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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2012
The scheme commence on:

1 July 2011

Relevant facts and circumstances

You were born and are a citizen of Australia.

You work on an oil rig in a foreign country.

You commenced work on the rig in the 2008-09 income year.

You have a foreign country work visa which is for 2 years. This has been renewed.

Your purpose for going overseas is to work and live on the oil rig.

You intend to live and work on the oil rig for the foreseeable future.

You have no plans to return to Australia to live permanently.

You return to Australia to visit your parent and sibling.

The sole purpose of these visits to see your family is to care for your sick parent and to maintain their home.

Your permanent place of abode is the accommodation provided to you by your employer on the oil rig.

You do not have any assets in the foreign country.

You have a home in Australia which you do not rent out while you are overseas.

You use this home to return to and stay when you come back to Australia.

Your assets in Australia include:

1. residential home

2. bank account

3. share portfolio

You have an open ended contract with your employer.

No family members accompany you overseas.

You have a partner in the foreign country.

You are a member of an Australian sporting club.

You have social contact with your colleagues on the oil rig.

You have maintained your Australian health insurance.

Your mail goes to your Australian postal box.

You work 28 days off and 28 days on.

You divide your time off between Australia and the foreign country.

You have lodged a tax return in the foreign country in 2010/11.

You are not eligible to contribute to a Commonwealth government super fund.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1)
Reasons for decision

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

Subsection 995-1(1) of the 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:
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.

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.

You left Australia to work in a foreign country on an oil rig in the 2008-09 income year. You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to 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.

Domicile

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, the domicile of origin of an individual is where the individual was born. 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. 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 therefore your domicile of origin is Australia. You are not a citizen of the foreign country and therefore you retain your Australian domicile.

As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

Permanent place of abode

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.

An individual who establishes his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent.

On the other hand individuals or families who make do with temporary accommodation with limited resources and facilities such as in barracks, on oil rigs, in single quarters, on ships or in mining towns are less likely to be able to show the establishment of a permanent place of abode.

In your case:

· you work on an oil rig,

· your employer provides you with accommodation on the rig,

· you maintain a home in Australia,

· you return to Australia to maintain the house and see your parent and sibling, and

· you have maintained Australian health insurance.

The Commissioner is not satisfied that you have established a permanent place of abode outside Australia; therefore you are a resident under this test.

As you meet the domicile test it is not necessary to consider the 183 day and superannuation tests.

Your residency status