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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your private ruling

Authorisation Number: 1012423358725

Ruling

Subject: Residency status

Question and answer:

Were you a resident of Australia for income tax purposes for the period that you lived and worked in country Z?

Yes.

This ruling applies for the following period:

Year ended 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts

You were born in country Z and are a citizen of country Z.

You moved to Australia, where you lived under a permanent resident class visa BB which is a resident return visa that allows you to re-enter Australia, should you elect to leave for some purpose.

You are separated from your spouse and have dependants.

You work part time in Australia as a consultant for Australian companies.

You and your dependants left Australia for country Z for a short period of time.

The purpose of your trip was to develop business solutions in country Z.

During this trip you performed work for your Australian employer.

When you arrived in country Z you rented a fully furnished apartment.

You did not possess any overseas assets.

The assets that you held in Australia consisted of a bank account.

While in Australia you lived at your relative's house.

You did not return to Australia for the period you were overseas.

The remuneration that you received from your work in country Z was deposited into your Australian bank account.

You did not pay any tax to the country Z authorities on this income.

The social and sporting ties that you have with both country Z and Australia consist of an informal sporting group.

Neither you nor your ex-spouse had ever been a Commonwealth Government of Australia employee.

Your intention was to travel to country Z for business only, after which you returned to Australia after a short period.

Relevant legislative 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 first two tests are examined in detail in Taxation Ruling IT 2650: 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 first question to be asked in considering the residency status of a person 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 apply any of the other tests. The person is a resident of Australia for income tax purposes.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.

In your case, you left Australia for business purposes. You returned to Australia after living in country Z for a short period of time. Although you were physically in country Z for this period, the period that you lived in country Z is not considered a sufficient time to be said that you are dwelling permanently or for a considerable period of time in Indonesia. In addition, you have stated that the reason for you travelling to country Z was for business purposes, which when it was completed you returned to Australia. Based on these facts it is considered that you continued to reside in Australia.

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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.  From the information that you have provided, you were born in country Z therefore you had a country Z domicile. However you left country Z and moved to Australia gaining an Australian permanent residence visa, thus adopting Australia as your domicile of choice. Further from the information that you have provided your single intention for returning to country Z was to conduct business, therefore it is considered your adopted Australian domicile remained 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.

For the period that you lived in country Z your circumstances were the following:

Based on these facts, the Commissioner is not satisfied that you established a permanent place of abode in country Z, particularly given that you only were present in country Z for a short period of time.

Accordingly, for the period that you lived in country Z, you continued to be a resident of Australia for income tax purposes under the domicile test.

As you were a resident of Australia for income tax purposes under the resides and domicile tests there is no need to consider the remaining tests.

Conclusion

As you were a resident of Australia under both the 'resides test' and 'the domicile' test outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997 for the period that you lived and worked in country Z, you were an Australian resident for income tax purposes for this period.

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