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Edited version of private ruling
Authorisation Number: 1011759996507
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Ruling
Subject: Residency - Foreign Resident
Question:
Will you be an Australian resident for income tax purposes?
Answer:
No.
This ruling applies for the following period:
Year ending 30 June 2011.
Year ending 30 June 2012.
The scheme commenced on:
1 July 2009.
Relevant facts
You are a Country A citizen; you were also born in Country A.
You have always worked and lived in Country A with only recent occasional business trips abroad.
All your extended family live and work in Country A. You last visited Australia some time late in the 2009-10 income year.
Your spouse is a dual Country B/Australian national. They were born in Australia; they also worked and studied there until some time late in the 1999-00 income year. Since then, they have lived and worked in Country A. All their extended family live and work in Australia.
Your spouse has been continuously employed in Country A until some time late in the 2010-11 income year when they resigned in order to care for your child. They have no plans on returning to work in the foreseeable future. They have been a Country A taxpayer for XX years.
You always worked and paid taxes in Country A. You have been employed by Company A as staff for several years on a Country A contract. Some time in the 2009-10 income year, you started working for Company A's business in Country C. This business is based in Country A. Company A fly you to Country C where you work for 28 days before returning for 28 days off.
You currently have one child and will soon be expecting your second child.
Your spouse is relocating to Australia and residing with their extended family. You intend on making a few trips to Australia this year to visit them. This would also depend on your work commitments, amongst other aspects. And since your visits will be of a short duration, you will only be coming to Australia on a specific visa whilst you are on leave.
You intend to eventually divide your time between Australia and Country A. However, Country A will remain your home base. Although you don't have a fixed schedule yet, your spouse and children will move between Country A and Australia once or twice a year. Hence, you will travel from Country C to visit them either in Country A or Australia.
At this stage, you do not plan to settle or permanently reside in Australia.
You would still retain a home and mortgage in Country A. Your employment contract and duties would be in Country A and Country C. You would be paid in Country A into your Country A bank account.
Also in Country A, you would have a car, medical insurance and pensions. All your investments, savings and assets would also be in Country A.
In Australia, you intend on purchasing a holiday home that you may use when you visit and rent out when you are overseas.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
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 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. 3rd 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'.
As you are, and will be residing in Country A and Country C, you will not be 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 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 will only be away from Country A for short holiday periods visiting Australia. Therefore, you would be considered to have maintained your Country A domicile.
In addition, although you will be visiting Australia for short holiday periods a few times a year, your associations with Country A will be considered to be more significant as:
· you will maintain your house there.
· you will maintain assets there such as your car.
· you will maintain bank accounts, investments and pension funds there.
Based on these facts, it is considered that you will not establish a permanent place of abode in Australia. Therefore, you will not be considered to be an Australian resident for income tax purposes under the domicile test.
Your residency status
As you will not be deemed to be an Australian resident under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936 there is no need to examine the remaining tests. Therefore, you will not be considered to an Australian resident for income tax purposes.