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Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2012

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts

You were born in and are a citizen of Australia.

You went overseas to work a number of years ago.

You worked in country B for a short period.

You wish to work in low or no tax countries and to be a non-resident of Australia for taxation purposes to maximise your income.

You were not able to secure a permanent residents status in country B.

While in Country B your employer provided you a serviced apartment.

After you finished your contract in country B you spent two weeks in country B on holiday before commencing your current employment.

You are now working in Country C.

You have a work visa for Country C.

You live in employer provided accommodation in Country C.

You work 8 weeks on and 2 weeks off.

You have investment properties in Australia along with shares as well as bank accounts to assist in the management of the properties.

You do not have any assets overseas.

No family members accompanied you overseas.

You intend to return to Australia once or twice each year.

You intend to be overseas for the duration of your working life.

Neither you nor your spouse are currently or have ever been Commonwealth government employees.

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'.

You left Australia to work in Country B for a short period. You are now in Country C. 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 prove an intention to make his or her home indefinitely in that country. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

In your case, you were born in Australia; therefore, your domicile of origin is Australia. You intend to remain overseas for the duration of your working life.

You left Australia to work in country B and you are now working in Country C . You intend to extend your current work contract or seek further contracts overseas.

You did not have permanent residency or citizenship of Country B and you do not have permanent residency or citizenship of Country C or any other country overseas. Therefore, you have not proven an intention to make Country C your home indefinitely and your domicile remains 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.

On the other hand individuals or families who make do with temporary accommodation with limited resources and facilities such as in barracks, on oil rigs, in single quarters, on ships or in mining towns are less likely to be able to show the establishment of a permanent place of abode.

In your case:

· You left Australia to work in country B

· You worked in country B for a short period before securing another contract

· You are now working in Country C

· You have employer provided accommodation in country C

· You will return to Australia to visit family

· The commissioner is not satisfied that you have established a permanent place of abode outside Australia therefore you are a resident under this test.

· As you meet the domicile test it is not necessary to consider the 183 day and superannuation tests.

Your residency status

You are a resident of Australia for taxation purposes under the domicile test.

You are required to declare all your income both in Australia and outside Australia in your tax returns.