Edited version of your private ruling

Authorisation Number: 1012488092344

Ruling

Subject: Residency

Questions and answers:

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You were born in Australian.

You are currently working temporarily in foreign country A.

You left Australia on initially for one year.

You live with extended family in foreign country A.

You have no permanent residence in foreign country A.

You have the following assets in Australia:

· residential property (currently rented out but you considered it your main residence)

· financial affairs (you still maintain Australian bank accounts, insurance policies, private health insurance, superannuation, shares and other bills)

· motor vehicle (with ongoing payment of bills, insurance)

· household effects (from the residential property).

You have always lived in Australia on a permanent basis.

You have not chosen to migrate permanently to the foreign country.

You have no dependents or partner in foreign country A and your family live in Australia.

During the period 1 July 20XX to 30 June 20YY you did not return to Australia.

During your time in foreign country A, you have also been travelling around foreign country B.

You have not spent longer than six months in foreign country A continuously since you left Australia.

You are still on the Australian electoral roll.

The government of foreign country A considers you to be a resident for tax purposes. You have completed and lodged a tax return in foreign country A.

You have applied to have your current working holiday visa to be extended until a future date.

Relevant legislation provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 6-5(3)

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 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'.

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, it can be said that you continue to reside in Australia according to ordinary concepts while you are overseas. You are really only on a working holiday based in foreign country A so you are still residing in Australia. While it may be said that you are living or based in foreign country A, this does not mean you stop residing in Australia. Accordingly, you remained a resident of Australia under the resides test during the period of the ruling.

The domicile test

If a persons domicile is Australia they will be 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 foreign country A, your domicile is Australia and 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:

· left Australia for foreign country A (and foreign country B) on a date initially for one year but have applied to have your current working holiday visa to be extended until a future date

· have no permanent residence in foreign country A

· live with extended family in foreign country A

· have not chosen to migrate permanently to foreign country A

· retain a residential property in Australia (currently rented out but you considered it your main residence)

· maintain Australian bank accounts, insurance policies, private health insurance, superannuation, shares and other bills

· maintain a motor vehicle in Australia (with ongoing payment of bills, insurance)

· retain household effects in Australia (from the residential property)

· are still on the Australian electoral roll

· you have no dependents or partner in foreign country A and your parents live in Australia.

Based on the above, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia during this period. Your domicile remained Australia. Therefore, you were a resident of Australia for tax purposes under the domicile test during the period of the ruling.

As you have passed two of the residency tests, it is not necessary to consider the 183-day test and the superannuation test.

Conclusion

As you are a resident of Australia under two of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are an Australian resident for taxation purposes during the period of the ruling.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).