Edited version of private ruling

Authorisation Number: 1011758664846

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Ruling

Subject: Residency

Questions and answers:

Will you remain a resident of Australia for income tax purposes for the duration of your stay overseas?

Yes.

Are you required to lodge a tax return in Australia while you are working overseas?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Australia and your country of origin is Australia.

You will leave Australia in the 2010-11 income year for a working holiday and to travel in a foreign country.

You intend to remain on your working holiday for 2 years and then to return to Australia.

You do not plan to come back to Australia for any period during your working holiday.

You have a working visa for that covers a 2 year period in the foreign country.

You will be provided employment by an agency in the foreign country and you do not yet have an employment contract.

You will be living in rental accommodation provided by the agency and you may travel around various locations within the foreign country depending on where the jobs are located.

None of your family members will be accompanying you overseas as you would like to do this by yourself.

You have sporting connections in Australia and in the foreign country.

You will open a bank account in the foreign country for your pay to be deposited.

You live at home with your parents in Australia.

You have a term deposit in Australia.

You are not a Commonwealth Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 770-10(1)

Income Tax Assessment Act 1997 Section 6-5

International Tax Agreements Act 1953 Section Sch1-Art14

International Tax Agreements Act 1953 Section Sch1-Art22

Reasons for decision

Residency

If you are an Australian resident for taxation purposes you are required to include income earned from all sources, whether in or out of Australia, in your assessable income for the year. However, where you are not a resident of Australia for taxation purposes, you will only have to include income you have earned from an Australian source during the year.

The terms 'resident' and 'resident of Australia' are explained in legislation and these laws also provide a series of tests which help to determine whether or not a person is a resident of Australia for taxation purposes.

1. The resides test

As you will be residing in the foreign country, you will not be a resident of Australia under this test. 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 tests.

2. The domicile and permanent place of abode test

If you keep your domicile in Australia you will be an Australian resident for taxation purposes unless the Commissioner is satisfied you will set up a permanent place of abode outside of Australia.

Your domicile is your country of origin unless you make a decision to change it. To obtain a different domicile you must intend to make your home indefinitely in another country and also be able to prove this, usually by applying for a permanent residency visa.

A working holiday visa does not qualify as an intention to acquire a new domicile of choice and as it is not your intention to make your home indefinitely in the foreign country, you will maintain your Australian domicile while you are overseas.

We will now look at whether or not you will establish a permanent place of abode outside Australia.

Permanent place of abode

The expression 'place of abode' means a person's residence; where they live and sleep at night. A permanent place of abode does not have to be 'unending' or 'forever'. It does not mean an abode in which a person intends to live for the rest of their life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Some of the factors which we consider relevant in determining whether or not a permanent place of abode has been established are:

· the intended and actual length of your stay in the overseas country;

· whether you intend 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 you establish 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 your presence in the overseas country; and

· the durability of association that you have with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that you are 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 intend to stay in the foreign country for 2 years;

· you intend to work and travel around the foreign country, depending on where the agency provides work for you and you will return after 2 years;

· your accommodation will depend on where you are working;

· you do not own any property and you live with your parents in Australia;

· you will not be returning to Australia at any time during the 2 year period; and

· you will open a bank account in the foreign country and you will keep your term deposit in Australia.

Although you will have rental accommodation while working and travelling around in the foreign country, you do not have definite and stable living arrangements. Your plans fall more into a transitory category in that your accommodation will be arranged wherever you are placed in your employment.

Your associations with Australia are more significant as your family are located in Australia and you intend to return to Australia at the expiration of your 2 year visa.

Based on this, you will not establish a permanent place of abode outside of Australia.

Your residency status

You will remain an Australian resident under the domicile test for the duration of your 2 year stay in the foreign country.

If your worldwide income during the Australian financial year is in excess of the tax-free threshold (currently $6,000) you will need to lodge tax returns in Australia.