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Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes for the period you were overseas?

Yes.

This ruling applies for the following periods

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are an Australian citizen and Australia is your country of origin.

You left Australia in 2009 to work in country A and returned in 2010.

You had an 18 month working Visa.

You intended residing in country A. permanently and had no plans initially to return to Australia.

You had a bank account, a car, and lived in rental accommodation while in country A.

You returned to Australia in 2010 and remained in Australia for a year.

During that year you lived in rental accommodation with your partner.

You paid tax on your country A. income and were employed by a country A company.

You were employed on an 18 month contract in country A which you cut short and returned to Australia.

Your family did not accompany you overseas.

Your partner remained in Australia while you were in country A as he/she was unable to obtain a visa.

You do not have any social or sporting connections in Australia or country A.

You have never been a Commonwealth Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Residency

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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 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.

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 meet 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'.

You were residing in country A as evidenced by:

· living in rental accommodation and owning a car

· working full time

· your intention was to work in country A until the end of your contract

You did not intend to return to Australia

Therefore, you were not considered to be residing in Australia.

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 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.

You took no action to enable you stay overseas to be long term. You only had a short term work visa.

Therefore, you have maintained your Australian domicile.

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 have advised that you were renting accommodation in country A,

you did not maintain a residence in Australia while you were away but your partner was living in Australia, and

Your partner was not able to join you in country A as they were unable to obtain a visa.

You returned to Australia after 12 months.

The Commissioner is not satisfied that you have a permanent place of abode outside Australia.

The 183-day test

This test does not apply to as you were not in Australia for over 183 days in any year during your absence.

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 will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

You are a resident of Australia under the domicile test.