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Ruling

Subject: residency

Question and answer:

Are you a resident of Australia for taxation purposes from xxxx to xxxx?

Yes.

Are you a resident of Australia from xxxx to xxxx?

No.

This ruling applies for the following period:

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on:

1 July 2005

Relevant facts

You were born in and are a citizen of Australia and an overseas country.

You left to work overseas with your spouse a number of years ago.

Your spouse had a 2 year contract overseas when you left and you and your spouse expected to return to Australia after the contract had ended.

Your spouse's contract has been extended a number of times and you remain overseas living and working with your spouse.

You and your spouse have had children while overseas.

You have a permanent job overseas.

You have purchased a home overseas.

Your home in Australia is being rented out.

You have assets in Australia.

You have assets overseas.

You have made short trips back to Australia since leaving.

Neither you nor your spouse are or have been a Commonwealth Government employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income tax Assessment Act 1997 Section 6-5

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

Reasons for decision  

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.

Subsection 995-1(1) of the 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 first two tests are examined in detail in Taxation Ruling IT 2650: Residency - Permanent Place of Abode outside Australia.

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 Macquarie Dictionary, 2001, rev. 3rd 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'.

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.

You left Australia a number of years ago.

You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test.

The domicile test

If a person has 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.

Domicile

There are essentially 3 types of domicile that an individual can have:

§ the domicile of origin;

§ the domicile of choice; and

§ the domicile of dependency.

Basically, the domicile of origin of an individual is where the individual was born. 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 e.g., through having obtained a migration visa, a working visa. Even for a substantial time such as 2 years would not be sufficient evidence of an intention to acquire a new domicile.

In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

You were born in Australia. Therefore, your domicile of origin is Australia.

Initially your intention was to return to Australia after the conclusion of your spouses 2 year work contract. The Commissioner is not satisfied that you at this point had established a permanent place of abode outside Australia as 2 years is not evidence enough that you had established a new home.

You are therefore considered to be a resident of Australia.

As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have 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.

An individual who establishes his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent.

In your case:

§ you are living and working overseas

§ you and your spouse have purchased a home overseas

§ your spouse has extended their initial work contract a number of times

§ you are not sure if you will return to Australia

§ you and your spouse have had children overseas

The Commissioner is satisfied that you established a permanent place of abode from xxxx to the present day outside Australia; therefore you are not a resident under this test.

The 183 day test

When a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for more than 183 days during any financial year since leaving Australia and therefore you are not a resident 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.

In your case, neither you, nor your spouse, are current Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes.

Therefore, you are not a resident of Australia under this test.

Your residency status

You were a resident of Australia for taxation purposes from xxxx to xxxx .

You are a non-resident of Australia from xxxx until the present day.

As a resident of Australia for taxation purposes you are required to declare income derived both in and outside Australia in your Australian tax returns.

As a non-resident of Australia for taxation purposes you are required to declare income derived in Australia in your Australian tax return.