Edited version of your private ruling

Authorisation Number: 1012515903832

Ruling

Subject: residency

Question and answer:

Were you a resident of Australia for taxation purposes for the period you were in country A?

No.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Australia and you are a citizen of Australia.

You and your spouse went to country A to live and work.

You intended to go country A on a permanent basis to live and work.

You had a multiple year work contract.

You and your spouse had a multiple year work visa which gave the option of being a permanent resident after a number of years.

You and your spouse intended to apply for the residents' visa after the number of years.

You gave up your rental property when you left for country A.

You sold all your household affects prior to going to country A.

You and your spouse were required to return from country A due to personal reasons.

You did not make any trips back to Australia prior to your return.

You rented fully furnished apartments in country A.

You have had your name removed from the Australian electoral roll.

You have notified Medicare that you are a non-resident.

You have notified your bank that you are a non-resident.

Neither you nor your spouse are currently or have ever been Commonwealth Government employees.

You are over the age of 16.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (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 (IT 2650).

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

· Physical presence in Australia

· Nationality

· History of residence and movements

· Habits and "mode of life"

· Frequency, regularity and duration of visits to Australia

· Purpose of visits to or absences from Australia

· Family and business ties to different countries

· Maintenance of Place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Physical presence in Australia

A person does not necessarily cease to be a resident because he or she is physically absent from Australia.

In relation to this the AAT has stated that:

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

You and your spouse went to country A on a permanent basis.

You did not return to Australia until you returned for family reasons.

Nationality

The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case.

You and your spouse are Australian citizens and you were both born in Australia.

Habits and "mode of life"

The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia.

You and your spouse moved to country A on a permanent basis to live and work.

You gave up your rental property in Australia and sold your belongings prior to leaving for country A.

You lived in fully furnished rental properties in country A.

Frequency, regularity and duration of visits to Australia

Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country.

Case law has shown that a taxpayer can be a resident of a country even if they only spend a short period of time in that country, for example the AAT found a taxpayer to reside in Australia despite the fact that he had only been present in Australia in the relevant income year for separate periods of only two weeks, three weeks and two and half weeks. A further decision found a taxpayer who had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months to be residing in Australia.

You and your spouse did not make any trips back to Australia.

You returned to Australia on a date for personal reasons.

Purpose of visits to or absences from Australia

You and your spouse went to country A on a permanent basis.

Neither of you visited Australia prior to your return.

Family and business ties to Australia and the overseas country or countries

Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident.

Family

Your spouse accompanied you to country A.

Your parents remained in Australia.

Business or economic ties

You and your spouse were employed in country A.

Maintenance of Place of abode

The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer.

You gave up the lease on your rental property when you moved to country A.

Summary of resides test

Based on a consideration of all of the factors outlined above, you are not a resident of Australia according to ordinary concepts in the resides test as you did not maintain a continuity of association with Australia for the relevant 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.

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 to prove an intention to make his or her home indefinitely in that country.

Your country of origin is Australia and you are a citizen of Australia.

You had a multiple year work visa overseas with the option of becoming a permanent resident after a number of years. It was your intention to apply for permanent residents however you returned after XX months of being overseas.

Your domicile remained Australia.

As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

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.

You and your spouse went to country A on a permanent basis to live and work.

You gave up your lease on a rental property in Australia and sold your belongings prior to leaving to go to country A.

You rented fully furnished apartments in country A.

You did not return to Australia for visits prior to your return.

Your names were removed from the electoral roll, from Medicare and you notified your bank that you were going overseas.

Your pattern of behaviour is consistent with someone establishing a permanent place of abode outside of Australia.

The Commissioner is satisfied that you established a permanent place of abode overseas so you are not a resident under the domicile test.

The 183-day test

When a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You are not a resident under this test as you were not in Australia for 183 days or more in any of the financial years.

The superannuation test

An individual is still considered to be a resident 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. Only Commonwealth Government employees were eligible to contribute to the PSS or CSS.

As you and your spouse were not Commonwealth Government of Australia employees and you are over the age of 16, you will not be treated as a resident under this test.

Your residency status

For the period you were in country A you were not a resident of Australia for taxation purposes under subsection 6-1(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.

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