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Ruling

Subject: Residency for tax purposes

Questions and answers

1. Are you a resident of Australia for taxation purposes?

No

2. Will you become a resident of Australia when your spouse and children relocate to Australia to attend university?

No

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You are a citizen of Australia and country A.

You were born in Country A.

You left Australia to live and work in Country B.

You do not intend to return to Australia to live and have not return to Australia since leaving.

You have a permanent non terminating employment in country B.

Your spouse and children have accompanied you to Country B.

You have been renting a X bedroom apartment in country B.

You have a house in Australia which you have been renting out.

You have some family and friends in Australia.

You were a member of a super fund but no longer contribute to this super fund.

Your spouse is intending to return to Australia in the future

Reasons for decision  

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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:

1. The resides test

2. The domicile test

3. The 183 day test

4. 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

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

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.

In your case, you left Australia permanently. As you are not living in Australia, you are therefore not considered to be residing in Australia according to ordinary concepts.

Ordinarily, where a taxpayer leaves Australia to work overseas and his family remains in Australia the taxpayer is generally viewed as continuing to reside in Australia for tax purposes. This is because, it would be considered that he has maintained his settled or usual place of residence in Australia, and therefore his residency status would be generally considered to have remained unchanged.

In your case, you left Australia with your family and moved to country B. From when you left to the present date you worked and lived in country B with your family, therefore you are residing outside of Australia. In the future, your spouse intends to return to Australia with your children to cater for their educational needs; however you will remain in country B. Therefore as you will continue to remain in Country B to live and work with no intention to reside in Australia, it is considered that your status of being a foreign resident under the 'resides test' will remain unchanged.

The domicile test

If a person has their domicile in Australia they will be 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 will have established a permanent place of abode in country B based on the following information:

· You do not intend to return to Australia

· You were accompanied by your family to reside in country B

· You have a work contract in country B

Based on these facts, it is considered that you will have established a permanent place of abode outside Australia. Consequently, you would not satisfy the domicile test.

While some of your family are returning to Australia for a few years to attend school you have not given up your permanent domicile in Country B.

The183 day test

When 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 have not been back to Australia since leaving. You have no intention on returning to Australia to live and would only return for a short period on a holiday if you do return.

You are not a resident under this test.

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.

You and your spouse are not eligible to contribute to the PSS.

You are not a resident under this test.

Your residency status

You are a non-resident of Australia for taxation purposes from when you left Australia.

You will remain a non-resident of Australia for taxation purposes if your spouse and children return to Australia to attend school.

Please note:

If you cease being an Australian resident or a resident trust for CGT purposes, you are taken to have disposed of certain assets for their market value on the day you stopped being a resident.

If you ceased being an Australian resident on or after 12 December 2006, or ceased being a resident trust for CGT purposes on or after that date, you are taken to have disposed of each of your assets that are not taxable Australian property for their market value at the time you ceased being a resident. In the case of any indirect Australian real property interests and options or rights to acquire such interests, you are taken to have immediately re-acquired these assets for their market value.

If you are an individual, you can choose to disregard all capital gains and capital losses you made when you stopped being a resident.

If you ceased being a resident on or after 12 December 2006 and you make this choice, those assets are taken to be taxable Australian property until the earlier of:

· a CGT event happening to the assets (for example their sale or disposal), or

· you again becoming an Australian resident.

The effect of making this choice is that the increase or decrease in the value of the assets from the time you cease being a resident to the time of the next CGT event, or of you again becoming a resident, is also taken into account in working out your capital gains or capital losses on those assets. The way you prepare your tax return is generally sufficient evidence of your choice.

Due to the uncertainty of your spouse and children's plans for the future, the Commissioner is unable to provide a ruling for your spouse and children in relation to a hypothetical situation.

We are however, able to give you some general advice in relation to becoming a resident of Australia for taxation purposes.

Generally you are considered to be a resident of Australia for taxation purposes if:

· You have always lived in Australia

· you moved to Australia and are a permanent resident

· you have been in Australia continuously for 6 months or more and for most of the time been:

- in the one job

- living in the same place, or

· been in Australia for more than half the financial year unless:

- your usual home is overseas and

- you do not intend to live in Australia

You can use the Are you a resident? tool to help you work out your residency status on our web site at www.ATO.gov.au.

If your wife and children are unable to determine their residency status for taxation purposes after looking at the residency tool on the web site they can then write in and request a private ruling when their situation becomes more certain.