Edited version of your written advice

Authorisation Number: 1012654049919

Ruling

Subject: Residency

Question

Were you a resident of Australia for taxation purposes from when you departed Australia until you returned upon the termination of your employment?

Answer

No.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You are a citizen of Australia and country Z.

Your country of origin is country Z.

You are unmarried and you do not have children.

You departed Australia to take up a permanent position in country X.

A letter from your employer dated confirms the offer of employment in country X for an indefinite period.

A letter confirms you were given thirty days' notice of termination. The letter also confirms your last day of service with your employer.

This letter also advises that:

The company will cancel your Employment Pass before your departure from country X.

Your final pay check will be released to you when ALL the following issues have been concluded:

a) All your tax withholding has been updated and any outstanding dues (e.g. rental advance, etc if any) are settled;

b) Cancellation of your Immigration/Work Pass;…

A letter from your employer confirms that you were transferred to their country X office on an indefinite and that your role was subsequently made redundant.

Your intention was to live in country X indefinitely, as per your employment contract, but due to a restructure you were made redundant.

A 'letter of intent' confirms that you had viewed a property in country X with the intention of leasing it.

You were unable to secure new employment in country X therefore you returned to reside in Australia.

Before relocating to country X you lived in a rented apartment in Australia. You moved out of the apartment prior to your relocation to country X.

You jointly own a property in Australia but have not lived there for several years.

Personal effects, including clothes, sports equipment and kitchen utensils were sent to country X.

You changed banking arrangements prior to the relocation, including opening an account suitable for a non-resident.

Upon arrival in country X you opened a bank account and commenced with the assistance of a real estate agent the process of establishing a permanent residence in country X.

You have not been an employee of the Commonwealth Government of Australia and hence have not been a member of the CSS or PSS.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) defines a resident or resident of Australia as:

(a) a person, other than a company, who resides in Australia and includes a person:

(i)  whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia;

(ii)  who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or

(iii)  who is:

(A)  a member of the superannuation scheme established by deed under the Superannuation Act 1990; or

(B)  an eligible employee for the purposes of the Superannuation Act 1976; or

(C)  the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and

The above definitions are applied as 'tests of residency' and if any one of these definitions is met, you will be a resident of Australia for taxation purposes for the period in question.

The primary test for deciding your residency status is whether you resided in Australia according to the ordinary meaning of the word 'resides'. However, where you do not meet this test, you may still have been a resident of Australia for tax purposes if you satisfy the conditions of one of the other three.

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'.

You have a joint ownership interest in a dwelling in Australia however you have not lived there for several years. You were living in rented accommodation and you moved out prior to leaving Australia indefinitely. Personal effects, including clothes, sports equipment and kitchen utensils were sent to country X.

You changed banking arrangements prior to the relocation, including opening an account suitable for a non-resident.

Results of the 'resides' test

As you were living and working in country X indefinitely from when you left Australia, you were not a resident of Australia for tax purposes under this test.

We therefore need to examine the remaining tests to determine your residency status.

Domicile

The domicile test requires you to be domiciled in Australia to be a resident for taxation purposes. There are essentially three types of domicile:

• domicile of origin;

• domicile of choice; and

• domicile of dependency.

Broadly, your domicile of origin is where you were born, or the country of your father's permanent home.

A domicile of choice occurs when you prove an intention to make your home indefinitely in another country. However, there must be both the act and the intention to select a new jurisdiction as your permanent home, for example, applying for permanent residency in another country.

In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

In order for a domicile of choice to be acquired, the common law requires that there be both a change of residence and the intention of residing in the new country permanently or at least indefinitely. The requisite intention without a change of residence, or a new residence without the necessary intention is not sufficient for the acquisition of a new domicile and in either case would suffice for the retention of the existing domicile.

Your domicile of origin is country Z. Your domicile of choice is Australia because you have Australian citizenship. You have not indicated that it was your intention to apply for permanent residency in country X, albeit it was your intention to stay there indefinitely.

For this reason you have retained your Australian domicile.

We now need to determine if you established a permanent place of abode outside Australia.

Permanent place of abode", according to Fisher J (79 ATC at 4317; 9 ATR at 910-911), is:

...the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

The word 'permanent' does not have the meaning of everlasting or forever but is used in the sense of being contrasted with temporary or transitory (Applegate 79 ATC at p.4314; 9 ATR at p.907).

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia lists a number factors used by the Commissioner to assist in reaching a decision on an individual's permanent place of abode. These factors include:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) any intention either to return to Australia at some definite point in time or to travel to another country;

(c) the establishment a home outside Australia;

(d) the abandonment of any residence or place of abode the individual may have had in Australia;

(e) the duration and continuity of the individual's presence in the overseas country; and

(f) the durability of association that the individual has with a particular place in Australia.

Your circumstances

You departed Australia for country X indefinitely.

You state that your intention was to live in country X indefinitely as the employment contract you signed indicated it was for an indefinite period.

You have provided a letter of intent to rent a property in country X.

You have joint ownership interest in a property in Australia however you have not lived there for several years. You were renting your accommodation before you left Australia and you moved out of this accommodation prior to your relocation to country X.

You moved your personal effects, including clothes, sports equipment and kitchen utensils to country X.

You changed banking arrangements prior to the relocation, including opening an account suitable for a non-resident.

Upon arrival in country X you opened a local bank account and commenced with the assistance of a real estate agent the process of establishing a permanent residence in country X.

Apart from your employment and a small group of friends you had no other connections in country X.

Your parent and friends remain in Australia. You have no other connections in Australia.

To assist with our decision we are guided by the example contained in paragraph 35 of IT 2650:

35. An engineer was sent by his Australian employer to the Philippines on a project assignment for a minimum period of 3 to 4 years and he decided to relocate his family in the Philippines. In fact, the assignment was terminated after 2 years and the taxpayer returned to Australia. It was always his intention to return to Australia at the completion of the project. He retained his Australian home and rented it out. On arriving in the Philippines, the taxpayer and his family initially resided for short periods at a hotel and in an apartment. Later, he sub-leased a house which the family occupied until their return to Australia. Having regard to the nature and quality of his use of the place of abode in the Philippines, the taxpayer was considered to have established a permanent place of abode outside Australia (Case R92 84 ATC 615; Case 145 27 CTBR(NS) 1131).

Result : non-resident.

Results of the domicile/permanent place of abode test

The Commissioner is not satisfied that you abandoned your domicile in Australia. However, he is satisfied that your intention was to establish a permanent place of abode outside Australia. Hence you are not a resident of Australia under this test.

The 183 day/usual place of abode test

Under the 183-day test you will be an Australian resident if you are present in Australia for more than183 days during a financial year 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.

You were present in Australia for less than 183 days of the 2012-13 financial year.

Results of the 183 day/usual place of abode test

You were not a resident of Australia under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person.

Results of the superannuation test

You were not a member of the CSS or the PSS or a spouse of such a person. You are over 16 years of age. Therefore, you were not a resident under this test.

Conclusion

You ceased to be an Australian resident from when you departed Australia indefinitely.

Upon your return to Australia as the result of the termination of your employment, you recommenced your Australian residency for taxation purposes.

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