Edited version of private ruling

Authorisation Number: 1011826620987

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Ruling

Subject: Residency

Question:

Are you an Australian resident for income tax purposes for the 2011-12 income tax year?

Answer: No.

This ruling applies for the following period:

1 July 2011 to 30 June 2012.

The scheme commenced on:

1 July 2011.

Relevant facts:

You are over the age of 16.

You are an Australian citizen.

Your domicile of origin is Australia.

You have been living and working in another country since 2006.

You are employed in the other country under a contract.

Your employment contract is due to cease a few months before the end of the 2011-12 income tax year.

You are negotiating to extend your contract.

If you are unable to extend your contract you do not intend to return permanently to Australia. Rather, you intend to remain in the other country, even if your current employment ceases.

Your employer provides you with a furnished apartment but if you had to, you would rent or purchase your own accommodation in the other country.

You will soon be eligible for lifetime residency status in the other country because of the time you have spent living there.

You have formed lasting social and personal relationships in the other country.

You return to Australia once or twice each year for short periods to visit family and friends.

You have no household items or personal effects stored in Australia.

Your assets in Australia are:

· two residential rental properties, and

· a superannuation fund from previous Australian employment which you have not contributed to since commencing employment in the other country.

You have a bank account in the other country.

You are not, and you do not have a spouse who is, either:

· a member of the public sector superannuation scheme (PSS) established under the Superannuation Act 1990, or

· an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) established under the Superannuation Act 1976.

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.

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'.

Taxation Ruling No. IT 2650 Income Tax: residency - permanent place of abode outside (which contains the Australian Taxation Office (ATO) view on whether an individual who temporarily leaves Australia ceases to be Australian resident for income tax purposes) specifies that a person's place of abode is where they live.

During the 2011-12 income year, you will be living in the other country where you will be working for your employer under a contract that may expire before the end of the 2011-12 income tax year. Even if your employment contract is not extended, you intend to remain living in the other country where you have been living and working since 2006.

You are residing in the other country according to the ordinary meaning of the word 'reside'. Accordingly, you will not be a resident of Australia for taxation purposes under the 'resides' test during the 2011-12 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 domicile by choice outside of their domicile of origin, 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 becomes a citizen of a country outside of their domicile of origin.

Taxation Ruling IT 2650 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 of time for example.

In your case, you are an Australian citizen and your domicile of origin is Australia.

Although you have been living in working in the other country since 2006 and you have no intention of returning to Australia in the near future, we consider that you have retained your Australian domicile because you have not become a citizen of the other country.

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

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.

IT 2650 also specifies that a period of two or more years is generally considered sufficient to support the establishment of a permanent place of abode outside of Australia and that an intention to return to live in Australia permanently does not prevent a taxpayer setting up a permanent place of abode elsewhere in the meantime.

In your case, we consider you have established a permanent place of abode in the other country because:

· You have been living and working in the other country since 2006.

· You have established a home in the other country.

· You intend to remain in the other country, even if your current employment ceases.

You have retained your Australian domicile but have established a permanent place of abode in the other country. If there is no change in your circumstances, you will not be considered a resident of Australia under the domicile and permanent place of abode test in the 2011-12 income tax year.

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 the 2011-12 income tax year, you will not be in Australia for 183 or more days and you do not intend to take up residence in Australia. Further, we consider you usual place of abode is in the other country. Based on this, you will not be a resident of Australia for taxation purposes under this test in the 2011-12 income tax 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 are over the age of 16, and you are not a member of the PSS or an eligible employee for the purposes of the CSS.

You do not have a spouse who is a member of the PSS or 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

Based on the facts in this ruling, you will not be a resident of Australia in the 2011-12 income tax year.