Edited version of private ruling

Authorisation Number: 1011771139848

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Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes for the years ended 30 June 2008, 2009, 2010 and 2011?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2008.

Year ended 30 June 2009.

Year ended 30 June 2010.

Year ended 30 June 2011.

The scheme commenced on

1 July 2007

Relevant facts and circumstances

You are a citizen of Australia and have a residency visa from Country X.

Your country of origin is Australia.

You departed Australia in 200X.

You have a residency visa and a work permit in Country X. You pay tax of approximately XX% PAYE on the wages that you earn in Country X.

You do not intend to reside permanently in Country X but intend to work and live there for possibly another X more years.

You visit Australia on two or three occasions a year for a period not exceeding X weeks.

You primarily visit Australia to see your family and to undergo medical check ups.

Your accommodation in Country X is provided by your employer there.

You and your spouse are joint tenants of a residence in Australia. You stay at this residence during your trips to Australia.

Your only asset in Country X is a personal bank account.

You have a joint bank account and own a motor vehicle in Australia. You do not own any other assets in Australia.

Your wife is employed in Australia. Your children work and attend school in Australia. None of your family members have accompanied you on your move to Country X.

You do not have any sporting or social connections with Country X.

You and your wife have never been employed by the Commonwealth Government of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1),

Income Tax Assessment Act 1997 Section 6-5 and

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

We followed these ATO view documents

Taxation Ruling IT 2650

Summary

You are considered to be an Australian resident for income tax purposes.

Detailed reasoning

Residency

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 reside 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 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'.

As you are in Country X, you are not considered to be residing in Australia under this test.

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 to prove an intention to make their 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 their 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.

Taxation Ruling IT 2650 provides assistance in determining a person's permanent place of abode. It is a question of fact which must be determined in the light of the circumstances of each case. 

Some of the factors considered to be relevant in determining a person's place of abode include:

(g) the intended and actual length of the individual's stay in the overseas country;

(h) whether the individual 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;

(i) the establishment of a home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, a family or a household) outside Australia;

(j) the abandonment of any residence or place of abode the individual may have had in Australia;

(k) the duration and continuity of the individual's presence in the overseas country;

(l) the durability of association that the individual has with a particular place in Australia, eg., maintaining bank accounts in Australia, informing government departments that he or she is leaving permanently, place of education of his or her children, family ties, etc.

We consider the following factors which indicate that you have a permanent place of abode in Australia:

· You departed Australia on 200X in order to assume work in Country X. You have obtained a residency visa and a work permit in Country X.

· You do not intend to reside permanently in Country X but intend to work and live there for possibly another X more years.

· You are an Australian citizen and have family Australia with whom you have maintained close ties. You visit Australia on two or three occasions a year to see your family and to undergo medical check ups.

· Your accommodation in Country X is provided by your employer there. You and your spouse are joint tenants of a residence in Australia. You stay at this residence during your trips to Australia.

· Your wife is employed in Australia. Your children work and attend school in Australia. None of your family members have accompanied you on your move to Country X.

· Your only asset in Country X is a personal bank account. You have a joint bank account and own a motor vehicle in Australia.

· You do not have any sporting or social connections with Country X.

Based on these facts, on balance it is considered that you are an Australian resident for tax purposes for the years ended 30 June 2008, 2009, 2010 and 2011 as your intention is always to return to Australia after your work contracts.

The 183-day test

This test will not be applied to your circumstances as it has been identified that your permanent place of abode is in Australia.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

This test does not apply to you as you and your spouse are not eligible to contribute to the PSS or the CSS.

Conclusion

You are considered to be an Australian resident for tax purposes as you have satisfied the domicile test as outlined in subsection 6(1) of the ITAA 1936.

Source of Income

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a non resident taxpayer includes ordinary income derived directly or indirectly from Australian sources.

For the years ending 30 June 2008, 2009, 2010 and 2011, you are considered to be an Australian resident for tax purposes under the Domicile test outlined in subsection 6(1) of the ITAA 1936 during the period you resided in Country X.

Therefore, you should include your income derived from your employment in Country X in your Australian tax returns for the 2007-08, 2008-09, 2009-10 and 2010-11 financial years.

Foreign Tax Credit

Under the foreign tax credit system, income derived by Australian resident taxpayers from all sources in and out of Australia is assessable, but a credit will be allowed for foreign tax paid on the foreign income, up to the amount of Australian tax payable in respect of that income. Subsection 160AF(1) of the ITAA 1936 sets a credit limit equal to the Australian tax payable on the foreign income.

Subsection 160AF(1) of the ITAA 1936 provides that an Australian taxpayer will be entitled to a foreign tax credit if the following conditions are satisfied:

· the assessable income of the taxpayer includes foreign income; and

· the taxpayer has paid foreign tax in respect of that foreign income, being tax for which the taxpayer is personally liable.

The amount of the credit is the lesser of the foreign tax paid or the Australian tax payable in respect of the foreign income you derived from Country X.