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Edited version of private ruling
Authorisation Number: 1011704833657
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Ruling
Subject: Residency - working overseas
Question
Are you a resident of Australia for income tax purposes whilst working overseas?
Answer
Yes.
This ruling applies for the following period
Year ending 30 June 2012.
The scheme commenced on
1 July 2011.
Relevant facts
You are a citizen of Australia.
Your country of origin is Australia.
You have been offered an open-ended contract of employment to work in Country A.
You are resigning from your job in Australia.
You intend to move to Country A for work purposes for a number of years.
You will rent a property while in Country A.
Your spouse and children will remain in Australia, maintaining the family home.
Your spouse and children may join you in Country A in a number of months if your spouse can gain employment in Country A.
If your spouse fails to obtain employment in Country A, you will return to visit your family in Australia during your time employed in Country A.
You intend to return to Australia at the end of your employment contract in Country A.
You do not have any overseas assets.
Your assets in Australia consist of the family home and a motor vehicle.
All household furniture/possessions will be left in the family home in Australia.
You do not intend on transferring any money from Country A to Australia.
You and your spouse are not Commonwealth Government of Australia Employees and have not held a position with the Commonwealth Government of Australia.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 995-1.
Income Tax Assessment Act 1936 Subsection 6(1).
Reasons for decision
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 paragraph 6(1)(a) 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:
· 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 to be a resident of Australia if they meet the conditions of one of the other three tests.
1. 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; have 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'.
In your case, since your employment ties will be in Country A where you have an open-ended work contract, you will not be dwelling permanently or have a settled place of abode in Australia during the period you are working in Country A. Therefore, you will not be considered as residing in Australia for the period you will be overseas.
2. The domicile test
Generally, 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
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.
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 residential home that you own jointly with your spouse and as your spouse and children will remain in Australia during your period of overseas employment, there is no evidence of any intention on your part to make your home indefinitely outside Australia, along with the fact that you will have strong financial ties with Australia. Accordingly, you are considered to have maintained your Australian domicile.
Based on the facts presented above, it is considered that you will not have established a permanent place of abode outside Australia and are therefore considered to be a resident of Australia for tax purposes under the domicile test for the period that you will work overseas.
3. The 183-day test
Where 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.
This test does not apply to you as you will not be present in Australia for 183 days during the income year.
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.
In your case, you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.
Your residency status
You will be deemed to be an Australian resident for income tax purposes under the tests of residency outlined in subsection 6(1) of the ITAA 1936 from the date of your departure from Australia.