Edited version of private ruling

Authorisation Number: 1011742082170

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Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are originally from Country A but you resided in Australia for decades.

You moved to Country X a few years ago to commence employment with your current employer.

Your employer is not a resident of Australia.

Your initial contract was for a period of two years with an option to extend your employment on terms mutually agreeable to both parties.

You have since extended your employment contract.

It is possible that your employment contract will be further extended.

Due to your age, you may retire at the end of the current contract or after a further extension of the current contract.

You have relocated to Country X and you will reside there for the duration of your employment contract.

You stated that you have not decided to return to Australia to live at the expiration of your employment. You are attracted to remaining a resident of Country X for various reasons including financial benefits available to you as a permanent resident of Country X.

The term of the contract requires your employer to provide you with a furnished three bedroom apartment exclusively for you and your family for the duration of your employment.

You and your spouse keep your personal effects at this address. You have purchased a television and other household appliances, sporting equipment and other personal effects at this address along with other daily necessities.

You formed valued personal relationships with other residents of Country X through your work and your membership of various social and sporting clubs and associations.

Your work schedule is such that you work continuously for eight weeks at a time with two weeks off between each rotation.

You only return to Australia for three or four times each year for 10 to 12 days at a time to visit family and friends. During other periods of rotation you and your spouse either remain in Country X or travel to other countries.

You are not required to leave Country X or travel to Australia during the period of your employment, but if you choose to do so, your employer covers the cost of your travel as well as your spouse's travel to Country X.

You have adult children who are independent of you in Australia. Your children are married and have their own families.

Your spouse had joined you in Country X for a period of time; however your spouse also spent long periods in Australia to provide assistance to your children in raising their young family. You and your spouse kept a house in Australia to provide your spouse with a base for this purpose.

However, you and your spouse have recently decided to sell the house in Australia. You have also commenced looking at purchasing a house in Country X. You inspected a number of properties and are still looking for the appropriate one.

Your other assets in Australia consist of an investment property and your contributions in the Australian Superannuation fund when you were employed in Australia.

You maintain a bank account in Country X from which all your personal living expenses are paid and you have recently established other financial investments in Country X that you intend to maintain while you are living there.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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, and

· 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

Since you have not been living in Australia for a few years, you are not considered to be residing in Australia under this test for the relevant income year.

Therefore, you are not a resident of Australia under this test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you are an Australian citizen, and although your country of origin is Country A, you moved from there to Australia permanently when you were a small child.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

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

(b) whether the taxpayer 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) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

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

(f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

Your situation based on the facts provided are such that you still have a durability of association with Australia but your continual presence and association with Country X is also growing. On balance, it would not be sufficient to deem that you have not established a permanent place of abode outside of Australia.

Therefore, although you have maintained your Australian domicile, since you also have a permanent place of abode outside of Australia, you are not considered to be an Australian resident under this test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

In your case you do not intend to be physically present in Australia for more than 183 days during relevant income year.

Therefore, you are not a resident of Australia under this test.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

· the spouse or child under 16 of a person covered by either of the above funds.

In your case, neither you, nor your spouse, are eligible to contribute to the abovementioned superannuation schemes.

Therefore, you are not a resident of Australia under this test.

Your residency status

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.