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Edited version of private ruling
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Ruling
Subject: residency
Question
Will you be a resident of Australia for taxation purposes for the period you are working overseas?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2006
Relevant facts
You are a citizen of Australia.
You were born overseas.
You intend to work overseas for at least 2 years.
You have a work contract overseas.
This contract can be extended.
You intend to return to Australia to live at the end of your work contract.
You will be on a work visa.
Your family will accompany you overseas.
You will rent an apartment overseas.
You intend to rent your home out in Australia for the period you are overseas.
Neither you nor your spouse are currently or have ever been employees of the Commonwealth Government.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6(1)
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose of the Income Tax Assessment Act 1936 (ITAA 1936).
The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.
The resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
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.
In your case you will be living overseas for at least 2 years and maybe longer. As you will not be living in Australia, you are not considered to be residing in Australia according to ordinary concepts during the time you are working overseas.
The domicile test
If a person has 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 his or her 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 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 case, you will not establish a permanent place of abode overseas based on the following information:
· Your work contract is only for two years and you are unsure if you will extend the contract.
· You will rent an apartment overseas.
· You intend to return to live in Australia at the end of your work contract.
Based on these facts, it is considered that you will not establish a permanent place of abode outside Australia. Consequently, you would satisfy the domicile test and would be a resident under this test.
As you satisfy the domicile test it is not necessary to consider the 183 day and superannuation tests.
Your residency status
You will be a resident of Australia for taxation purposes for the period you are working overseas.
As a resident of Australia for taxation purposes you are required to declare all your income derived both in Australia and overseas.
You are required to declare your income derived overseas in your Australian tax return.