Edited version of private ruling

Authorisation Number: 1011737098937

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Ruling

Subject: Residency status

Questions and Answers

1. Were you a resident of Australia for tax purposes for the year ended 30 June 2010?

No

2. Are you a resident of Australia for tax purposes for the year ending 30 June 2011?

No

3. Will you be an Australian resident for tax purposes for the year ending 30 June 2012 from your date of arrival in Australia?

Yes

This ruling applies for the following periods:

Year ended 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You were born in Country X and have lived there most of your life.

One of your children lives in Country X, another child lives in Country Y and one child lives in Australia.

Your spouse died a few years ago. Since your spouse died, you have been contemplating moving to Australia.

You have substantial assets in Country X, including the family home, furniture, personal possessions, art collection, bank accounts, a motor vehicle and business interests. You also have an investment overseas.

You are a member of a religious congregation in Country X.

You hold a temporary visa.

You visited Australia for the first time during the year ended 30 June 2009 for a few months. You purchased a unit near your child. You lived in the unit for a very short time. You will live in the unit when you move to Australia on a permanent basis.

You were diagnosed with an illness in Country X where you had surgery.

You travelled to Australia during the year ended 30 June 2010 to begin treatment. This was the main reason for your visit to Australia. You stayed with your son most of the time. You returned to Country X in the year ended 30 June 2011 following the completion of the treatment.

You were not in Australia for more than one half of the year in the year ended 30 June 2010 and this will also be the case for the year ending 30 June 2011.

You have applied for permanent residency and your application is still being processed.

You will transfer a significant portion of your personal funds to Australia once your immigration is approved.

Your plan to move to Australia has been delayed due to your medical condition and the delay in the processing of your immigration application. At this stage you plan to move to Australia on a permanent basis on date A in the year ending 30 June 2012.

You intend to put your house in Country X on the market before you move to Australia.

Apart from the unit in Australia, your other assets in Australia include a large investment, a motor vehicle which you purchased in your own name and several bank accounts.

You have private health insurance cover in Australia which you continue to maintain.

You and your spouse have never been a member of a Commonwealth Government superannuation scheme

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

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 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:

· 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

a) Income years ended 30 June 2010 and 2011

The resides test

The ordinary meaning of the word reside, according to the dictionary meaning, 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.

Taxation Ruling TR 98/17 specifies that the period of physical presence in Australia and an individuals behaviour while present in Australia are important factors for the purpose of the resides test and may reflect a degree of continuity, routine, or habit that is consistent with residing here.

Whether a considerable time has elapsed to demonstrate that an individual's behaviour has the required continuity, routine or habit is a question of fact and the Commissioner's view of the law is that six months is a considerable time when deciding whether an individual's behaviour is consistent with residing in Australia.

When behaviour consistent with residing here is demonstrated over a considerable time, an individual is regarded as a resident for taxation purposes from the time the behaviour commences. In considering an individual's behaviour while in Australia, the Commissioner considers a number of factors, including:

1. intention or purpose of presence

2. family and business/employment ties

3. maintenance and location of assets, and

4. social and living arrangements.

Although you have been contemplating moving to Australia since your spouse passed away, you have never been a resident of Australia according to ordinary concepts as:

· On both your visits to Australia, you did not come with the intention to live here permanently

· Whilst you have one child who lives in Australia, your other children are not located in Australia. As such your family ties are not mainly in Australia

· You have substantial assets in Country X, including the family home, furniture, personal possessions, art collection, bank accounts, a motor vehicle and business interests. You also have an investment overseas.

· You are a member of a religious congregation in Country X.

· You purchased a unit in Australia near your child, however you lived there for only a short time.

Based on the above facts it is considered that you were not an Australian resident for taxation purposes for the year ended 30 June 2010 or for the year ending 30 June 2011 under the resides test as your behaviour in Australia has not reflected a degree of continuity, routine or habit that is consistent with residing here.

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 your case you are domiciled in Country X. This is your domicile of origin.

In order to show that a new domicile of choice in a country outside Australia has been adopted, a 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.

You have not yet abandoned Country X or chosen another country as your permanent home. You have not changed your domicile to Australia. Your permanent place of abode is outside Australia, namely in Country X.

Thus you are not an Australian resident under the domicile test.

The 183 day test

Under this test, a person is required to be actually present in Australia for a total period of more than half the year of income, unless it can be established that the person's usual place of abode is outside Australia and there is no intention to take up residence here. The test applies in relation to the relevant income year rather than a calendar year.

In your case you were not in Australia for more than one half of the year in the year ended 30 June 2010 and this will also be the case for the year ending 30 June 2011.

Furthermore, your usual place of abode was in Country X for the income year ended 30 June 2010 as that is where you continued to live habitually. This will also be the case for the year ended 30 June 2011. Accordingly you are not an Australian resident under the 183 days test.

The superannuation test

An individual is 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 or your late spouse were never an employee of the Commonwealth Government of Australia.

Your residency status from 1 July 2009 to 30 June 2011

For the period 1 July 2009 to 30 June 2010, you were not a resident of Australia under any tests of residency outlined in subsection 6(1) of the ITAA 1936. You were therefore a non-resident of Australia for taxation purposes for that period. The situation is the same for the year ending 30 June 2011.

b) Income year ended 30 June 2012

As mentioned above, there are 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 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 tests do not need to be continued as residency for Australian tax purposes has already been established.

Paragraph 16 of TR 98/17 provides that a migrant who comes to Australia intending to reside here permanently is a resident from arrival.

In your case:

· You intend to move to Australia on a permanent basis on date A in the year ending 30 June 2012

· You have purchased a unit in Australia in which you will live

· You intend to sell your home in Country X before you move to Australia

· You have a child who lives in Australia and you have purchased the unit in a location which is close to your child

· You have private health insurance cover in Australia which you continue to maintain

· Apart from the unit in Australia, your other assets in Australia include a large investment, a motor vehicle which you purchased in your own name and several bank accounts.

· Your application for permanent residency is currently being processed

· You will transfer a significant portion of your personal funds to Australia once your immigration is approved.

Based on the information you have provided, it is considered that you will be an Australian resident for tax purposes from the date of your arrival as your behaviour in Australia will reflect a degree of continuity, routine or habit that will be consistent with residing here.