Edited version of private ruling

Authorisation Number: 1011814446073

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Ruling

Subject: Residency for taxation purposes

Questions:

Were you a resident of Australia for taxation purposes for the period between 1 July 2009 and the time you commenced residing in XXXX?

Answer: Yes.

Were you a resident of Australia for taxation purposes for the period between the time you commenced residing in XXXX and 30 June 2010?

Answer: No.

This ruling applies for the following period:

1 July 2009 to 30 June 2010.

The scheme commenced on:

1 July 2009.

Relevant facts:

You were born in Australia.

You are an Australian citizen.

You are not a citizen of any other country.

You do not have a spouse.

You left Australia intending to be away for two years.

You returned to Australia after being away for slightly less than two years.

You travelled overseas on a visa which allowed you to live and work in XXXX.

You initially travelled for several months after leaving Australia.

In XXXX, you rented an apartment and commenced full time employment in XXXX.

You remained living and working full time in XXXX for approximately 12 months until you left XXXX and travelled again before returning to Australia.

You rented an apartment in XXXX for the whole time you lived and worked there.

You do not have any assets overseas.

While you were overseas, your only assets in Australia were some Australian shares. You did not have a car or any property in Australia during this time.

You have never been employed by the Commonwealth of Australia.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not sure if you are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

You are not the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes 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:

· the resides test,

· the domicile and permanent place of abode test,

· the 183 day test, and

· the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

In your case, you left Australia and returned in a later income year. During this time, it cannot be said that you were dwelling in Australia, or had an abode in Australia. Instead, after leaving Australia you travelled for several months then settled in XXXX where you lived and worked for approximately 12 months. Accordingly, you are not considered to have been residing in Australia according to the ordinary meaning of the word 'reside' during the income year.

The domicile and permanent place of abode test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have, and be able to prove, an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

In your case, you have an Australian domicile because you were born in Australia and you have not obtained a domicile of choice in another country.

Taxation Ruling IT 2650 Income Tax: residency - permanent place of abode outside Australia (which contains the Australian Taxation Office (ATO) view on whether individuals who leave Australia temporarily cease to be Australian residents for income tax purposes) specifies that a person with an Australian domicile who is living outside Australia will retain their Australian domicile if they intend to return to Australia on a 'clearly foreseen and reasonably anticipated contingency' - at the end of a specific period for example.

In your case, you intended to return to Australia permanently within two years but in fact returned shortly before this time. Accordingly, we consider you retained your Australian domicile while you were overseas.

As a result, you will be considered a resident of Australia for taxation purposes under the domicile and permanent place of abode test unless the Commissioner is satisfied you had a permanent place of abode outside Australia while you were overseas.

Taxation Ruling IT 2650 specifies:

· that a 'permanent place of abode' does not have to be everlasting or forever and does not mean an abode in which a person intends to live for the rest of their lives, and

· that an intention to return to live in Australia permanently does not prevent a taxpayer from setting up a permanent place of abode elsewhere in the meantime.

IT 2650 provides that while a period of two or more years is generally considered sufficient to support the establishment of a permanent place of abode outside of Australia, length of time is not the only determinative factor. In essence, IT 2650 specifies that a person's place of abode is where they live and is a question of fact to be determined in the light of all the factors a particular case.

IT 2650 contains a number of examples to assist in determining the residency status of individuals who leave Australia temporarily.

We consider your circumstances during the 2009-10 income year were similar to those of the taxpayer in the example cited in paragraph 40 of IT 2650 which deals with residency under the permanent place of abode test. The example in paragraph 40 of IT 2650 states:

A person who went to the U.K. to work for 3 years and established a place of abode there was not considered to be an Australian resident during that period. At the end of the 3- year period, before returning to Australia she travelled around France for one year and Spain for another year, combining travel and casual employment. During the additional two years, she was not considered to have a permanent place of abode in either Spain or France and was therefore a resident of Australia.

Your circumstances during the income year were that:

· You were travelling for the initial period of the income year.

· You established a home in XXXX by renting an apartment there which you continued to reside in for the remainder of the income year.

· You commenced full time employment in XXXX which you continued for the remainder of the income year.

Applying your facts to the example cited above from IT 2650, we can determine that during the income year:

· You were a resident of Australia for taxation purposes for the period between 1 July and the time you commenced residing in XXXX. During this time you had not established a permanent place of abode overseas and therefore remained a resident of Australia for taxation purposes under the domicile test.

· You were not a resident of Australia for taxation purposes for the period between the time you commenced residing in XXXX and the end of the financial year. During this time, we consider that you had established a permanent place of abode in XXXX and were therefore not a resident of Australia for taxation purposes under the permanent place of abode test.

The 183-day test

Where a person is present in Australia for 183 days during an income year, the person will be a resident of Australia for taxation purposes 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.

In your case, you were not in Australia during the income year. Accordingly, you will not be a resident of Australia for taxation purposes under this test for the income year.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

· they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

· they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

· they are the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

In your case, you do not have a spouse, you are over the age of 16 and you have never been employed by the Commonwealth of Australia.

You are not a member of the PSS and, because you have never been employed by the Commonwealth, you cannot be an eligible employee for the purposes of the CSS.

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status for taxation purposes during the income tax year

During the income tax year:

· You were a resident of Australia for taxation purposes for the period between 1 July and the time you commenced residing in XXXX.

· You were not a resident of Australia for taxation purposes for the period between the time you commenced residing in XXXX and 30 June.