Edited version of private ruling

Authorisation Number: 1011803229497

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Ruling

Subject : Residency

Question 1

Are you an Australian resident for tax purposes?

Answer:

No

This ruling applies for the following period

Year ending 30 June 2009

Year ending 30 June 2010

Year ending 30 June 2011

Year ending 30 June 2012

The scheme commenced on

01 July 2008

Relevant facts

You are a citizen of Australia.

You departed Australia in 200X to take up a position in country A with an international organisation. The international organisation is an independent governance and economic consultancy based in a third country with projects in more than 20 countries.

You have been contracted by the international organisation as a senior advisor for the Government of country B on a contract of support to a government department of country A.

Since the start of your engagement, you have had a series of short term contracts and extensions which is likely to be extended.

You hold a short term multiple entry business visa from country A for the maximum time that the government of country A will allow this type of visa to be issued to international consultants.

Your intention is to reside in country A for the duration of your contract there. On the completion of your contract in country A, the international organisation has indicated that they wish to retain you as a consultant for their future projects in other countries where they currently have contracts.

You have no intention of returning to Australia to live at any time in the future. You are most likely to reside outside Australia after the completion of your contract in country A.

You work on a cyclical rotation. Of the several recreational breaks you have taken since arriving in country A, a number have been for the purpose of visiting friends in Australia. You were in Australia for periods of 1-2 weeks. When you return to Australia, you stay with family or friends or in hotel accommodation.

You are looking to purchase a house in county C with your partner, with the intention of living there in your retirement at some point in the future. To this end, you have travelled to country C for two short visits for the purpose of inspecting various properties.

You own an apartment in Australia which was where you lived prior to locating to country A. Initially, the apartment was left vacant, then let for short term stays on a fully furnished basis. You now intend to let the apartment on a long term lease on an unfurnished basis. You have stored your furniture while you are in country A.

You live in shared accommodation in a house in country A which is leased by the international organisation. Because of your restricted living arrangements due to communal living, you did not transport any furniture to country A. You have taken your personal possessions to country A and have bought a number of items since arriving in country A.

You are not married and do not have any children. You do have relatives in Australia.

You have an Australian bank account.

You have a bank account in country B into which your salary is paid because the international organisation is based in country B.

Apart from your friends in Australia, you do not have any social or sporting connections with Australia.

In country A, you have joined a local sporting club and other association.

You are not a Commonwealth Government of Australia employee.

A copy of your terms of reference and your contract with the international organisation have been supplied and form part of the facts of the application.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Question 1

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 an Australian resident for income tax purposes. These tests are:

1. The resides test

2. The domicile test

3. The 183 day test

4. 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

1. The resides test

The ordinary meaning of the word 'reside', according to the dictionary definition is to dwell permanently, or for a considerable time, to have one's settled abode, to live in or at a particular place.

As you are residing outside of Australia for a considerable time at a particular place, i.e. country A, you are not considered to be residing in Australia.

2. 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.

Domicile

Generally speaking, persons leaving Australia would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile by choice or by operation of law.

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.

In practice, if you are a resident who has always lived in Australia, you will retain a domicile here when you are overseas, unless you choose to permanently migrate to another country.

In your case, you have indicated that you will be moving to a different country when your current contract is completed. Therefore, you are considered to have maintained your Australian domicile as you are not located to a country outside Australia permanently for an indefinite period.

Permanent place of abode

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.

There are no hard and fast rules that can be used to determine your place of abode. Taxation Ruling IT 2650: Income tax: Residency - permanent place of abode outside Australia outlines some relevant factors that are used by the courts, tribunals and ATO in deciding such cases.

The relevant factors are:

· intended and actual length of stay overseas, including the continuity of that stay

· existence of an established home overseas

· existence of a residence in Australia (while overseas)

· family and financial ties

In your case, you are considered to have established a permanent place of abode outside Australia due to the length of time you have committed to being overseas and the establishment of a home overseas through employer provided accommodation. Although, you own an apartment in Australia, the renting out this apartment on a long term lease while overseas would indicate that you do not have a residence in Australia available to you. Therefore, you are not considered to be an Australian resident under the domicile test.

3. The 183 day test

When 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 do not satisfy this test as you have established a permanent place of abode outside of Australia.

4. 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 member of the PSS or CSS or the spouse of such a person, or a child under 16 of such a person. Therefore, you will not be treated as a resident under this test.

Your resident status

As you are not deemed to be an Australian resident under any of these tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident from May 200X, from the date you departed Australia at the start of your contract.