Edited version of private ruling

Authorisation Number: 1011773112581

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Ruling

Subject: Residency

Question:

Are you a resident of Australia for tax purposes?

Answer:

Yes

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commences on:

1 July 2011

Relevant facts and circumstances:

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

You intend to depart Australia in mid 20XX with your family.

You have a X month work contract with a company in Country X, with the possibility of further extension.

You have a work permit for Country X.

You will pay tax in Country X.

You intend to live in Country X for 1X-1X months.

During your stay overseas you plan to visit Australia for a week or two to see your relatives.

You own furniture and household goods in Australia. These will be put into storage upon your departure.

Your bank accounts in Australia will remain active.

Your social connection in Australia consists of your family and friends.

You intend to be socially active in Country X.

You have been renting a place in Australia.

You do not have a permanent place to live in Australia.

In Country X you will be renting a place to live.

You do not have any assets in Country X.

You and your spouse do not work for the Commonwealth Government of Australia.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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 resides test,

· the domicile test,

· the 183 day test, and

· 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

As your intention is to stay in Country X for only about X year/s and you maintain a significant connection with Australia you remain a resident of Australia under this test.

Therefore, you are a resident of Australia under this test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you were born in Australia and you are an Australian citizen.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

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

(h) 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;

(i) 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;

(j) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

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

(l) 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 relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

You will be renting an apartment in Country X. You have no intention of settling permanently in Country X. You have a twelve month work contract with a company in Country X, with the possibility of a further extension. You intend to live in Country X for twelve to eighteen months.

You have not satisfied the Commissioner that you have a permanent place of abode outside Australia.

Therefore, you are a resident of Australia under this test.

Your residency status

As you meet both the resides test and the domicile test you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.

If you are taxed in Country X on your employment income you maybe entitled to a foreign tax offset for some or all of the tax paid.