Edited version of private ruling

Authorisation Number: 1011721399747

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Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes for the years ended 30 June 2010 and 2011?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2010.

Year ending 30 June 2011.

The scheme commenced on

1 July 2009

Relevant facts and circumstances

You moved to Country X in 2007 to embark on a new career opportunity with an international company. You have been living in Country X since then.

You got married in Country X in2009 and your intention was to move back to Australia by early 2011. However due to the impending birth of your child, you and your wife made the decision to postpone your move back to Australia until early 2012.

Upon instruction from ATO staff, you completed a online questionnaire to determine your residency status. You supplied a copy of the following responses with your request for a private ruling:

· You are an Australian citizen.

· You hold a temporary residency visa in order to travel to Country X. The purpose of your move to Country X was for work purposes.

· Your intention was to move back to Australia in appropriately three years.

· You intend to return to Australia between 2011 and 2012.

· You came back to Australia on several occasions for holidays.

· You originally rented a room with a friend between 2007 and 2009. You then moved into your current place of residence, which was originally your wife's apartment.

· Your assets in Country X consist of bank accounts and general savings.

· In Australia, your assets consist of two properties and a share portfolio.

· You have rented out your properties to tenants.

· Your employment contract was valid for three years. You resigned from this job in early 2011.

· Your social connections in Australia consist of a wide family and friend network.

· Your social connections in Country X consist of your wife's family and friends.

Relevant legislative provisions

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

Subsection 6-5(2) of the Income Tax Assessment Act 1997

Subsection 6-5(3) of the Income Tax Assessment Act 1997

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

Reasons for decision

Summary

You are considered to be an Australian resident for income tax purposes.

Detailed reasoning

Residency

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 reside test

· the domicile test

· the 183 day test

· 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 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. 3^rd 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 living in Country X, you are not considered to be residing in Australia under this 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.

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.

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 their 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.

Taxation Ruling IT 2650 provides assistance in determining a person's permanent place of abode. It is a question of fact which must be determined in the light of the circumstances of each case. 

Some of the factors considered to be relevant in determining a person's place of abode include:

a) the intended and actual length of the individual's stay in the overseas country;

b) whether the individual 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;

c) the establishment of a home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, a family or a household) outside Australia;

d) the abandonment of any residence or place of abode the individual may have had in Australia;

e) the duration and continuity of the individual's presence in the overseas country;

f) the durability of association that the individual has with a particular place in Australia, eg., maintaining bank accounts in Australia, informing government departments that he or she is leaving permanently, place of education of his or her children, family ties, etc.

We consider the following factors which indicate that you have a permanent place of abode in Australia:

· In your case, you moved to Country X in 2007 to embark on a career opportunity.

· Your intention was always to return to Australia after approximately three years.

· Your initial employment contract was valid for four years. You departed Australia on a temporary visa.

· You married your wife in Country X in 2009. Your original intention was to move to Australia in 2011. However due to personal circumstances you have postponed your return back to Australia to 2012.

· You own several properties in Australia and intend to use one as a permanent place of residence upon your return. Prior to leaving Australia, you rented your properties out.

· You also hold a share portfolio in Australia.

· In comparison, your asset portfolio in Country X consists of bank statements and savings.

· You are an Australian citizen and have family and friends in Australia with whom you have maintained close ties. You have returned to Australia to spend time with your family and friends on several occasions since you moved overseas.

· Your wife's family and your friends reside in Country X.

Based on these facts, on balance it is considered that you are an Australian resident for tax purposes for the years ended 30 June 2010 and 2011 as your intention is always to return to Australia after your work contracts.

The 183-day test

This test will not be applied to your circumstances as it has been identified that your permanent place of abode is in Australia.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

This test does not apply to you as you and your spouse are not eligible to contribute to the PSS or the CSS.

Conclusion

You are considered to be an Australian resident for tax purposes as you have satisfied the domicile test as outlined in subsection 6(1) of the ITAA 1936.

Source of Income

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from Australian sources.

For the years ending 30 June 2010 and 30 June 2011, you are considered to be an Australian resident for tax purposes under the Domicile test outlined in subsection 6(1) of the ITAA 1936 during the period you resided in Country X. Therefore, you should include your income derived from your employment in County X in your Australian tax returns for the 2009-10 and 2010-11 income years.