Edited version of private ruling

Authorisation Number: 1011643127392

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Residency

Question 1

Are you an Australian resident for income tax purposes?

Answer:

No

Question 2

Is your income derived from Country X assessable in Australia?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ending 30 June 2011

The scheme commences on:

1 July 2007

Relevant facts and circumstances

You are an Australian citizen.

You left Australia in the 2007-08 income year and travelled to Country X to work.

You are on an employer sponsored visa which has been renewed every year.

The purpose of your visit in Country X was to work.

You are living with your parents in Country X and you are single.

You were renting when you were in Australia.

You are not a contributing member of a Commonwealth Superannuation Scheme.

Relevant legislative provisions

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

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

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. These tests are:

1. the resides test

2. the domicile test

3. the 183 day test

4. the superannuation test

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 meet the conditions of one of the other three 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 ones settled or usual abode, to live in or at a particular place.

As you are residing in Country X, you are not considered to be residing in Australia under this test.

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.

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

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.

In your case, you are an Australian citizen, and there is no evidence of an intention to make your home indefinitely in Country X. Therefore, you are considered to have maintained your Australian domicile.

However, you have established permanent residence in Country X. You are living with your parents in Country X. You have a permanent employment in Country X. Your employment contract has been renewed every year since your arrival in Country X.

Based on these facts, it is therefore considered that you have established a permanent place of abode in Country X.

3. The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode is in Country X.

4. 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 contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not be treated as a resident under this test

Your residency status

As you are not deemed to be a resident of Australia under any tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be a resident of Australia for income tax purposes from the date of your departure from Australia.

Assessability of income 

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident of Australia includes all the ordinary income derived directly or indirectly from all Australian sources during the income year.

A foreign resident is a person who is not a resident of Australia.

Salary and wages are regarded as ordinary income.

The source of income derived from employment is generally the place where the duties or services are performed (Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76).

Your employment duties carried on outside of Australia are considered to be sourced out of Australia. Therefore the income derived in relation to such employment is not assessable in Australia under subsection 6-5(3) of the ITAA 1997 as you are a foreign resident.