Edited version of private ruling

Authorisation Number: 1011695491725

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Ruling

Subject: residency

Question

Are you a resident of Australia for tax purposes while working overseas?

Answer

Yes.

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

In your tax returns for the relevant income years you have self-assessed as an Australian resident for tax purposes. You have not lodged your other tax return.

You are an Australian citizen for a number of years.

You departed Australia in the relevant income year to work in Country A for an extended period of time.

Your spouse has remained in Australia since your departure to pursue own professional career.

Your children are pursuing university and high school in Australia, and accordingly were also unable to accompany you overseas at this stage.

You have provided a copy of your most recent employment contract, the expatriate employment agreement with the foreign company. It states that your place of repatriation is Australia for the purposes of leave, mobilisation and demobilisation. In addition to your salary you receive a housing allowance and utilities allowance.

You hold a current non-Immigrant resident visa, however, is automatically renewed every 12 months. The visa allows you to ordinarily reside in Country A.

You have provided details of your overseas travel movements for the relevant income years and also another period. During this period you returned to Australia several times.

You departed Australia in order to undertake overseas employment. You have provided details of your overseas employment history.

Upon departing Australia, it was your intention to reside overseas indefinitely, returning from time to time for holidays in the short periods between contracts. You intend to continue residing overseas until you retire.

In Country A you have resided in a rented accommodation. Whilst away in Country B and Country C you also maintained your rental accommodation. You own a motor vehicle in Country A. In addition, you recently purchased an additional studio apartment in Country A.

You have held your primary bank accounts and credit cards in Country A for some time.

You maintain a bank account in Australia.

You, jointly with your spouse, own a residential property in Australia which your spouse and children reside in, two investment properties and one block of land.

Any return trips to Australia over the last six years were for the purpose of holidaying and inspecting your investment properties. During those holidays you stayed in your home or holiday accommodation in other States.

You hold a current Australian driver's licence.

You do not own a motor vehicle in Australia.

You have advised Medicare that you have become a non-resident of Australia for tax purposes. Medicare has advised that they do not deregister individuals from Medicare but a note is put on their file that the individual is a non-resident.

You have a Comprehensive International Medical Coverage.

You voted in the recent and previous Federal Elections via Australian embassies overseas.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6-1(1).

Reasons for decision

Summary

You remain a resident of Australia for tax purposes while working overseas.

Detailed reasoning

The terms resident or 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 for tax purposes. These tests are:

· the resides test

· the domicile test

· the 183 day test

· the superannuation test.

The first two tests are the most applicable in deciding whether an individual remains an Australian resident for tax purposes in the situation where the individual leaves Australia temporarily.

The primary test for residency 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 tests.

The resides test

As you lived and worked in Country A, Country B and Country C for an extended period of time apart from your frequent holidays in Australia, we consider that you are not a resident of Australia for tax purposes under the resides test.

The domicile test

Where an individual does not ordinarily reside in Australia, subsection 6(1) of the ITAA 1936 provides that they may still be considered a resident for tax purposes if they have a domicile in Australia, unless the individual shows that they have a permanent place of abode outside of Australia.

This test generally applies where an Australian resident goes to work in an overseas country for an extended period of time.

Taxation Ruling IT 2650 gives some of the factors which the Commissioner will consider in determining where a taxpayer's permanent place of abode is. These are:

· the intended and actual length of the taxpayer's stay in the overseas country

· whether the taxpayer intended to stay in an overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time

· whether the taxpayer has established a home outside Australia

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

· the duration and continuity of the taxpayer's presence in the overseas country

· the durability of association that the person has with a particular place in Australia, that is, maintaining bank accounts in Australia, informing government departments such as the Social Security Department that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

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 or 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 their home indefinitely in that country, for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

Domicile

The first part of this test requires a person to have a domicile in Australia.

In your case, you are an Australian citizen. There is no evidence of an intention to make your home indefinitely overseas. You went overseas temporarily to work under contract. Your spouse and family did not accompany you. Although you have worked overseas for the past six years, the transient nature of accommodation overseas, your regular return to Australia and your connection with Australia indicates you intend not to make your home in another country. You have maintained your Australian domicile.

The second part of this test is to determine whether a person has established a permanent place of abode outside Australia.

Permanent place of abode

A person's permanent place of abode cannot be ascertained by the application of hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

IT 2650 stresses that the duration of an individual's stay or intended stay out of Australia is not, of itself, conclusive and must be considered along with all the other relevant factors.

In your case, you have accepted contracts to work for various companies in Country A, Country B and Country C for some years.

You have stated that it is your intention to continue with your overseas employment until when you retire and return home in Australia and that you have chosen to reside indefinitely overseas while under employment contract, only returning to Australia for holidays. You have leased a home in Country A for a long period of time and you recently purchased an apartment there.

We consider that even you have worked overseas for an extended period of time, you have not established a permanent place of abode outside Australia for the following reasons:

· you returned to Australia on a regular basis, that is, you have not left Australia permanently

· your spouse and family did not accompany you overseas and continue to live in a family home owned by you and your spouse in Australia

· you maintain a bank account in Australia and your salary is remitted to Australia and

· you retain a connection with Australia with the retention of your Medicare cover, by voting in the 2009 and previous Federal elections and by holding a current Australian driver's licence.

You are therefore considered to be a resident of Australia for tax purposes under the domicile test. It is not necessary to consider your residency status under the other tests mentioned (the 183 days and the superannuation test).