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Edited version of private ruling
Authorisation Number: 1011764374937
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Ruling
Subject: residency
Question and answer
1. Are you a resident of Australia for taxation purposes?
No.
2. Can you carry a rental loss forward to later income years?
Yes
This ruling applies for the following period
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2013
The scheme commenced on
1 July 2009
The scheme that is the subject of the ruling
You are a citizen of Australia.
You left Australia a year ago to work for an aid agency.
You have a category "F" visa to enter Country A.
You have a one year contract with the option of a further two years extension.
You currently rent an apartment in Country A.
You have a bank account with Country A.
You have a permanent abode in Australia that you are currently renting out.
You have a joint bank account in Australia.
You do not pay tax in Country A as you are working for an international aid organisation.
You do not have any social or sporting connections in Australia.
You do not have any social or sporting connections in Country A.
Neither you nor your spouse are or have been Commonwealth Government of Australia employees.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1).
Income tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 Subsection 995-1(1).
Income Tax Assessment Act 1997 Section 36-15
Explanation (This does not form part of the ruling)
Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other 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'.
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.
You left Australia in a year ago to live in Country A and it is your intention to live and work in Country A for at least another two years. As you will not be living in Australia, you are not residing in Australia according to ordinary concepts.
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.
You will have established a permanent place of abode in Thailand based on the following information:
· You have a work contract which ends in two years.
· You are renting an apartment
· Your immediate family live in Country A
· You have a bank account in Country A
On these facts, you will have established a permanent place of abode outside Australia. Consequently, you do not satisfy the domicile test.
183 day test
When 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.
This test does not apply to you as you have not been present in Australia for more than 183 days.
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 and your spouse are not nor have you been Commonwealth Government employees.
Accordingly, you are not a resident under this test.
Your residency status
You are a non-resident of Australia for income tax purposes from January 2010 until you return to Australia.
Rental losses carried forward
A rental loss incurred in one year may be carried forward and offset against rental gains in the succeeding income years. The losses may be carried forward indefinitely until absorbed.
To derive a tax loss, your allowable deductions (for example, rental property deductions) must exceed the total of both your assessable income (for example, rental property income) and your net exempt income.
Losses, which are carried forward from previous years, must first be offset against net exempt income and then against any assessable income remaining after all current year deductions are allowed (section 36-15 of the Income Tax Assessment Act 1997 (ITAA 1997)).
You are required to report rental losses in your tax return in the year in which they occur.
You will need to submit a tax return for each of the years you own the rental property to enable you to record your carried forward losses and ultimately claim any carried forward loss.