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Edited version of private ruling
Authorisation Number: 1011721773101
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Ruling
Subject: Residency
Question and answer
Are you a resident of Australia for taxation purposes?
No.
This ruling applies for the following period
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on
1 July 2010
The scheme that is the subject of the ruling
You are a citizen of an overseas country.
Your parents and sibling live overseas.
You have lived in Australia for several years.
You returned to your country of origin due to family reasons.
You have commenced work overseas.
You have a contract which will require you to live overseas for the next few years.
You are not sure if you will return to Australia after your work contract ends.
You have significant assets overseas.
You have a few assets in Australia.
You rent a property overseas.
You are not a Commonwealth government employee.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1).
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 Subsection 995-1(1).
Explanation (This does not form part of the ruling)
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 purpose 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 for income tax purposes. These tests are:
1. The resides test
2. The domicile test
3. The 183 day test
4. 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other 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'.
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.
In your case, you left Australia went overseas to live and work and you intend to be overseas for the near future. As you will not be living in Australia, you would therefore not be considered to be residing in Australia according to ordinary concepts.
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 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 will have established a permanent place of abode in China based on the following information:
· You have a work contract for the next few years
· You are renting a property overseas
· Your immediate family live overseas
· You have significant assets overseas
On these facts, it is considered that you will have established a permanent place of abode outside Australia. Consequently, you would not satisfy the domicile test.
The 183 day test
When 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 have not been present in Australia for more than 183 days..
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.
You are not a Commonwealth Government employee.
You are not a resident under this test.
Your residency status
You are a non-resident of Australia for income tax purposes until you return to Australia.
Please note:
If you cease being an Australian resident or a resident trust for CGT purposes, you are taken to have disposed of certain assets for their market value on the day you stopped being a resident.
If you ceased being an Australian resident on or after 12 December 2006, or ceased being a resident trust for CGT purposes on or after that date, you are taken to have disposed of each of your assets that are not taxable Australian property for their market value at the time you ceased being a resident. In the case of any indirect Australian real property interests and options or rights to acquire such interests, you are taken to have immediately re-acquired these assets for their market value.
If you are an individual, you can choose to disregard all capital gains and capital losses you made when you stopped being a resident.
If you ceased being a resident on or after 12 December 2006 and you make this choice, those assets are taken to be taxable Australian property until the earlier of:
A CGT event happening to the assets (for example their sale or disposal), or
You again become an Australian resident.
The effect of making this choice is that the increase or decrease in the value of the assets from the time you cease being a resident to the time of the next CGT event, or of you again becoming a resident, is also taken into account in working out your capital gains or capital losses on those assets. The way you prepare your tax return is generally sufficient evidence of your choice.