Edited version of private ruling

Authorisation Number: 1011771598732

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Ruling

Subject: Residency status

Question and answers:

1. Are you a resident of Australia for taxation purposes for the period that you were in Australia?

No.

2. Are you a resident of Australia for taxation purposes when you return to Australia?

Withdrawn by applicant.

This ruling applies for the following period

Year ended 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts

You are an overseas citizen.

You are divorced with one dependant.

You came to Australia.

Your dependant did not accompany you to Australia due to a conflict with school terms.

You had a visa.

The purpose of your trip to Australia was to gain certification in your specialised field of expertise.

You also intended to offer your services to a private clinic in Australia.

While in Australia you been working as a sole trader..

Your visa expired and you were required to leave Australia and return to your country of origin. You did so with the intention of returning to Australia to continue your income earning activities.

When you return to Australia you will be accompanied by your dependant.

Your visa is due to be extended..

You intend to maintain a working relationship as a sole trader in Australia.

You have an ABN and are GST registered.

While in Australia you had been residing with friends. When you return intend to continue to live with friends until you can find a house to rent.

You do not own any assets in Australia.

You own the following overseas assets:

· a residential apartment

· a plot of land

· bank accounts

Your overseas apartment is currently being rented out.

You have no social or sporting ties to Australia.

You have extensive social ties to your country of origin, as your family including your dependant still reside overseas.

You have no sporting ties overseas.

You are not eligible to contribute to the superannuation funds for Commonwealth (Australian) government employees.

You are over 16 years of age.

Your future intention is to reside permanently in Australia and apply for permanent residency status.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1).
Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

· resides test;

· domicile and permanent place of abode test;

· 183 day test; and

· Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary is 'to dwell permanently or for a considerable time; having one's abode for a time'.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

The following factors are useful in determining whether your behaviour over the time spent in Australia reflects a degree of continuity, routine or habit that is consistent with residing here:

(a) intention or purpose of presence;

(b) family and business/employment ties;

(c) maintenance and location of assets; and

(d) social and living arrangements

In your case, you are not considered to have resided in Australia as your behaviour does not reflect the degree of continuity, routine or habit that is consistent with residing here. This is because:

· although it is your intention is to reside in Australia permanently, you only spent a short period of time in Australia before returning to your country of origin;

· although you worked in Australia as a sole trader, your family, including your dependant continues to reside overseas;

· all your assets are currently overseas;

· you do not have any social or sporting ties to Australia;

· you stayed with friends while in Australia.

The domicile/permanent place of abode 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 your case, your domicile remained unchanged in the period 15 October 2010 to 21 December 2010 as you were still a citizen of Greece.

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. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia provides the Commissioner's view on when a person has established a permanent place of abode and at paragraph 15 defines permanent place of abode as:

the taxpayers fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayers presence, the duration of his presence and the durability of his association with the particular place.

IT 2650 also examines the factors to be taken into account in determining whether a person who leaves Australia temporarily to live overseas will be considered an Australian resident during their absence These tests can be applied equally in the situation of a person leaving another country to live in Australia temporarily. Paragraph 5 of the IT 2650 states that the following factors need to taken into account in order to determine an individual's residency status upon leaving Australia:

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

(b) any intention either to return to your country of original at some definite point in time or to travel to another country;

(c) the establishment of a home outside Australia;

(d) the abandonment of any residence or place of abode the individual may have had in their country of origin;

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

(f) the durability of association that the individual has with a particular place in Australia.

The weight to be given to each factor will vary with the individual circumstances of each case and no single factor on its own is conclusive. However, the Courts have determined that greater weight should be given to factors (c), (e) and (f).

Taking these factors into consideration, when you left your country of origin:

(a) you were in Australia for a short period of time;

(b) you always intended to return to your country of origin to organise a more permanent Australian visa;

(c) you stayed with friends and had not established a home inside Australia;

(d) you are currently maintaining your residence in your country of origin but had rented out to tenants;

(e) you were in Australia for a continuous short period before returning to Greece;

(f) your dependant has continued to attend school in your country of origin and you continued to maintain your overseas bank accounts.

In considering the above factors, you are not considered to have established a permanent place of abode in Australia. The contributing factors as to why you are not considered to have established a permanent place of abode in Australia, are that you did not established a home inside Australia during this period and you were in Australia for only a short period of time before returning to your country of origin. In addition, all your assets including your residence and bank accounts remain overseas and your dependant continued to attend school in your country of origin.

The 183-day test

Where 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.

You stay in Australia did not exceed 183 days. You do not satisfy this test because it was not your intention to take up with residence in Australia during this period and as previously established you are considered to have a permanent place of abode outside of Australia.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the 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. 

This test does not apply to you as at no stage were you a Commonwealth (Australian) government employee and therefore eligible to contribute to these super funds. In addition you are single and over sixteen years of age.

Conclusion

As you are not deemed to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are considered to be a foreign resident for the period.