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This edited version has been archived due to the length of time since original publication.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.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your written advice

Authorisation Number: 1013097123668

Date of advice: 28 September 2016

Ruling

Subject: Residency

Issue 1 Question 1

Are you an Australian resident for tax purposes during the period you are working in Country A?

Answer

Yes.

Issue 2 Question 1

Are Australian residents employed by Organisation X exempt from paying income tax in Australia?

Answer

No.

This ruling applies for the following periods:

The scheme commences on:

1 July 20ZZ

Relevant facts and circumstances

You were born in Australia and have lived here since 19xx.

You moved to Country A during the 20XX financial year to work for Organisation X on a 12 month contract with no planned return to Australia during this period.

Contracts with Organisation X are not offered for longer than 12 months but you have volunteered to stay longer.

You are residing in an employer provided camp with security due to inherent danger in Country A.

You will open a Bank of Country A account but will also utilise Australian bank accounts to distribute your pay due to instability in Country A.

You own two Australian investment properties, one of which you are intending to sell.

You do not own an Australian principal place of residence and was renting before leaving Australia.

You are single and do not have any dependents in Australia.

You will pay medical coverage through Insurance Company Y in Country A.

Relevant legislative provisions

Income Tax Assessment Act 1936 (ITAA 1936) subsection 6(1).

Income Tax Assessment Act 1997 (ITAA 1997) subsection 995-1(1).

Domicile Act 1982 section 10.

Issue 1 Question 1

Are you an Australian resident for tax purposes during the period you are working in Country A?

Reasons for decision

Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose of the 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 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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

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'.

Since you have moved to Country A during the 20XX financial year and do not intend to return to Australia during the initial 12 month contract, you are not residing in Australia according to the ordinary meaning of the word.

The domicile test

Section 10 of the Domicile Act 1982 provides that "the intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

Even though your intention is not to return to Australia during the initial 12 month contract and you have also volunteered to stay beyond this initial period, you have failed to prove that you intend on making Country A your home indefinitely because it is clearly foreseeable that you will return to Australia once your current contract has expired. Your place of domicile is still considered to be in Australia.

Furthermore, to be deemed an Australian resident, the Commissioner has to be satisfied that your "permanent place of abode" is not outside Australia. "Place of abode" refers to your dwelling place or the physical surroundings in which a you live (R v Hammond (1852) 117 E.R. 1477 at p. 1488). Paragraph 23 of Taxation Ruling IT 2650 emphasises that the following factors are relevant in determining whether a taxpayer has established a permanent place of abode:

In applying factor (a) to your case, while your intention is to stay longer, your current contract term of 12 months coupled with Organisation X's policy of offering contracts not longer than this timeframe do not suggest a permanent stay in Country A.

Factor (b) is difficult to be determined at this time as you are not definitely returning to Australia at the end of the contract nor are you moving to another country based on your current circumstances.

In relations to factor (c), paragraph 28 of Taxation Ruling IT 2650 considers that facilities such as barracks are deemed to be temporary accommodation. Therefore, the camp that you are living in is unlikely to be considered a permanent place of abode overseas.

Giving up the property you were renting is deemed to be an abandonment of your residence in Australia. Subject to the other factors, this builds a case towards the establishment of a place of abode overseas.

As discussed above, the duration of 12 months is not substantial enough to be considered a permanent presence in Country A.

Lastly, maintaining Australian bank accounts and an investment property suggest a strong association with Australia.

Paragraph 24 of Taxation Ruling IT 2650 states that while no single factor will be decisive, factors (c), (e) and (f) seem to hold the greatest weight. In your case, factor (b) is undecided and factor (d) is in your favour. However, factor (a), together with the factors with the greatest weight- (c), (e) and (f) suggest that you have not established a permanent place of abode outside Australia. You are therefore considered an Australian resident for tax purposes.

Issue 2 Question 1

Are Australian residents employed by Organisation X exempt from paying income tax in Australia?

Reasons for decision

Detailed reasoning

Taxation Ruling 92/14 explains that income tax exemption is available only for holders of a high office, representatives, holders of an office or experts/consultants working for an International Organisation.

Working in Organisation X does not come under any of the roles mentioned in the above paragraph. Therefore, we do not need to consider whether Organisation X is an International Organisation. No exemptions from paying Australian income tax are available from your employment with Organisation X.

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