Edited version of private ruling

Authorisation Number: 1011816937931

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Ruling

Subject: residency

Questions and answers:

1. Are you a resident of Australia for taxation purposes?

No.

2. Is your salary income derived while working overseas exempt from tax in Australia?

Yes.

This ruling applies for the following period

Year ended 30 June 2009

The scheme commenced on

1 July 2008

Relevant facts

You are a citizen of Australia.

You were born overseas.

You left Australia a number of years ago to work.

You do not intend to return to Australia in the near future.

You have established a home in Country X

You do not have a spouse.

You are currently not and have never been a Commonwealth government employee.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 6-15.

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:

· The resides test

· The domicile test

· The 183 day test

· 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.

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 were in Country X for the whole of the financial year. You intend to be overseas working and living for the foreseeable future. As you were not living in Australia, you would therefore not be considered to be residing in Australia according to ordinary concepts.

The domicile test

If a person has their domicile in Australia they will be 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 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 have established a permanent place of abode overseas based on the following information:

· you will not be returning to Australia in the foreseeable future

· You have taken up and will take up future work contracts in other overseas countries

· You have established a home in Country X and will live and work in other countries until your eventual return to Australia.

Based on the above facts, the Commissioner is satisfied that you have established a permanent place of abode outside Australia. Consequently, you would not satisfy the domicile test.

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.

This test does not apply to your situation as you will not be in Australia for 183 days in any year.

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 and your spouse are not and have never been a Commonwealth employee.

You are not a resident under this test.

Your residency status

You are a non-resident of Australia for income tax purposes.

Under sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 a non-resident is not required to declare their foreign sourced income only the income that they derive in Australia.

Therefore, you are not required to declare the income derived overseas in your Australian income tax return.