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Edited version of your private ruling
Authorisation Number: 1012455164106
Ruling
Subject: Residency
Question and answer
Did you remain an Australian resident for income tax purposes for the period you were in Country X?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2011
Year ended 30 June 2012
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You were born in Australia and are an Australian citizen.
Early May 20XX you left Australia for Country X.
You terminated your lease in Australia and stored a small amount of personal effects at a relative's home.
You had the intention of leaving Australia indefinitely and work abroad.
On arrival in Country X your employer supplied you with short term accommodation in which you lived for a number of months.
After this you were residing elsewhere as a part of your employment.
Early November 20YY you returned to Australia unexpectedly.
Relevant legislative provisions:
Income Tax Assessment Act 1997 Section 995-1(1).
Income Tax Assessment Act 1936 Subsection 6(1).
Reasons for decision
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 were not living or working in Australia during your time away. Therefore you are not a resident according to the resides test.
The domicile 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.
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.
Your domicile is Australia because you were born in Australia and you are an Australian citizen.
Permanent place of abode
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 left Australia and ended your lease in Australia. You had an intention leave Australia permanently. However, in Country X you were supplied with short term accommodation before you began work as part of your full-time employment.
Though you gave up your abode in Australia, at no point did you establish a permanent place of abode overseas but were rather in temporary accommodation. Living and working as an itinerant is not considered a fixed residence outside of Australia.
The Commissioner is not satisfied that you established a permanent place of abode outside of Australia, therefore, you are a resident of Australia under the domicile test.
As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other statutory tests of residency
Your residency status
As you meet the domicile test, you are a resident of Australia for tax purposes.
As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.
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