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Edited version of private ruling
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Ruling
Subject: Residency
Am I an Australian resident for tax purposes?
No.
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commenced on
1 July 2009
Relevant facts
Your partner received and accepted an offer in another country for a defined period, commencing on a specific date. You departed Australia to join him a couple of months later.
You rented out your house in your home city to friends. The tenancy agreement was for one year with an option of an additional year. You have advised the tenants that you wish to continue renting out your house for the second year.
You intend to return to your home city some time in the future.
In the city of the other country where you are located, you and your partner rented an apartment. The tenancy agreement was for six years (this is a standard duration for a tenancy agreement in the other country).
Your intention was to be located in the other country for at least the duration of your partner's fellowship and longer if you obtained a suitable job.
You did voluntary work two days a week in the other country.
Your partner joined a local sport team.
You and your partner set up a bank account and obtained health insurance in the other country.
About half a year later, you received an offer to take up a position with a company in a third country as a consultant.
As you had no employment in the other country, you accepted a short contract. You arrived in the third country a couple of months later. Your contract concludes on a specific date. Your partner remained in the other country.
You and your partner have not at any time been employed by the Australian government. Consequently, you and your partner are not eligible members of Australian government superannuation funds.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1997 Subsection 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 term '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 at particular places, 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, it was your intention to be located in the other country for at least the term of your partner's fellowship. You resided in the other country for more than half a year before relocating to the third country for a short contract. It is considered that you have established permanent places of abode in the other country and the third country. 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 were not present in Australia for 183 days during both years of income and 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 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 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.