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Edited version of your private ruling
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Ruling
Subject: residency
Questions and answers
1. Are you a non resident of Australia from the date you left Australia to live and work overseas?
Yes
2. Are you a resident of Australia from the date you returned to Australia permanently?
Yes
This ruling applies for the following period
Year ended 30 June 2011
The scheme commenced on
1 July 2010
Relevant facts
You are a citizen of Australia and Country X. Your country of origin is Country X.
You moved to Australia from Country X to live with your partner (now spouse) who is Australian.
You, your spouse and children moved to Country X with the intention to live there permanently.
You resigned from your jobs in Australia and organised for a house swap where a family from Country X stays in your house in Australia for a year and you live in their house for a year.
You secured permanent jobs in Country X prior to departing Australia.
Your airline tickets had a return date of one year and you planned to return to Australia to visit and then organise your house to be rented out after the house swap finished.
Your school aged children attended a public school in Country X for about12 months.
You, your spouse and children joined local sporting facilities and established friendships in your local overseas community.
The only asset you held overseas was a bank account for your salary to be paid into.
You took out compulsory medical insurance as this is a requirement for residents of Country X.
You and your spouse are not or were not Commonwealth Government employees.
Your spouse and one of your children in particular did not adjust very well living in Country X and your other children preferred their home to be Australia. You and your family therefore made a decision to return home to Australia.
You made plans to return to Australia by giving notice to your overseas employers and organised your airline tickets back to Australia.
You arrived back in Australia after spending about 12 months in Country X.
Your argument
You believe you are not a resident of Australia for the year ended 30 June 2011
You lived in a fixed house and you had permanent work.
Your children attended the local school.
You resigned from your jobs in Australia.
You intended to live in Country X permanently but your spouse and child were very homesick.
You have family ties in Country X.
Assumptions
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 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. 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'.
You left Australia in mid 2010 to move to Country X with your spouse and children to live there for an indefinite period. Accordingly you were 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.
In your case, your domicile of choice became Australia when you became an Australian citizen.
You are also a citizen of Country X and when you decided to live indefinitely in Country X your domicile reverted to your domicile of birth - Country X.
Therefore, under the domicile test you are a non resident of Australia for tax purposes for the duration of time you were living in Country X.
Upon your return, Australia became your domicile of choice.
Note
As you were resident for only part of the financial year your Australian sourced income for that period will be taxed at resident rates and the tax-free threshold will be apportioned based on the number of months you were a resident.
When you complete your tax return for the year ended 30 June 2011 write the date you stopped being an Australian resident for tax purposes in the date box at item A2 on your tax return.