Edited version of private ruling

Authorisation Number: 1011768890050

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Ruling

Subject: Residency

Question and answer:

Were you a resident of Australia for taxation purposes during the period from Date A to Date B?

No.

This ruling applies for the following period:

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2008

Relevant facts and circumstances

You were born in Australian and you are an Australian citizen.

You departed Australia for a foreign country, travelling on a working holiday visa. The purpose of your visit overseas was to work and also travel during these couple of years.

You obtained employment as a contractor.

The employer asked you to continue as a sponsored worker and as such you were required to obtain a special visa. You returned to Australia to obtain the necessary visa.

You returned to the foreign country having obtained the new visa. You intended to stay in the foreign country, working for the period of your visa.

While in the foreign country you lived in rented accommodation.

Prior to your departure from Australia you resided with people in their home.

You are single and have no dependants. No family accompanied you to the foreign country.

You owned no property in Australia and had no permanent place to live in Australia.

You retained a small investment bank account in Australia whilst you were living in the foreign country.

Whilst in the foreign country you opened a bank account. This account remains open.

Your employment contract lasted until a fixed date, at which time it was up for discussion for future years. You had the necessary visa to continue working with your current employer in the foreign country until a new fixed date.

Whilst living in the foreign country you had no sporting connections in Australia. However, you did have family as well as friends.

In the foreign country you had social connections with friends you met whilst travelling and also through your work.

You have never been a Commonwealth Government of Australia employee.

Your contract was not renewed due to budget cuts. To continue to work in the foreign country, you would have had to apply for another visa as your existing visa was only valid for work with your previous employer. This would mean you would have had to return to Australia to apply for another visa and then return to the foreign country. You decided to return to Australia earlier than you had intended. Your friend, a citizen of the foreign country, accompanied you.

You departed the foreign country and arrived in Australia.

You are now residing in Australia, with your friend, in rented premises and you have obtained employment here. You intend to remain in Australia.

You have provided copies of your visas and other documents relating to your residence in the foreign country.

You are more than 16 years of age.

Relevant legislation provision/s:

Income Tax Assessment Act 1997 Subsection 995-1(1)
Income Tax Assessment Act 1936 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 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 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. 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 provide 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 and

· 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, when you went to a foreign country your intention was to stay for some years on a working holiday. You returned to Australia at a later date to update your visa. You returned to the foreign country a short time later. You intended staying for the period of the visa. During this time you lived rented accommodation in the foreign country but maintained no place of abode in Australia. You owned no property in Australia but maintained bank accounts in both Australia and the foreign country. You were single with no dependants and no family accompanied you to the foreign country.

On balance you are not considered to be a resident of Australia according to ordinary concepts under the resides test during the period from Date A to Date B as your ties to the foreign country were stronger than they were to Australia. Therefore, you were not a resident of Australia under the resides test during the period from Date A to Date B.

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, during the period from Date A to Date B, you:

· were employed full time in the foreign country

· maintained a residence there in rented accommodation

· maintained social connections there

· established a bank account there.

Based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the period from Date A to Date B. Therefore, you were not a resident 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 you have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you have no spouse and are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

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 he or she does not intend to take up residence in Australia.

In your case, during the period from Date A to Date B, 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 from Date A to Date B.

Conclusion

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to have been an Australian resident for taxation purposes during the period from Date A to Date B.