Edited version of private ruling

Authorisation Number: 1011443181441

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Ruling

Subject: Residency

Questions and answers:

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following period/s:

Year ended 30 June 2010.

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are an Australian citizen by birth.

You have no spouse or children.

You left Australia to take up work in country A.

Prior to moving to country A you worked in Australia.

You were living and working in country A for a number of months prior to taking up your current work contract.

You intend staying in country A for a few more years, possibly more. This will depend on the success of your employment.

You cannot say for certain whether you will return to Australia or seek employment opportunities overseas should your current employment be terminated. However, you do not see yourself returning to Australia to work in the foreseeable future.

You have a residential work permit for country A.

Your employer covers the on-going costs of renewing any necessary visa's or work permits, provides you with a house in which to live in country A, and pays for your return air travel from country A to your 'point of origin' in Australia during rotational leave.

Your employment contract is for an indefinite period.

You pay tax in country A on your employment income.

Your income is paid into an Australian bank account.

You have Australian bank accounts and other Australian investments.

You receive interest, dividend and trust distributions from your investments in Australia.

You do not have any bank accounts in country A.

You return to Australia for approximately three weeks each year to visit friends and relatives.

You are the director of a number of companies that are used to manage family investments. When in Australia you have meetings to discuss business strategies for the companies.

You own a residential property in Australia. You lived in this property for some time when you moved to country A. You intended to sell this property as soon as possible, because it has become superfluous to your needs.

You are yet to take any steps to sell the property and intend on returning to Australia later this year to make arrangements to sell. The property is currently furnished and being rented out.

When you left Australia you distributed your personal effects that you did not need to take with you to country A between your family and friends.

You have friends and extended family in Australia.

You are not involved in any social clubs or community based organisations in Australia.

During your leave time you have taken holidays to other parts of country A and to other countries when you are not in Australia.

You have learnt the local language in country A and are active in the local community through the attendance and support of local sporting clubs and other community groups.

You are not and have never been a Commonwealth Government of Australia employee.

You lodged your 2009 return as a non-resident and seek this ruling to clarify your residency status as you intend to stay in country A indefinitely.

Relevant legislative provisions

Subsection 6(1) of the Income Tax Assessment Act 1936

Section 6-5 of the Income Tax Assessment Act 1997

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.
Are you an Australian resident for tax purposes?

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 an Australian resident for income tax purposes. These tests are:

1. The resides test

2. The domicile test

3. The 183 day test

4. The superannuation test

The first two tests are examined in detail in Taxation Ruling 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 considered to be an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

1. The resides test

The ordinary meaning of the word reside, according to the dictionary definition, 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.

As you are residing outside of Australia and have no set plans to return to Australia permanently in the near future, you are not considered to be residing in Australia.

2. 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.

Domicile

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice by operation of law.

In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

In your case, you have advised that you are unsure about whether you will extend your stay in country A, seek further work overseas or return to Australia. You have not stated that you will not return to Australia. Therefore, you are considered to have maintained your Australian domicile.

Permanent place of abode

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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

Taxation Ruling IT 2650 outlines the elements to be considered when determining whether a person has established a permanent place of abode outside of Australia. The ruling states that all of the circumstances of each case need to be considered and not one factor is determinative.

Factors to be considered include:

- intended and actual stay overseas

- intention to stay in one country or move between countries

- whether a home has been established outside of Australia

- the duration and continuity of presence overseas, and

- the durability of association with Australia.

Although you maintain economic ties with Australia through your family companies, investments and your rental property you have established your life in country A through your long term employment contract, social networks and involvement in local community and sporting groups. You are considered to be a non-resident of Australia under the domicile test.

The 183 day test

When a person is present in Australia for 183 days 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 do not satisfy this test as you have not spent 183 in Australia in any financial year, stating you generally spend 3 weeks of your leave each year in Australia.

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.

You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person as nor you or your wife have ever been employed by the Commonwealth of Australia. Therefore, you will not be treated as a resident under this test.

Your resident status

The Commissioner is satisfied that your usual place of abode is outside Australia. Therefore you are a non-resident of Australia for tax purposes.