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Ruling

Subject: Residency

Questions and answers:

Will you be a foreign resident for taxation purposes?

Yes.

Is the income you receive from your overseas employment assessable in Australia?

No?

This ruling applies for the following period:

1 July 2010 to 30 June 2014.

The scheme commenced on:

1 July 2010.

Relevant facts and circumstances:

You have left Australia indefinitely and since 20XX you have been living and working in another country.

You have a visa allowing you to reside in the other country until 20XX.

You intend to reside in the other country for the next decade.

You have established a home in the other country by renting a property on a long term lease and transferring all your personal effects to the other country.

You are separated from your spouse and abandoned your home in Australia when you transferred that home to your spouse under the terms of a court order.

Apart from your spouse and children, you have no other family in Australia.

You only travel to Australia to visit your children.

In the 2010-11 income tax year you spent a total of less than 183 days in Australia.

You will not spent a total of 183 days or more in Australia in either of the 2011-12, 2012-13, or 2013-14 income tax years.

Your only assets in Australia are bank accounts.

You are over the age of 16 and neither you, nor your ex-spouse, are members of the Public Sector Superannuation Scheme, or eligible employees for the purposes of the Commonwealth Superannuation Scheme.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1997 Section 6-10.

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

Residency for taxation purposes

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 IT 2650 - Income tax: residency - permanent place of abode outside Australia specifies that a person's place of abode is where they live.

You left Australia to live and work in another country and you intend to remain in the other country for the next decade. We consider that you have already been living in the other country for a considerable time and that is where your place of abode is. Accordingly, you are not a resident of Australia under this test.

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.

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

Although you intend to remain in the other country for the next decade, we consider that you have retained your Australian domicile while you have been living and working in the other country 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.

Taxation Ruling IT 2650 specifies that a permanent place of abode:

· does not have to be everlasting or forever,

· does not mean an abode in which a person intends to live for the rest of their lives, and

· 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.

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 for several years and intend to remain there for the next decade.

· You have established a home in the other country by renting accommodation there and having your personal effects moved to the other country.

· You have abandoned your home in Australia by transferring it to your former spouse as part of a separation agreement.

Since leaving Australia you have retained your Australian domicile but have established a permanent place of abode in the other country. You will not be a resident of Australia for taxation purposes under this test while you maintain a permanent place of abode in the other country.

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 your case, you have been living and working in the other country for several years.

You spent less than 183 days in Australia during the 2010-11 income tax year.

You will spend less than 183 days in Australia in each of the 2011-12, 2012-13 and 2013-14 income tax years.

Based on this, you will not be a resident of Australia for taxation purposes under this test.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

1. they are members of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

2. they are eligible employees in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

3. 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.

You are over the age of 16 and neither you, nor your ex-spouse, are members of the Public Sector Superannuation Scheme, or eligible employees for the purposes of the Commonwealth Superannuation Scheme

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Assessable income - general

Section 6-5 of the ITAA 1997 provides that if you are a non-resident of Australia for taxation purposes, your assessable income in Australia only includes income from Australian sources.

Conclusion

You will not be a resident of Australia for taxation purposes while you are living and working in the other country.

While you are a non-resident, you will only be taxable in Australia on Australian sourced income. This will not include the salary and wages you earn from your employment in the other country.