Edited version of private ruling

Authorisation Number: 1011751447821

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Ruling

Subject: Residency - leaving Australia

Question

Are you a resident of Australia for tax purposes?

Answer: No.

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You are an Australian citizen.

You are not married and do not have children.

You are contracted to work for your employer from 2010 to 2013 with a possibility of extension.

You are not certain that you will return to Australia at the end of your contract.

You are employed in the capital city of country A.

Your employment income and fringe benefits are taxed and a portion of this tax is paid to social security.

You departed Australia in 2010.

You are not on the Australian electoral role.

You hold a 12 month work and residency permit (which is the maximum permit period) and this will be renewed annually.

You hold a long term lease on an apartment country A.

You travel to the project site every second week.

You are engaged on a rotation basis comprised of eight weeks work and two weeks vacation to anywhere in the world.

You do not intend to return to Australia more than twice a year (each trip being no more than 14 days).

You have worked overseas for many years, however, prior to your country A contract, you did not work during 2009 and resided in Australia.

You own a house in Australia where you stay when you return to Australia.

You do not rent out the house and store numerous possessions there.

You have an Australian bank account.

You have an account in an Australian industry super fund.

You have two country A bank accounts.

You also hold two local visa cards.

You have established ties with country A including being a formal member of a private club, a dining club and a former students association. You are also an integral part of the country A support society and have inaugurated complete private sponsorship of an orphanage.

You have your mail redirected to your office address in country A.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Residency

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

· 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'.

You are currently residing in country A as evidence by:

· renting an apartment

· you are not on the Australian electoral role

· working full time and

· your intention is to work in country A until the end of your contract.

Therefore, you are not considered to be residing in 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 a new domicile of choice in a country outside Australia has been adopted, the person must be able to 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 have advised that you have a long term lease on an apartment in country A;

· you maintain an association with Australia through your investments,

· you will be residing in country A for a period which may exceed three years,

· you are working full time and

· you have created social ties in country A.

Therefore, you are not considered to have maintained your Australian domicile.

Based on these facts, the Commissioner is satisfied that you have established a permanent place of abode in country A.

The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode is overseas.

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 will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

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

Note

From the date you become a foreign resident any interest income will be subject to foreign resident withholding tax. As your investment income has its source in Australia, this income will be subject to tax in Australia under section 6-5(3) of the ITAA 1997. Therefore, you will need to lodge an income tax return in Australia to declare this income.

As you are considered to be a non-resident for Australian tax purposes from the day you left Australia you may be required to lodge an amended tax return for the 2009-10 income year. As you were an Australian resident for tax purposes until your Australian employment ceased, you will be eligible to a pro-rated tax-free threshold for the 2009/10 income year.