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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?

Yes

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. You became an Australian citizen many years back.

Your country of origin is Country W.

You left Australia with your spouse in the 2010-11 income year for a three month holiday in Country X.

At the time you were receiving a Centrelink Disability pension. You informed Centrelink prior to leaving that you were going overseas.

You were aware of Centrelink's rule that your pension would be discontinued if you did not return to Australia in 13 weeks. You booked your return flight to Australia well before the 13 week cut off time.

Your pension was your only source of income and you had a dependent spouse.

Your visa was a single entry 90 day non-migration visa.

After arriving in Country X you developed a medical condition which prevented you from returning to Australia for a few years. Doctors in Country X advised you not to fly for 3-5 years.

In view of your medical condition, the Country X immigration authorities granted you a 12 month visa renewable every year based on your continuing marriage to your spouse. You are required to have a bank account in Country X in your name with a minimum required balance to show you are in a financial position to look after yourself, your spouse and your spouse's family.

You are not able to return to Australia by boat as you suffer from severe seasickness.

Your spouse is caring for you and you are living with your spouse and her family in Country X. You are supporting your spouse and her family. You have lived in the one location since your arrival in Country X.

Your plan between now and the next 18 months is to continue to live with your spouse and your spouse's family in Country X and to work on improving your health.

Your plan is to return to Australia as soon as you are fit enough to do so. You hope to do this within 3-5 years. At present you are living completely off your savings and the small amount of rent you receive from your family home in Australia which you have rented out.

You plan to return to Australia as soon as possible as your Disability pension from Centrelink will recommence and your spouse will receive a payment for caring for you. Medicare will also be available to you and your spouse.

Your family members in Australia include your sister, many cousins, uncles and aunts and your three children.

Your assets in Australia are your residential home, investments and a bank account.

You do not possess any assets in Country X apart from a bank account.

You do not have any sporting commitments with Australia. You have a strong social commitment to Australia through your close friends and family. You keep up to date with daily events that are happening in Australia through the Internet and satellite television. You have daily contact with your children and family. You read the latest news on News.com.au and watch many Australian sports including Australian cricket, rugby, and other sports. You follow the Australian stock exchange and keep up to date with the Australian dollar on a daily basis.

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

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:

o The resides test

o The domicile test

o The 183 day test

o 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.

1. 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 are residing outside of Australia for a considerable time, you are not considered to be residing in Australia. Thus you are not a resident of Australia under the resides test.

2. The domicile test

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile, unless the Commissioner is satisfied they have a permanent place of abode outside of 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.

In your case, you have indicated that you will be returning to Australia as soon as you are physically fit to do so. You have maintained your home in Australia and you have three children who live here. Therefore you are considered to have maintained your Australian domicile.

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.

For the 2010-11 income year, although you had accommodation and a bank account in Country X, it is considered that your associations with Australia were more significant than your associations with Country X as:

You went to Country X for a three month holiday and due to health reasons have not been able to return to Australia. Doctors have advised not to fly for 3-5 years and you suffer from seasickness and thus cannot return by boat.

At the time of departure you were receiving a Centrelink Disability pension. You informed Centrelink prior to leaving that you were going overseas.

You were aware of Centrelink's rule that your pension would be discontinued if you did not return to Australia in 13 weeks. You booked your return flight to Australia well before the 13 week cut off time.

You will spend your time in Country X working on improving your health so that you can return to Australia. Your spouse is caring for you on a full time basis.

You do not have a permanent residence visa in Country X. At the time of departure from Australia, your visa was a single non-migration visa. In view of your medical condition, the Country X immigration authorities granted you a 12 month visa which needs to be renewed each year.

You are living on a very limited income in Country X with which you are supporting your spouse and their family.

You plan to return to Australia as soon as possible as your Disability pension from Centrelink will recommence and your spouse will receive a payment for caring for you. Medicare will also be available to you and your spouse.

You have a house in Australia which you have rented out whilst you are in Country X. You will live in that house when you return to Australia.

You do not possess any assets in Country X apart from a bank account.

You have family members in Australia, including your three children, your sister, many cousins, uncles and aunts.

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

You have a strong social commitment to Australia through your close friends and family. You keep up to date with daily events that are happening in Australia through the Internet and satellite television. You have daily contact with your sons and family. You read the latest news on News.com.au and watch many Australian sports including Australian cricket, rugby, and other sports. You follow the Australian stock exchange and keep up to date with the Australian dollar on a daily basis.

Based in these facts, it is considered that you have not set up a permanent place of abode outside Australia: Therefore you are an Australian resident under the domicile test.

As you are a resident of Australia under the domicile test, it is not necessary to consider the other two tests.

Your residency status from 1 July 2010 to 30 June 2011

For the 2010-11 income year you were a resident of Australia under the domicile test of residency outlined in subsection 6(1) of the ITAA 1936.