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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts:

You were born in country A and are a citizen of both country A and Australia.

You are single with no dependants.

You left Australia to travel to country B to complete a postdoctoral fellowship.

You have an overseas working visa.

The employment contract in country B was initially for a short period, however this was extended.

While in country B you lived in rental accommodation.

After the completion of the contract you travelled to country A to assist your siblings care for your parents who were suffering from various medical ailments.

For a period you stayed in countries A, C and D where your parents and siblings live.

You did not return to Australia from the time that you left.

The only asset that you have overseas is a credit card.

The assets that you own in Australia consist of bank accounts and credit cards:

Before you left to travel overseas you were renting a place in Australia and when you left you had your personal items were stored with friends.

Your social and sporting ties to Australia are:

· a network of friends; and

· a membership to a sporting club.

Your overseas social and sporting ties consist of a network of friends.

You have never been a Commonwealth Government of Australia employee.

You had no intention of residing overseas permanently.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(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.

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: RESIDENCY - PERMANENT PLACE OF ABODE OUTSIDE AUSTRALIA, provide 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 left Australia to live in country B to complete a postdoctoral fellowship. At the completion of your contract you spent a period staying with your family in countries A, C and D. As you are living, studying and working overseas, it is considered that your place of abode is outside of Australia. Accordingly, you are not considered to be residing in Australia and so are not a resident 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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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.  In your case, although you born in country A and have country A citizenship, you gained Australian citizenship and in doing so have proven an intension to make Australia your home indefinitely. Therefore, it is considered that Australia has become your adopted domicile of choice.

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 you intend to live for the rest your 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.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

· the intended and actual length of the taxpayer's stay in the overseas country;

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

· whether the taxpayer has established 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), outside Australia;

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

· the duration and continuity of the taxpayer's presence in the overseas country; and

· the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In your case:

· you left Australia to for fill a postdoctoral fellowship in country B;

· you lived in rental accommodation in country B, and with family in countries A,C and D;

· you had always intended to return to Australia and have done so;

· your personal belongings remained in Australia at a friends residence;

· you have maintained your Australian banks accounts and credit cards.

Based on the above, the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia and therefore you are a resident of Australia for taxation purposes under the domicile test.

As you are a resident of Australia for income tax purposes under the 'domicile test', there is no need to consider 'the 183-day test' or 'the superannuation test'.