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Ruling

Subject: Residency

Question and answer:

Will you be a resident of Australia for taxation purposes after you leave to commence working overseas?

No.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You are a citizen of Australia and you were born in Australia.

You are currently employed in Australia.

You have been offered a permanent position in another country.

If you accept the position you will take leave without pay from your current position for an initial period of over X years.

When you leave Australia you will go straight to the foreign country to take up the position.

You will be applying for a residence permit which will give you permanent resident status, thereby allowing your family to join you in the foreign country.

Your family will join you approximately X weeks after you leave, once you have been granted the residence permit.

You will not be in Australia for more than 183 days for the income years you will be living and working overseas.

After the initial period you will decide whether to return to your job in Australia, extend your leave without pay further or remain overseas permanently.

You will be taking your family with you and you will reside in company provided accommodation in the foreign country.

The accommodation is provided as part of your employment contract and is a villa situated in a compound.

Your children will be educated in an international school in the foreign country.

You will be paid in local currency into a local bank account. You will be opening a bank account in the foreign country for this purpose.

You will retain your house in Australia and make it available for rent unfurnished. The rent you receive will be used to meet the mortgage payments.

You will retain an Australian bank account to facilitate these mortgage payments.

You will be selling all your furniture and your car and will not keep any other assets in Australia.

Your family medical insurance will be suspended.

You and your spouse have family in Australia and you will return for holidays to visit. These visits will be approximately X weeks in duration, X times per year.

You will not maintain any social or sporting connections with Australia.

You and your children will be joining local sporting groups in the foreign country.

Neither you nor your spouse have ever been employees of the Commonwealth Government of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

Reasons for decision

Residency Status

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 which will help us ascertain whether you will be a resident of Australia for income tax purposes when you leave to accept a position overseas. These tests are:

(i) residence according to ordinary concepts;

(ii) the domicile test;

(iii) the 183 days test; and

(iv) the Commonwealth superannuation test.

The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word resides.  However, where you do not reside in Australia according to ordinary concepts, you may still be considered to be a resident of Australia for tax purposes if you 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 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'.

As you will be residing in a foreign country from when you leave Australia to commence your employment, you will not be a resident of Australia for tax purposes under this test.

The domicile test

If a person has 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.

There are essentially 3 types of domicile that an individual can have:

· the domicile of origin;

· the domicile of choice; and

· the domicile of dependency.

Basically, your domicile of origin is the where you were born. In order to show that you have chosen a new domicile of choice in a country outside Australia, you must be able prove an intention to make your home indefinitely in that country. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

You were born in Australia and you have not chosen a new domicile of choice, therefore your domicile remains in Australia. We now need to determine if you will establish a permanent place of abode outside Australia.

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 you in the meantime setting up a permanent place of abode elsewhere.

Income Tax Ruling IT 2650 lists the following relevant factors to be taken into account in determining a person's permanent place of abode:

(g) the intended and actual length of the individual's stay in the overseas country;

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

(i) whether 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) has been established outside Australia;

(j) abandonment of residence or place of abode in Australia;

(k) duration and continuity of the individual's presence in overseas country; and

(l) durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments he or she is leaving permanently, family ties and so on.

The weight given to each factor varies with the circumstances of each individual taxpayer. When we apply your circumstances to the above criteria:

· You will be leaving Australia for an initial period of over X years and plan to visit Australia to see family X times per year for X weeks at a time.

· You will be employed in a foreign country and your employment contract includes accommodation in a villa situated within a compound in the foreign country.

· You will open a bank account in the foreign country. This will be necessary to enable your salary to be deposited by your employer.

· Your family will be accompanying you overseas and your children will be educated in the foreign country.

· Your family home in Australia will be made available to rent unfurnished as you will be selling all your furniture.

· You will keep a bank account in Australia to facilitate mortgage payments on the house in Australia.

· You will not have any other assets in Australia.

· You will not maintain any social or sporting connections with Australia, other than your family.

· You and your family will pursue local sporting and other activities when you have relocated to the foreign country.

· After the initial X years you live and work in the foreign country you will decide whether you will return to Australia, extend your leave without pay or stay permanently in the foreign country.

When we take all these facts into consideration, it is clear that you have established a permanent place of abode outside Australia.

You will not be a resident of Australia under this test.

The 183-day test
You are a resident under this test if you will actually be in Australia, continuously or intermittently, during more than one-half of a year of income, unless the Commissioner is satisfied that your usual place of abode is outside Australia.

You will not be in Australia for more than 183 days during the current year of income, and you will only be visiting Australia for periods of up to 2 weeks, twice per year for the time you are initially overseas.

You will not be 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 Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person.

In your case, neither you nor your spouse are members of the CSS or the PSS.

You will not be a resident under this test.

Your residency status

For the reasons outlined above you will not be a resident of Australia for tax purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936.