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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 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2007

Relevant facts:

You were born in Australia and are a dual citizen of Australian and another country.

You have resided in Australia.

You applied for a job with a recruitment agency.

You received an overseas posting.

Your intention was to reside overseas indefinitely.

You left your parent's residence and flew overseas to receive training. After your training you flew to your country of posting where you taught for a number of months.

After returning to Australia for a period you returned to your posting overseas where you continued your assignment.

During this period with the exception of the first week, you lived in rental accommodation provided by you employed due to the fact that as you did not have a residence permit you were unable to sign a rental agreement.

As a result of you not having a residence visa you were required to extend your 'work visa' on a number of occasions during this period.

As you were not provided with a residence visa you were unwilling to extend your contract with recruitment agency.

As you harboured a desire to return overseas you applied for another overseas position.

You returned to Australia.

As a result of your applications you received another offer and left Australia.

When you returned overseas you were issued with a residence visa.

During your assignment you lived in rented accommodation.

After the completion of the year you took an overseas holiday.

Due to a conflict between you and your previous employer you had difficulties returning to your position. Without the certainty of how you could re-enter the country of your posting again, you applied for a job with an overseas council in another country.

You received an offer at another posting overseas.

You left Australia once again.

During this period you lived in rental accommodation.

During your contract you work at a number of different locations.

You also visited other countries on your holidays.

You were informed that you could re-enter the country of your first posting via your dual citizenship

As a result you began applying for jobs once again and accepted an offer to work in the country of your original posting.

During this time proposed to an overseas national.

You returned to Australia for a period.

After a period you flew overseas to collect your overseas visa and began your new posting.

You lived in rental accommodation.

During your stay you made a number of trips to visit you fiancée, her family and friends.

After a period you married your fiancée in another country.

Due to implications of the local law at the end of the year you organised an Australian visa for your spouse and returned to Australia.

Before you initially left Australia you sold your only asset that owned, which was your motor vehicle.

Your overseas assets that you owned were:

· bank accounts; and

· motor vehicles.

In your county of posting, it is not possible for a foreign resident to purchase real estate when employed by a local company.

While overseas you made and maintained a number of friendships with local nationals and expatriates, with whom you socialised with while living overseas.

You are not a contributing member of the superannuation fund for the Commonwealth government officers and do not have a spouse who is such a contributing member.

When you returned to Australia you disposed of your overseas motor vehicles and closed your overseas bank accounts.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1).

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

· 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.

You left Australia to live overseas for an indefinite period 10 years. You served in a number of positions overseas. As you were living and working overseas, it is considered that your place of abode was outside of Australia. Accordingly, you were not considered to be residing in Australia and therefore were 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. From the information that you have provided there is no evidence to indicate an intention to adopt a new domicile of choice. Therefore, as you were still an Australian citizen while living overseas, your domicile was Australia and remained unchanged.

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 live and work overseas;

· intended to live overseas for an indefinite period;

· lived in short term lodgings some of which were provided by your employer's;

· did not stay in the one place for more than 12 months;

· returned to Australia each year at the end of each school term for extended periods;

· lived in your fathers residence when you return to Australia; and

· returned permanently to Australia.

On the balance and based on the above, the Commissioner is not satisfied that you had established a permanent place of abode outside of Australia and so considers that you are a resident for taxation purposes under the 'domicile test'.

As you are considered a resident of Australia under the 'domicile test', there is no need to consider the 2 remaining tests.

Your residency status

As you are considered a resident of Australia under the 'domicile test' outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for income tax purposes.