Edited version of private ruling

Authorisation Number: 1011779785817

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Ruling

Subject: Residency, leaving Australia

Questions and answers:

Are you a resident of Australia for tax purposes from the date of your departure in 2011 until your current employment ceases in a few years time?

No.

This ruling applies for the following period:

Year ended 30 June 2011.

Year ended 30 June 2012.

Year ended 30 June 2013.

Year ended 30 June 2014.

The scheme commenced on:

1 July 2010.

Relevant facts:

You are an Australian citizen.

You left Australia early in 2011.

You have an employment contract with a company in Country A.

You currently intend to make your home in Country A for a minimum of a few years.

You and your family have relocated to Country A.

You have returned to Australia a number of times for work related purposes.

You have a lease agreement for the term of your contract.

You have brought most of your furniture with you from Australia.

You intend to retain ownership of a property in Australia.

You intend to seek employment in Country A or the surrounding region if your employment contract is not extended beyond x months.

You have no current plans to return to Australia.

Your only intentions of returning to Australia are limited to 2 visits to see family and friends for 2 week or less.

You intend to open a bank account in Country A.

You will be keeping a bank account related to your mortgage in Australia.

You sold or gave away a pet, furniture, house-hold items, car and boat.

Your children are enrolled at a local school in Country A.

You are no longer a member of any sporting or social clubs in Australia, and have intentions in join sporting clubs in Country A.

Neither you or your spouse have ever been employed by the Commonwealth Government.

Assumptions:

N/A

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

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

Income Tax Assessment Act 1936 Subsection 6(1) .

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 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 will 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'.

You and your spouse are currently residing in Country A as evidenced by:

· renting an apartment,

· residing with your family,

· working full time, and

· your intention to work in Country A indefinitely.

Therefore, you are not residing in Australia.

The domicile test and 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.

A persons domicile is established at birth when they acquire a domicile of origin, being the country of their fathers permanent home. The domicile of origin is retained until such time as a domicile is established by choice or by operation of law in another country.

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 his or her home indefinitely in that country. A domicile may be changed by operation of law for example where a person has obtained a migration visa.

In your case you have not indicated a permanent intention to change your domicile from Australia as you are retaining ownership of a property in Australia and have no firm intentions to never return to Australia. You have not currently indicated an intention to gain citizenship or a migration visa overseas.

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.  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.

In your situation,

· you have advised that it is your current intention to make your home in Country A for a minimum of a few years;

· you maintain an association with Australia through your family and investments,

· you are residing in Country A with your family,

· you are working full time in Country A,

· you intend to establish sporting connections and open a bank account in Country A, and

· your spouse and children are intending to work and attend school respectively in Country A.

Therefore, you have established a permanent place of abode in Country A.

The 183-day test

In the 2010-2011 year you are in Australia for 183 days however after you left it has been identified that your usual place of abode will be outside Australia. You will not be in Australia for 183 days in the other income years. Therefore you are not a resident under the 183 day test.

The superannuation test

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

You are not a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are an Australian resident for taxation purposes from the date of your departure from Australia.