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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You are a citizen of Australia.

You were born in Australia.

You departed Australia on date A.

You will return to Australia on date B.

You entered a foreign country on a visa.

You have not returned to Australia since your departure.

You rent an apartment in the foreign country. You have lived at this address in the foreign country for all but a few weeks at the beginning of your time in the foreign country and for a few weeks when you travelled around the foreign country and in other foreign countries.

For a period before leaving Australia you lived with some relatives.

You do not have a permanent place to live in Australia. When you return to Australia you may live with your relatives or you may decide to rent accommodation.

You have opened a bank account in the foreign country.

You have bank accounts in Australia.

At present you are employed but you do not have a contract with your employer.

You live with your partner in the foreign country. This partner meets the definition of a spouse.

You have no dependent children.

Members of your family have not accompanied you to the foreign country.

You have numerous friends and relatives in Australia.

You have numerous friends through work in the foreign country. You also have relatives in the foreign country.

Neither you nor your spouse has ever been a Commonwealth Government of Australia employee.

You are more than 16 years of age.

Relevant legislation provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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 test

§ the 183-day test

§ 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.

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 satisfy 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 Shorter 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'.

Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

In your case, you departed Australia on date A and now live in rented accommodation in the foreign country. You are employed in the foreign country.

Accordingly, as you were not living and working in Australia, you were not considered to be 'residing' in Australia and, therefore were not a resident of Australia under the resides test during the period.

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.

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

In your case, as you are still an Australian citizen while living in the foreign country, your domicile has remains unchanged.

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 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 you:

§ departed Australia date A and will return to Australia on date B

§ now live in rented accommodation in the foreign country where you live with your partner

§ have no dependent children

§ have no fixed residence in Australia to return to but may live with relatives or in rented accommodation

§ have not returned to Australia since your departure and have been in the foreign country since your departure from Australia except for a few weeks in other foreign countries

§ have opened a bank account in the foreign country

§ have bank accounts in Australia

§ have relatives and friends in Australia

§ have relatives and friends in the foreign country.

On balance and based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the income year. Therefore, you were not a resident of Australia for taxation purposes under the domicile test during the income year.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

In your case, you departed Australia on date A and you have not returned to Australia since your departure for the foreign country. Accordingly, you were not present in Australia for more than 183 days during the income year. Therefore, you were not a resident of Australia under the 183-day test during the income year.

The superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor your spouse has ever worked for the Commonwealth Government of Australia. As such, you or your spouse were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age. Therefore, you were not a resident of Australia under the superannuation test.

Conclusion

As you were not a resident of Australia under any of the tests of residency outlined in subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936 you were not considered to have been an Australian resident for taxation purposes during the income year.

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