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Ruling

Subject: Residency status

Question and answers:

Are you a resident of Australia for income tax purposes?

No.

This ruling applies for the following period

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on

6 March 2007

Relevant facts

You were born in country A on XX August 19XX and are a dual country A and Australian citizen.

You were married with children.

You moved to Australia and became an Australian citizen.

After a period you worked in country B on rotation from Australia.

You and your spouse moved permanently to country B.

During this period you had visa, which is generally renewable every X years.

When you and your spouse moved permanently to country B you rented your family home to your adult children at a reduced or nominal amount.

After a period you and your spouse separated.

You returned to Australia for a short holiday before relocating to country C for work purposes, while your spouse remained in Australia.

In country C you were provided with a serviced apartment by your employer.

As a result of your employer experiencing severe financial difficulties you left the company and took up employment with another employer which was also located in country C.

You new employer also provided you with a serviced apartment.

After a period your employer was unexpectedly bought out and your employment was terminated.

During this period you held an employment pass in country C, which is generally renewable.

You then took up a new position with a new employer which required you to relocate to country D.

Your new employer also provided you with a serviced apartment in country D where you currently reside.

You have a residents permit in country D.

You and your spouse are still separated and she has remained in Australia where she lives in a rental apartment.

Your eldest child is employed in the workforce while the younger child is at university. Both live independently and support themselves, although you provide some financial support to your younger child.

After a period, you and your spouse disposed of your family home, which had remained vacant since you had separated.

The assets that you hold in Australia include;

· your family residence (which was disposed);

· investment properties (one of which you are planning to dispose of); and

· an Australian bank account.

The assets that you hold overseas include;

· bank accounts in country A and country B;

· a credit card in country C.

· household belongings in country D.

You severed all social and economic ties with Australia when you departed for country B.

You have never had any social or sporting ties to Australia, country A, B, C and D.

You cancelled your Australian private health insurance.

You have spent short periods in Australia after leaving for country B.

Neither you nor your ex-spouse have been employed by the Australian Federal Government.

You have no immediate plans to return to Australia, except for a holiday or maybe to retire in the future.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be 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 first two tests are examined in detail in Taxation Ruling It 2650: Residency - Permanent Place Of Abode Outside Australia. 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 satisfy 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 Shorter 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'.

Taxation Ruling IT 2650, provide guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

In your case, you left Australia to live and work in country B followed by moves to country C and country D. You have no immediate plans of returning to Australia. As you were living and working in countries C, B and D for a considerable period of time in all three countries it is considered that you were not residing in Australia.

Accordingly, you are not considered to be residing in Australia for the period X March 20XX to XX June 20XX, and so are not a resident for taxation purposes under the 'resides test' for this period.

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.  In your case, although you became a citizen of Australia on 3 April 1996, you maintained your British citizenship effectively becoming a dual citizen. However, as you have not taken up citizenship in any other countries it is considered your domicile is unchanged.

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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

· the intended and actual length of the taxpayer's stay in the overseas country;

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

· 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;

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

· the duration and continuity of the taxpayer's presence in the overseas country; and

· the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In your case you:

· have not lived in Australia for a number of years;

· due to both personal and employment circumstances you were required to move from country B, country C and country D for extended periods,

· you have no intention of returning to Australia in the foreseeable future except as an occasional tourist and possibly when you retire;

· have lived long term accommodation provided by your employers;

· have carried all of you personal belongings with you;

· had a residence in Australia that has been sold;

· have children that live in Australia independently;

· do not have any social or sporting ties to any of the countries that you have lived and worked including Australia;

· cancelled your Australian private health insurance; and

· have maintained an Australian bank account so that the rental income that you earn from your investment properties can be banked into it.

On the balance and based on the above, the Commissioner is satisfied that you have a permanent place of abodes (in Brazil, Singapore and China) outside of Australia accordingly, you are not a resident for taxation purposes under the domicile test.

The 183-day test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, 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.

You were not in Australia in excess of 183 days for the income years included in this ruling, therefore this test does not apply to you.

The Superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.  Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

This test is not applicable to your circumstances as you are over the age of 16 years and have not, or have you or your ex-spouse ever been a member of a CSS or PSS.

Accordingly, you are not a resident under this test.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes.