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Ruling

Subject: Residency status

Question and Answer:

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

No

This ruling applies for the following periods:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Australia and Country Y.

Your country of origin is Australia.

You left Australia for Country X in the 2009-10 income year for employment purposes.

You held a Youth Mobility Visa.

You travelled after leaving Australia until you found a job.

You commenced employment in Country X on date A around the start of the 2010-11 income year.

You ceased employment on date B in the 2011-12 income year.

You paid tax in Country X on your salary income.

You rented a room during the period you were employed in Country X. You lived in the same room for the duration of your employment (date A to date B).

You left Country X on date C in the 2011-12 income year. On your way to Australia you went to Country Z for travel purposes.

You returned to Australia on date D in the 2011-12 income year to live and work permanently here.

No family members accompanied you to Country X.

You did not visit Australia during your stay in Country X.

You did not possess any assets overseas.

You live with your parents in Australia.

Your assets in Australia are a car and a bank account.

You did not have any social or sporting commitments with Country X.

You have family members and friends in Australia.

You do not have any sporting commitments in Australia.

You are not eligible to contribute to the Public Service Superannuation Scheme or the Commonwealth Superannuation Scheme.

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 resided overseas from date A to date E, you were 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 your case your domicile is in 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.

We have noted that you live with your parents in Australia and apart from your family, you have friends in Australia as well as a car and bank account. You went to Country X for employment purposes and you had no intention to make your home indefinitely in the UK. Thus you 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.

For the period 1 July 2010 until 30 June 2011 it is considered that you were not an Australian resident for taxation purposes under the domicile test for the following reasons:

You went to Country X for employment purposes and were employed for the whole of the 2010-11 income year.

You established a regular place of abode in Country X for the period 1 July 2010 until 30 June 2011. You lived in one place (a rented room) for the total duration of your employment in Country X.

You possess no assets in Australia apart from a car and a bank account.

As mentioned, the expression 'place of abode' refers to where a person lives and sleeps at night. In your case you rented a room in Country X for the duration of your employment there. You lived in the one location between 1 July 2010 and 30 June 2011.

Based on these facts, it is considered that you established a permanent place of abode in Country X for the 2010-11 income year.

Thus you were not a resident of Australia under the domicile test as you established a permanent place of abode overseas.

The 183-day test

Under this test, a person is required to be actually present in Australia for a total period of more than half the year of income, unless it can be established that the person's usual place of abode is outside Australia and there is no intention to take up residence here.

As you were not in Australia for 183 days or more, you were not a resident of Australia under this test.

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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

As you are not eligible to contribute to the Public Service Superannuation Scheme or the Commonwealth Superannuation Scheme, you were not a resident under this test.

Your residency status from 1 July 2010 until 30 June 2011

From 1 July 2010 until 30 June 2011 as you were not a resident of Australia under any tests of residency outlined in subsection 6(1) of the ITAA 1936, you were not a resident of Australia for taxation purposes.