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Ruling

Subject: residency

Question and answer

Are you a resident of Australia for tax purposes while you are living and working overseas?

Yes

This ruling applies for the following period

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2011

Relevant facts

Your country of origin is Australia and you are an Australian citizen.

You left Australia to move to Country X to commence a post-doctoral research position funded by a fellowship award.

You are completing the overseas component of your fellowship and wish to remain overseas by postponing the Australian component of the fellowship until a later date.

You are renting an apartment in Country X since when you moved there.

You are single with no dependants.

You have visited Australia for two short visits to see family and friends.

You have belongings such as furniture and a car stored at your parents home in Australia.

You have an overseas bank account.

You will remain the whole time in Country X other than occasional periods of travel as a tourist.

You intend to return to work in Australia and the fellowship requires you to work for two years in Australia.

You are not an eligible employee in the CSS or PSS superannuation scheme.

You have remained on the Australian electoral roll.

Assumptions

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

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, and

§ 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.

If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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 have been living and working in Country X and accordingly you are not residing in Australia.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

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.

Your domicile is Australia because you are an Australian citizen and you intend to return to Australia after your time away overseas.

Therefore, you will be a resident of Australia unless the Commissioner considers you have established 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.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

§ 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.

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

§ You intend to return to Australia at the end of your overseas stay

§ You are not intending to live in Country X permanently

§ Your fellowship award requires you to return to Australia to complete the Australian proportion of your postdoctoral fellowship

§ You are renting a house in Country X while you are employed there

§ You have furniture, a car and other possessions stored at your parents home in Australia ready for when you return

§ You intend to return to Australia in the next one to two years depending if you postpone the Australian portion of your fellowship.

As the Commissioner is not satisfied that you have established a permanent place of abode outside Australia you are a resident of Australia under the domicile test.

Your residency status

As you are a resident of Australia under the domicile test of residency there is no need to examine the remaining tests.

Conclusion

As you are domiciled in Australia, and the Commissioner is satisfied that you do not have a permanent place of abode outside Australia, you are a resident of Australia for the duration of your employment overseas.

Your foreign income is assessable in Australia and you are required to lodge a tax return in Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid.