Edited version of private ruling

Authorisation Number: 1011853032062

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Subject: Residency - leaving Australia

Question

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on

1 July 2010

Relevant facts

You are employed as a consultant by an Australian employer.

Your contract commenced early in the recent year and expires in subsequent year.

You began unpaid leave with your Australian employer early in the recent year.

You ceased being a full time employee of your Australian employer in 200X. You started working as a casual employee in 200Y and ceased in the recent year.

You began working as a contractor for your Australian employer early in the recent year.

You intend to live in country A for at least three years.

You live, with your partner, in rental accommodation in country A on an ongoing basis.

You do not intend to return to Australia in the future, if you do it will only be to attend conferences.

You do not own any property in Australia.

You own a property in country B.

You were a contributing member of PSS and another fund, but have not contributed to either fund since you left as you will be contributing to superannuation funds in country A (both mandatory and voluntary).

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Residency

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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'.

You are currently residing in country A as evidence by:

· renting an apartment indefinitely there

· working full time there, and

· your intention is to work in country A until the end of your contract.

Therefore, you are not considered to be residing in Australia.

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.

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 have advised that you do not own a property in Australia but own one in country B,

· you and your partner are renting on an on-going basis in country A

· you maintain an association with Australia through your family, and

· you do not intend returning to Australia at the end of your contract.

Therefore, you have not maintained your Australian domicile.

Based on these facts, the Commissioner is satisfied that you do not have a permanent place of abode in Australia.

The 183-day test

This test does not apply to you as after your departure you will not be in Australia for over 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. 

The Commonwealth superannuation fund test is only relevant to Commonwealth government employees.  

A person is a resident under this test if they are: 

· a member of the superannuation scheme established by deed under the Superannuation Act 1990, or

· an eligible employee for the purposes of the Superannuation Act 1976, or

· the spouse, or a child under 16, of a person covered by either of the above.  

The Superannuation Act 1990 establishes a scheme called the Public Sector Scheme (PSS), and the Superannuation Act 1976 established a scheme called the Commonwealth Superannuation Scheme (CSS).  

A person is a member of the PSS if they are entitled to benefits from the PSS on retirement (or in other special circumstances such as death or disability) and their current employer is an approved authority under the Superannuation Act 1990. 

A person is an eligible employee in the CSS if you are entitled to benefits from the CSS on retirement (or in other special circumstances such as death or disability) and their current employer is an approved authority under the Superannuation Act 1976.  

Active members of these Commonwealth government superannuation funds and their spouses are always residents of Australia for tax purposes.

If a person is not currently employed in a Commonwealth department (for example - Treasury, Centrelink) or statutory body (for example - CSIRO, ABC), they are not an active member of one of these funds, and therefore neither a member of the PSS or an eligible employee in the CSS.

An individual continues to be currently employed by an organisation while they are on leave from duties - even where they are on long-term unpaid leave or suspended from duty. An individual ceases to be currently employed when they resign, retire, or are dismissed from the organisation.

As you are on unpaid leave while working overseas you are still considered to be currently employed and an active member of the PSS.

Your residency status

You are considered to be a resident of Australia under the superannuation test of residency outlined in subsection 6(1) of the ITAA 1936.

Consequently, as you are a resident according to one of the four tests you are resident of Australia for Australian income tax purposes.