Edited version of private ruling

Authorisation Number: 1011861597965

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Ruling

Subject: Residency for tax purposes

Questions and answers:

Were you a resident for tax purposes from 1 July 2009 until you departed Australia?

Yes.

Were you a resident for tax purposes from when you departed Australia until 30 June 2010?

No.

This ruling applies for the following period:

Year ended 30 June 2010

The scheme commenced on:

1 July 2009

Relevant facts and circumstances

You moved to Country X in the year ended 30 June 20XX.

Your family accompanied you.

You had a 12 month lease on a house.

You purchased various household items and also shipped your family's belongings from Australia.

You opened a bank account in Country X.

Your children were enrolled in a local school.

You were employed in a permanent position with a company in Country X.

It was your intention to reside in Country X permanently.

You retained ownership of your family home and it was rented out.

You retained bank accounts in Australia.

Due to an unexpected change in your family circumstances, you returned to Australia in the income year ended 30 June 20XX. The total time you were in Country X was approximately nine months.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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, and

· 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 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In your case, it was your intention to leave Australia permanently, your family moved with you and you set up a new home in Country X.

Therefore, you were not residing in Australia during the period you left Australia to 30 June 2010.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you were born in Australia and you are an Australian citizen. However, the Commissioner is satisfied that you had a permanent place of abode in Country X for the year ended 30 June 2010 from the time that you departed Australia in October 2009.

Therefore, you are not a resident of Australia under this test during the period you left Australia to 30 June 2010.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

As you were not physically present in Australia for more than 183 days in the year ended 30 June 2010, you are not a resident of Australia under this test.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

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

As neither you, nor your spouse, have ever been Commonwealth government employees and you are therefore not able to contribute to the abovementioned superannuation schemes, you are not a resident of Australia under this test.

Your residency status

For the period during the beginning of the income year until you left Australia, you were residing in Australia and therefore a resident for tax purposes.

For the period during when you left Australia until the end of the income year, you do not meet any of the tests of residency. Therefore for this period you were a non-resident for tax purposes.

You became a resident for tax purposes when you returned to Australia in the income year ended 30 June 2011.

As you were a resident for only part of the year, your income will be taxed entirely at resident rates. The foreign source income you received during your period of non-residence will not be assessable in Australia. The tax-free threshold will be apportioned based on the number of months in the income year that you were a resident.