Edited version of your private ruling

Authorisation Number: 1011971830284

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: residency

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

You departed Australia permanently for a foreign country. You have no intention of returning to Australia on a permanent basis.

You currently live in the foreign country on a multiple re-entry permit.

You currently work in the foreign country under contract to an employer. This contract can and will be extended.

You work in the foreign country on a several week on and lesser week off roster.

You are living in accommodation in the foreign country supplied by your employer.

You are currently registered on the Australia Embassy web site as a permanent resident of the foreign country and it is your intention to continue living in that country on a permanent basis.

You have been progressively integrating into normal community life in the foreign country and as part of that process you regularly participate in local team sports.

You have separated from your Australian spouse. A child support agreement and financial settlement was sanctioned by the Family Court. Full divorce proceedings are pending.

Your ex-spouse and children continue to live in Australia. Your children have remained with your ex-spouse as part of the Family Court settlement. They also remained in Australia to continue their education.

You have a house in Australia which you have decided to sell but the current listing authority has lapsed. You are at present back in Australia and prior to leaving you will be re-signing an extension of the existing listing authority. You do not have any offer on your property at the moment and you have no idea when it will sell. It is listed at this stage, but no firm offers have been presented.

You need to sell the property to raise the additional capital necessary for buying a dwelling in the foreign country. You have engaged an estate agent to find you an apartment to purchase in the foreign country. You had a contract to buy a property but subject to the offer you received additional information that caused you to form the conclusion that the property under offer was not really suited to your needs and you allowed the contract to lapse. However, you are still seeking to purchase a property in the foreign country but have not yet signed another purchase agreement/contract.

Your house in Australia stands empty when you are out of Australia and has only been retained for the sake of the children. Once you sell the house you intend to live with various people during your lesser week visits. You have no intention of buying a replacement property in Australia.

You return to Australia during your rostered breaks primarily to see your children. You also to needed to complete the financial settlement with your ex-spouse and your child support arrangements. These are now complete. Future visits will be solely to see your children. Your stays are never more than the lesser number of weeks, as per your roster.

You have a bank account in Australia used to service the mortgage on your house.

You have a superannuation account which you can neither close it nor transfer it out of Australia.

You have relatives in Australia. You visit them on some occasions.

You are a member of an Australian association, but you will let your membership lapse.

You have established friendships in the foreign country with other foreign nationals working in the foreign country.

You maintain a bank account in the foreign country.

You own a motor vehicle in the foreign country.

Neither you nor your ex-spouse has ever been an employee of the Commonwealth Government of Australia.

You are more than 16 years of age.

Relevant legislation 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 Income tax: residency - permanent place of abode outside Australia.

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 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'.

Taxation Ruling IT 2650 provides 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 have been living and working in the foreign country for some time on a contract which can and will be extended. You have no intention of returning to Australia on a permanent basis. You live there in accommodation supplied by your employer.

Accordingly, it is considered that you are residing in the foreign country and, therefore, are not a resident of Australia under the resides test.

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.

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 (for example, change of citizenship).

In your case, as you are still an Australian citizen while living in the foreign country, your domicile is Australia and remains unchanged.

Paragraph 14 of IT 2650 discusses the findings in the court case of F C of T v Applegate (79 ATC 4307). In this case, the Court said that the term "permanent" must be interpreted in the context in which it appears. It acknowledged 'that in its context in the "resident" definition a permanent place of abode does not have to be "everlasting" or "forever" … (but) should be contrasted with a temporary or transitory place of abode outside Australia. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his or her usual place of abode'. They stated further that 'the taxpayer's intention regarding the duration of his stay overseas was only one relevant factor to be taken into account. Of more importance is the nature and quality of use … of a particular place of abode overseas'.

Whilst it is acknowledged that you have been living and working in the foreign country for some time and are employed on a contract, it is considered that the accommodation provided by your employer is not a permanent place of abode. They are able to move you as and when they require. You also appear to see this accommodation as temporary in nature as evidenced by your decision to search for a dwelling to buy in the foreign country. As you have an Australian domicile and have not established a permanent place of abode outside Australia, you are a resident of Australia under the domicile test.

Conclusion

As you are a resident of Australia under the domicile test, you are therefore an Australian resident for taxation purposes as defined in subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.

As you have passed one of the tests of residency, it is not necessary to consider the remaining tests (183-day and superannuation).