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Ruling

Subject: Residency status

Question and Answer

Are you a resident of Australia for tax purposes for the 2010-11 income year?

Yes

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Australia.

You are a dual passport holder, with an Australian passport (by birth) and a foreign passport (via parents).

You left Australia on date A in the 2009-10 income year to travel overseas, including Country X.

Your foreign passport enables you to work in Country X.

Your intention was to travel for some months, and you were not planning to work in Country X at that time.

Between date A and date B, you were travelling overseas, including a visit to Country X as a tourist. You stayed in tourist type accommodation such as hostels and hotels.

You returned to Country X and prepared your paperwork in order to seek employment.

You commenced working in Country X on date C.

You plan to return to Australia within two years of commencing employment in Country X.

You do not own a home in Australia. Your parents live in Australia.

You were renting prior to leaving for overseas and plan to rent again to begin with when you return.

You are renting a room in a house in Country X.

The items you have taken with you overseas are your backpack with essential travel items including your clothing.

Your assets in Country X include funds which were transferred from Australia.

Your assets in Australia are an investment of a significant value.

No family members have accompanied you to Country X. Apart from your parents you also have aunts, uncles and cousins in Australia.

Your social and sporting commitments in Australia include a theatre group to which you belong.

Your social and sporting commitments in Country X include a dance group which you frequently attend.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 995-1.

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:

· The resides test

· The domicile test

· The 183 day test

· The superannuation test

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 dictionary meaning, 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 are residing outside Australia for a considerable time, you are not considered to be residing in Australia. Thus you are not a resident of Australia for taxation purposes 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 a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.

In your case, you were born in Australia and you have indicated that you will be returning to Australia to live. Therefore you have maintained your Australian domicile.

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.

For the period date A until date B you were mainly travelling and preparing for employment. You stayed in temporary accommodation such as hostels and hotels and thus you did not have a permanent place of abode overseas.

For the period date C until you leave for Australia, although you will have been working in Country X and living in a set location, it is considered your associations with Australia are more significant as:

· your family is in Australia

· no family members have accompanied you overseas

· you have taken with you only your backpack and essential travel items such as your clothing

· you have a large investment in Australia

· you belong to a theatre group in Australia

· you are only renting in Country X

· you intend to return to Australia within two years of commencing employment in Country X.

Based on these facts, it is therefore considered that you have not established a permanent place of abode outside Australia. Therefore you are considered to be an Australian resident under the domicile test.

Your residency status for the income year 2010-11

You are an Australian resident for tax purposes for the 2010-11 income year under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936.