Edited version of private ruling

Authorisation Number: 1011703356346

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Ruling

Subject: Residency

Question

Are you an Australian resident for income tax purposes?

Answer: No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commences on:

1 July 2003

Relevant facts and circumstances

You are a pilot employed by country X airlines and based in country X.

You were born in country Y.

You hold a country Y and Australian passport.

You left Australia over seven years ago to work in country X.

You rent an apartment in country X.

Your whole family used to live with you in country X until a few years ago when your child returned to Australia.

Your other child returned to Australia over two years ago.

Your spouse returned to Australia shortly after to care for your child due to a medical condition and will return to country X when your child's medical situation permits.

You intend to reside in country X until you retire.

You pay tax in country X on your employment income including bonuses and benefits.

You are a member of a certain sporting club in Australia but have not been very active in the last few years due to the little time you spend in Australia.

You are not a member of any club in country X.

Neither you nor your spouse have been Commonwealth Government of Australia employees.

You have the following overseas assets:

Country Y

A small town house where your relatives live;

An investment account and bank accounts.

Country X

Country X shares;

A bank account;

A mortgage with a country X bank.

Assets in Australia

· Vacant land deriving no income;

· A house where your child lives, which was previously a rental property;

· A small rural property that is rented out;

· Your personal home.

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 for income tax purposes. 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.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The 183 day and superannuation tests are not relevant in your case.

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 have resided in country X for over seven years, you are not considered to reside in Australia under the resides test.

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.

The expression permanent 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 the person intends to live for the rest of their life. It should be contrasted with temporary or transitory place of abode outside of Australia.

Taxation Ruling IT 2650 outlines some of the factors considered relevant in determining a person's permanent place of abode. These are summarised at paragraph 23 of the ruling as;

· the intended and actual length of the individual's stay in the overseas country (a period of two years or more in a country would generally be regarded as a substantial period)

· any intention to return to Australia at some definite point in time or travel to another country

· the establishment of a home outside of Australia

· the abandonment of any residence or place of abode the individual may have had in Australia

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

· the durability of association that the individual has with a particular place in Australia.

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor is decisive.

Residency status

In your case:

You left Australia for country X over seven years ago.

Your whole family used to live with you in country X until a few years ago.

You have shares and bank accounts in country X.

You intend to reside in country X until you retire.

You have a vacant block of land and a small rural property in Australia.

You also have your personal home in Australia and a house in which your child lives.

All these factors are relevant, however, the length of time you have been overseas and your intention to remain overseas until you retire is of sufficiently long enough period that the weight of this factor exceeds the combined weight of the other considerations. Therefore, it is considered that you have established a permanent place of abode outside of Australia. Accordingly, you are a foreign (non) resident of Australia for income tax purposes.