Edited version of private ruling

Authorisation Number: 1011664915356

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Ruling

Subject: Residency

Question 1

Am I an Australian resident for taxation purposes?

Answer: No

Question 2

Is my income from working in Qatar assessable in Australia?

Answer: No

This ruling applies for the following period

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2010

Relevant facts

You are an Australian citizen, single with no dependants.

You will depart Australia part way in the year of income to take up a contract position with an educational institution in country X.

Your contract position is English as a second language (ESL) senior advisor. You will be responsible for program development to assist ESL teachers working at another educational institution in conjunction with a three year project your employer has entered into with the other educational institution and country X's education department

You intend to be in country X working on this contract for at least two years. It is possible that your contract with your educational institution may be extended for up to three years. This is the full duration of the project your employer has in country X.

In country X, you will be based in one location and will lease a furnished apartment and car at your own expense.

You will not be accompanied to country X by family members.

You intend to be involved in the local community of country X through friendships, organisations and community events. You have already made enquiries with a local sporting club.

You will not be returning to Australia during your contract in country X.

It is your intention to return to Australia.

You own a home in a major Australian city which you will rent out during your time spent in the country X.

You own a small number of rental properties in Australia, listed Australian shares and have funds in an Australian superannuation account. You will retain these assets during your time in country X.

You are not a member of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation (PSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Question 1

An Australian resident is defined in subsection 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (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:

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 be still 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 for a considerable time at a particular place, 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 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 it is your intention to 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.

In your case, you have a contract in the country X for at least two years; you are based in one location and will lease a furnished apartment and car. It is considered that you have established a permanent place of abode in the country X. Therefore, you are not considered to be an Australian resident under the domicile test.

3. 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 established a permanent place of abode outside of Australia.

4. The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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 the spouse of such a person, or the child under 16 of such a person. Therefore, you will not be treated as a resident under this test.

Your resident status

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

Question 2

Subsection 6-5(3) of the ITAA 1997 provides that if you are a foreign resident, your assessable income is that income with an Australian source. Therefore, as your employment income from working in another country does not have an Australian source, it is not assessable in Australia in terms of subsection 6-5(3) of the ITAA 1997.