Edited version of private ruling

Authorisation Number: 1011825974335

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Ruling

Subject: Residency - working overseas

Question

Are you an Australian resident for taxation purposes?

Answer

No

This ruling applies for the following periods

Year ending 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

The scheme commenced on

1 July 2010

Relevant facts and circumstances

We previously made a ruling but you have informed us of a change in your circumstances and asked for a replacement ruling.

You are employed by a company based in Country Y.

The company is contracted to an international entity in Country X.

You have worked overseas since the 2006-07 income year.

You intend to stay and work overseas indefinitely.

You usually work several weeks on, with a few weeks off, although this may vary due to work demands.

If you return to Australia during a break, you do not perform any work-related duties.

You have also made several visits to Australia of between one and three weeks, to visit family and for personal reasons.

You previously had permanent accommodation at a specific location, which your former partner shared with you from the 2008-09 income year.

In the 2010-11 income year you purchased a property in the capital of Country X which is your residence.

You own an investment property in Australia which has never been your residence.

You do not pay tax in Country X as your employer is exempt from taxes under an agreement between the international entity and the government of Country X.

You are not a member of a Commonwealth superannuation scheme.

Relevant legislative provisions

Section 995-1 of the Income Tax Assessment Act 1997

Subsection 6(1) of the Income Tax Assessment Act 1936

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 test

· The 183 day test

· 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 may still be considered 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 dictionary meaning, 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.

As you are living and working in Country X during your deployment, it is considered that you are not an Australian resident for taxation purposes under the resides test.

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.

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

Taxation Ruling IT 2650 provides the Commissioner's guidelines on the factors should be considered in determining residency under this test.

The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country (e.g. through having obtained a migration visa).

Australia is your domicile of origin. As there is no evidence you have chosen by law to make your home indefinitely in Country X, your domicile remains in Australia.

The second part of this test is to determine whether you have established a permanent place of abode outside Australia.

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.

A person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The following factors, listed at paragraph 23 of IT 2650, have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and regarding a taxpayer's permanent place of abode. They include:

(a) the intended and actual length of the taxpayer's stay in the overseas country;

(b) whether the taxpayer intended to stay in the overseas country only temporarily then move on to another country or return to Australia at some definite point of time;

(c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

(d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

(e) the duration and continuity of the taxpayers presence in the overseas country; and

(f) the durability of association that the taxpayer has with a particular place in Australia for example, maintaining bank accounts, informing government departments such as Centrelink that he or she is leaving Australia permanently and that any benefits such as family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

IT 2650 states that the weight to be given to each factor will vary with the individual circumstances of each particular case, and no single factor will be decisive.

According to paragraph 28 of the ruling IT 2650, the fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent. Acquisition of a home in the overseas country would be a very relevant though not conclusive factor.

On the other hand, individuals or a family group who "make do" in temporary accommodation with limited resources and facilities such as in barracks, singles' quarters, aboard ships, oil rigs, or mining towns, will be less likely to be considered to have established a permanent place of abode overseas.

The ruling stresses, though, that the duration of an individual's stay or intended stay out of Australia is not, of itself, conclusive and must be considered along with all the other relevant factors.

In your case, you have lived and worked in Country X since the 2006-07 income year, and intend to work there indefinitely. You usually work on a cycle of several weeks on, with a few weeks off, although this may vary due to work demands, and you may return to Australia during the breaks. You have also made several visits to Australia of between one and a few weeks, to visit family and for personal reasons.

You previously had permanent accommodation at a specific location. Your former partner lived with you in Country X from the 2008-09 income year. However, in the 2010-11 income year you purchased a property which is your main residence.

You own a property in Australia which has never been your main residence.

Based on the above facts, it is considered that you have established a permanent place of abode overseas, as you have purchased an apartment in Country X which is your main residence, and do not have a main residence in Australia.

The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode is in Country X.

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 will not be treated as 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 considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident for tax purposes from the date you purchased a main residence in Country X under subsection 995-1(1) of the ITAA 1997.