented it out in anticipation of you all relocating to country X;

· you sold a motor vehicle and consolidated bank accounts and credit cards prior to your relocation to country X; and

· the only reason you returned to Australia within 12 months of moving to country X was because of reasons outside your control.

Therefore, you were not a resident of Australia under this test for the period early 200Y to early 200Z.

The 183 day test

In your case, during the period early 200Y to early 200Z you were not in Australia for more than 183 days in any income year.

Therefore, you were not a resident of Australia under this test.

The superannuation test 

An individual is considered to be an Australian resident for income tax purposes 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 resident under this test as you and your spouse have never been employed by the Australian Commonwealth government.

Your residency status

You were not a resident of Australia during the period early 200Y to early 200Z as you did not meet any of the tests of residency.

Please note that as you were a resident for part of both the 200Y and 200Z income years, you will need to apportion the tax free threshold to take this into account.

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