Edited version of private ruling

Authorisation Number: 1011696261818

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Ruling

Subject: Residency

Question 1

Are you an Australian residence for tax purposes?

Answer

Yes.

This ruling applies for the following period:

Income year ending 30 June 2011

Income year ending 30 June 2012

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You paid taxes in Country A for the time you worked.

You have earned Australian income for the income year ending 30 June 2011 which is approximately $9,000.

You are going to work in Country A from January 2011 until December 2011.

You will be in Country A on a work visa.

You will be paying tax in Country A for the income you earn there.

Your work visa will expire in the next few months and you will extend/renew your visa for 12 months, as soon as you arrive in Country A.

You will return to Australia in December 2011 for 6 weeks.

There is a possibility that you may go back to Country A to work in 2012.

You will go to Country A and organise to rent a flat.

You have a bank account in Country A and no other assets.

You have a bank account in Australia.

You live with family in Australia and currently do not own any property.

You have no social or sporting connections in Australia.

You do not have any dependents. You advised that you are divorced and your two children are adults who live independently.

You are not a Commonwealth Government of Australia employee.

Relevant legislative provisions

Subsection 995-1(1) of the Income Tax Assessment Act 1997.

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

International Tax Agreements Act 1953 Sch28-Art15.

Reasons for decision

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as 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. These tests are:

        the resides test

        the domicile test

        the 183 day test

        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. If the primary test is satisfied the remaining three tests do not need to be considered.

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.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), 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 Australia from the date of your departure in January 2011 and have stated you will visit in December 2011 for six weeks, you are not considered to be residing in Australia.

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 domicile outside of Australia.

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law (Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny [1869] L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) .

In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1), it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency.

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 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 his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice. 

Based on the following you

· have gone to Country A to work until December 2011 which may possibly extend to December 2012.

· Will be in Country A under a working visa which you may renew for 12 months in January 2012.

You have proved that you do not have an intention to make your home indefinitely outside Australia. Therefore the Commissioner is satisfied that you have a domicile in Australia.

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 live in Australia in the foreseeable future does not prevent the taxpayer setting up a permanent place of abode elsewhere in the meantime.

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.

Some of the factors which have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal and which are used by this Office in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

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

· whether the taxpayer intended to stay in the 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 (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), 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; and

· the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security 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.

On balance as:

· You intend to stay overseas to work in 2011 which could possibly extend to December 2012. You have intentions to return to Australia at a definite point in time.

· Your reason for leaving Australia is to work in Country A.

· You have no association with sporting clubs in Australia or Country A and you do not have any dependents in Australia.

· You have a bank account in both countries.

· You will organise a rental property to live in when you arrive at Country A.

You ties to Australia are strong and therefore the Commissioner considers that you have not established a permanent abode outside Australia

As you have not proved that you have an intention to make your home indefinitely outside Australia and have not established a permanent place abode outside Australia, the Commissioner is satisfied that you do not have a domicile outside Australia. Therefore you are an Australian resident for taxation purposes under this test.

The 183-day test

Under this test, if you are actually present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that:

· your usual place of abode is outside Australia, and

· you have no intention to take up residence here.

As you will be outside Australia for more than 183 days, you are not a resident under this test. 

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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

This test does not apply to you as you are not an employee of the Commonwealth Government of Australia.

Your residency status

As you satisfy the Domicile test, you are a resident of Australia for taxation purposes under the domicile test.