Edited version of private ruling

Authorisation Number: 1011750871658

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Ruling

Subject: Residency status

Question and answers:

Are you a resident of Australia for income tax purposes for the 20XX-XX, 20XX-XX and 20XX-XX income years?

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2009

Relevant facts

You were born in Australia and are an Australian citizen.

You married an overseas national.

You have lived in your spouse's country of origin for a number of years.

You have been employed overseas for a greater number of years.

All of your income for a greater number of years has been foreign sourced.

You have entered and left Australia on many occasions during the past greater number of years.

You currently have a contract to work overseas with a renewable working visa option.

You have children who are over the age of 16 years of age who reside with your ex-spouse in Australia.

Your children do not accompany or visit you overseas.

When you holiday in Australia your children only stay with you briefly from time to time and you do not claim a family tax benefit for them.

You have the assets in Australia including a residence.

You have maintained the residence for use when you return to Australia for holidays.

You have a residence in spouse's country of origin that is owned by your spouse.

You have no social or sporting ties with Australia.

You have no overseas social or sporting ties.

Neither you nor your spouse has ever been Commonwealth Government of Australia employees.

You are currently applying for permanent residency status in your spouse's country of origin.

You are over 16 years of age.

Your arguments and references

It is your opinion that you are not a resident of Australia for tax purposes.

You consider the last two tests (3 & 4) defined in subsection 6(1) of the ITAA 1936 are satisfied in favour of you not being a resident for tax purposes.

You point out that you spend a considerable period of time out of Australia and have done so for a number of years with your usual abode located overseas.

In applying these factors to your situation, you consider the following points are significant in relation to establishing your usual place of abode.

1. You have worked overseas for a greater number of years and have displayed no intention to return to Australia to reside. You married an overseas national and have applied for permanent residency in that country, where you have established a permanent place of abode with your current spouse for a number of years.

2. While you have maintained a residence in Australia, along with a motor vehicle and bank account, it is one of convenience only (for your trips to Australia for holidays and to meet with your children from your previous marriage), reflective of and within the capabilities of your wealth and financial position. There is no fixed time or pre-determined time made for these visits as your new family in Country X would take precedence. In no way does this reflect an intention to reside or return to Australia and is the residue of your past marriage that presents no financial burden to you to maintain.

You point out that you spend a considerable period of time out of Australia and have done so for a greater number of years with your usual abode located overseas with your family.

While your work finds you travelling temporarily to many countries around the world from time to time, you return to your fixed and habitual place of abode, your home with your current spouse, in overseas.

You have referred to IT 2650 and its addendum, and subsection 6(1) of the Income Tax Assessment Act 1936.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(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 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 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 satisfy 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'.

Taxation Ruling IT 2650 provide guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

· the intended and actual length of the taxpayer's stay in the overseas country;

· 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;

· 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;

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

· the duration and continuity of the taxpayer's presence in the overseas country; and

· 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 your case you:

· have worked overseas for a considerable time.

· have lived overseas for a number of years with your spouse who is an overseas national and have established a home there which is owned by your spouse;

· are currently applying for permanent residency overseas and have no intention of permanently residing in Australia;

· have returned to Australia on a number of occasions to holiday;

· own a residence in Australia where you stay when you return for holidays;

· have maintained other assets in Australia;

· have children in Australia that live with your ex-spouse;

· have long term employment in overseas;

· have no social or sporting affiliations with any clubs in Australia.

On balance you are not considered to be a resident of Australia according to ordinary concepts under 'the resides' test as your ties overseas are stronger than they are to Australia. 

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 an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. 

In your case, as you are still a citizen of Australia, it is considered your domicile is unchanged.

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 of forever. It does not mean an abode in which you intend to live for the rest of your life.

You:

· are married to an overseas national;

· have a permanent residence in your spouse's country of origin;

· applied for permanent residency in your spouse's country of origin;

· have no intention of returning to Australia to reside permanently.

On the balance and based on the above, the Commissioner is satisfied that you have a permanent place of abode outside of Australia and so considers that you are not a resident for taxation purposes under the domicile test.

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.

In your case, it has been determined that your permanent place of abode is outside of Australia and that you do not intend to take up residence in Australia, therefore this test is not applicable to your circumstances and you are not a resident under the 183 day 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 Service 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 is not applicable to your circumstances as you nor your spouse has ever been a Commonwealth Government employee and so, a member of a CSS or PSS. Further you are over the age of 16 years old. Accordingly, you are not a resident under this test.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.