Edited version of private ruling

Authorisation Number: 1011768825973

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Residency

Question and answer:

1) Were you a resident of Australia for tax purposes during the period 1 July xxxa to aa XXXX xxxx?

No.

2) Were you a resident of Australia for tax purposes during the period yy XXXX xxxx to 30 June xxxy?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2006
Year ended 30 June 2007
Year ended 30 June 2008
Year ended 30 June 2009

The scheme commenced on:

1 July 2005

Relevant facts and circumstances

You are an Australian citizen.

You were born in Australia.

You departed Australia many years ago for a foreign country on an extended holiday.

You found employment in the foreign country and decided to stay.

While resident in the foreign country, you returned to Australia periodically for the purpose of visiting family and friends. None of these periods exceeded 182 days.

A relative died. You and your spouse returned to Australia for several weeks. During this time you looked around for possible places to live.

You and your spouse returned to the foreign country but subsequently decided to return to Australia permanently.

You and your spouse returned to Australia to further explore different areas with the intention of purchasing a home and living here permanently.

You and your spouse purchased a house in Australia and returned to the foreign country to arrange the sale of your home there. Due to a slump in the property market, the sale was delayed.

You returned to Australia for several weeks to purchase furniture and whitegoods for the new house. The prior owner was still in residence due to the prior owner's new residence being unavailable.

You returned to Australia again at a later date. Your foreign house was still unsold.

Your foreign house was sold.

You moved to Australia permanently on yy XXXX xxxx.

All remaining foreign household goods were shipped to Australia after your arrival.

Your house in Australia was not rented during your absence.

Prior to purchasing your house you lived with friends and family

You have the following investments overseas:

· 1 savings account with bank

· 1 current account with a bank

· shares in a company in the foreign country

· shares in a different foreign company.

You still pay tax on these investments in the foreign countries.

You have the following investments in Australia:

· 1 current account with bank A

· 2 savings accounts with the same bank

· 1 term deposit with a financial institution

· 1 term deposit with a bank B

· shares in company A

· shares in company B.

You have no employment contract overseas.

You have no social or sporting contacts with the foreign country.

Neither you nor your spouse is an employee of the Commonwealth of Australia Government.

Relevant legislation provision:

Income Tax Assessment Act 1936 Subsection 995-1(1)
Income Tax Assessment Act 1997 Subsection 6(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 described in subsection 6(1) of the ITAA 1936. The definition includes four tests to assist in determining whether you are 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 discussed 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 you do not reside in Australia according to ordinary concepts, you may still be considered to be a resident of Australia for tax purposes if you 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'.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent Place of Abode Outside Australia provides 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 residence 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

· 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 departed Australia for the foreign country on an extended holiday. However, you found employment in the foreign country and decided to stay. You did not maintain a residence in Australia for the period 1 July xxxa to aa XXXX xxxx. You owned a residence in the foreign country which you lived in while there. You returned to Australia periodically for the purpose of visiting family and friends. You had some investments in Australia and overseas. On balance, your connections with the foreign country were more significant than your connection with Australia during the period 1 July xxxa to aa XXXX xxxx. Therefore, you were not a resident of Australia under the resides test for the period 1 July xxxa to aa XXXX xxxx.

However, as you:

· moved back to Australia with your spouse and belongings with the intention of residing permanently

· sold your residence in the foreign country; and

· purchased a residence in Australia in which you now reside

so are considered to be a resident of Australia for tax purposes under the resides test for the period yy XXXX xxxx to 30 June xxxx. As it is only necessary to pass one of the four residency tests to be considered a resident of Australia for tax purposes and you have passed the resides test for the period aa XXXX xxxx to 30 June xxxy, it is not necessary to consider if you meet the conditions of one of the other three residency tests for this period.

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 were still an Australian citizen while living in the foreign country, your domicile was Australia.

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 you intend to live for the rest your 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.

In your case you:

· departed Australia for the foreign country many years ago

· found employment and decided to stay there

· lived with your spouse there in a house you had purchased

· had investments overseas

· only visited Australia for short periods.

Based on the above, it is considered that you had established a permanent place of abode outside Australia for the period 1 July xxxa to aa XXXX xxxx and that you were not a resident of Australia under the domicile test during this period.

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.  To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor you spouse is or was a Commonwealth Government of Australia employee. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes and you are more than 16 years of age. Therefore, you were not a resident of Australia under the superannuation test for the period 1 July xxxa to aa XXXX xxxx.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and that you do not intend to take up residence in Australia.

In your case, during the period from when you departed Australia to your final move back to Australia, you established a place of abode in the foreign country and did not intend taking up residence in Australia. Therefore, you were not a resident of Australia under the 183-day test during the period 1 July xxxa to aa XXXX xxxx.

Conclusion

As you have not passed any of the four tests of residency for the period from 1 July xxxa until xx XXXX xxxx, it is considered that you were not a resident of Australia for tax purposes during this period. However, as you passed the resides test for the period yy XXXX xxxx to 30 June xxxy, it is considered that you were a resident of Australia for tax purposes during this period.