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Ruling

Subject: Residency

Questions and answers:

1. Are you a resident of Australia for taxation purposes from 1 July until you departed Australia for country X?

Yes.

2. Are you a resident of Australia for taxation purposes for the period after you departed Australia for country X until you return to live permanently in Australia?

No.

This ruling applies for the following period:

1 July 2010 until 31 October 2012

The scheme commence on:

1 July 2010

Relevant facts and circumstances

You were born in Australia and you are an Australian citizen.

You have dual nationality with country Y.

Your partner is a citizen of country X and his country of origin is country X.

You have not resided in your parents' family home in Australia, except for holidays, since beginning study at university approximately 5 years ago.

During your period of study you resided in a private rental share home in Australia.

On completion of your studies in the financial year you travelled to country X with the intention of staying for up to 2 years.

The purpose of your visit to country X is to be with your partner while he completes their study.

You did not require a visa as you have dual nationality with country Y which allows you to reside and work in country X without the need for a visa.

While you are in country X you are residing in the family home of your partner.

You commenced full time work in country X for a period of approximately 6 months.

You are currently employed in country X and this will end after approximately 1 year. You are considering terminating this contract within the next month and will look for alternative work in country X.

You pay income tax in country X.

You arrived back in Australia for a period of approximately 3 weeks in the financial year. You then returned to country X.

You have not returned to Australia on any other occasion.

You have some Australian income from casual work and have paid income tax for the financial year.

Your assets in Australia include bank accounts, a superannuation account, a car and your personal belongings.

You have purchased no assets in country X but have opened a bank account for ordinary living requirements.

Whilst overseas your belongings are being stored at your parents' family home, which is also your address for any correspondence from banks, superannuation fund, insurance etc.

You do not have a permanent place to live in Australia.

You will stay with your family temporarily when you return to Australia until you find your own accommodation.

You do not have any children.

You have no social or sporting connections in Australia other than personal friends.

Neither you nor your partner are or have been Commonwealth Government employees.

It is your intention to return and to reside permanently in Australia in a later financial year.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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

Reasons for decision

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests which will help us ascertain whether you are a resident of Australia for income tax purposes whilst overseas. These tests are:

(i)   residence according to ordinary concepts;

(ii)  the domicile/permanent place of abode test;

(iii)   the 183 days/usual place of abode test; and

(iv)   the Commonwealth superannuation test.

The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word resides.  However, where you do not reside in Australia according to ordinary concepts, you may still be considered to be a resident of Australia for tax purposes if you 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'.

Results of the resides test

For the period 1 July 2010 until you departed Australia for country X you were a resident of Australia for tax purposes under the resides test as you were living in Australia in a private rental share home.

As you have been living in country X since you left Australia and you will not be returning to live in Australia until a later financial year, you are not a resident of Australia for tax purposes under this test for that period.

We have established you were a resident for tax purposes for the period 1 July until you departed Australia for country X so there is no need to apply the remaining residency tests to this period.

The following discussion regarding the remaining tests of residency relates to the period after you departed Australia for country X.

The domicile/permanent place of abode test

Domicile

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 Australia.

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, your domicile of origin is where you were born, or the country of your father's permanent home. As you were born in Australia and your family home is in Australia, your domicile of origin is Australia.

In order to show that you have chosen a new domicile of choice in a country outside Australia, you must be able prove an intention to make your home indefinitely in another country, for example, change of citizenship or permanent residency.

You have not indicated that you are applying for citizenship or permanent residency in another country and you state that your intention is to return to Australia to live permanently in a later financial year.

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

As stated above, you were born in Australia and you have not indicated an intention to apply for citizenship or permanent residency of another country, therefore your domicile remains in Australia.

We now need to determine if you have established a permanent place of abode outside 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.

If an individual with a permanent place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another or moves constantly within the same country (for example, from town to town or even from suburb to suburb) any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or a permanent place of abode outside Australia.

The Commissioner's views are further explained in Taxation Ruling IT 2650: Income tax: residency - permanent place of abode outside Australia, and lists the following relevant factors to be taken into account in determining a person's permanent place of abode:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) whether the individual intended to stay in the overseas country only temporarily and then move on to another country or to return to Australia at some definite point in time;

(c) whether 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) has been established outside Australia;

(d) abandonment of residence or place of abode in Australia;

(e) duration and continuity of the individual's presence in overseas country; and

(f) durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments he or she is leaving permanently, family ties and so on.

The weight given to each factor varies with the circumstances of each individual taxpayer. When we apply your circumstances to the above criteria:

§ You have been in country X since completing your studies in the 2010-11 financial year and your intention is to stay in there for approximately 2 years.

§ Your intention is to return to Australia to live permanently at the end of this 2 year period in country X.

§ You and your partner are living at the family home of your partner.

§ You do not have a permanent residence in Australia.

§ You are currently employed in country X on a full time basis. You are considering terminating this employment and seeking further employment in country X.

§ You do not have any social or sporting connections in Australia other than personal friends.

§ You have maintained your bank accounts and your superannuation account in Australia. In addition, you have kept your car and your personal belongings in Australia.

Results of the domicile/permanent place of abode test

You have retained your domicile in Australia as you are an Australian citizen and you have not indicated any intention of applying for citizenship or permanent residency overseas.

As you have been living in the family home of your partner since you arrived in country X, the Commissioner is satisfied that you have established a permanent place of abode outside Australia.

You are not a resident of Australia under the domicile/permanent place of abode test.

The 183 day/usual place of abode test

183 days

Under the 183-day test, a person will be an Australian resident if they are present in Australia for more than183 days during a financial year unless the Commissioner is satisfied that their usual place of abode is outside Australia and they do not intend to take up residence in Australia.

Since leaving Australia after completing your studies in the financial year you have returned on one occasion for a short period (approximately 3 weeks). You do not intend to return to Australia until the later financial year.

From the information supplied you were not present in Australia for more than 183 days in the financial year. For the subsequent financial year you will still be in country X and you will not be in Australia.

You will be present in Australia for than 183 days in the later financial year as you will be returning to live in Australia permanently part way through the financial year so it is necessary to consider your usual place of abode for the period of the ruling that falls within the later financial year.

Usual place of abode (residency intentions)

Generally, a person's 'usual place of abode' is the place routinely used by them when physically present in a particular country. The place of abode need not be fixed, but must exhibit the attributes of a place of residence or a place to live, as against overnight, weekly or monthly accommodation of a traveller.

As outlined in the domicile/permanent place of abode test, you are staying in the family home of your partner for the duration of your time in country X. These arrangements display the necessary characteristics of an established, stable residence and satisfy the 'usual place of abode' test.

As we have established that your usual place of abode is outside Australia until you leave country X, we do not need to consider your residency intentions as they apply to the 183 days/usual place of abode test.

Results of the 183 day/usual place of abode test

You are not a resident of Australia under this test for the financial year and subsequent financial year as you will not be present in Australia for more than 183 days in any income year during this time.

For the remaining time you will be in country X, whilst you do expect to be present in Australia for more than 183 days in the relevant income year, the Commissioner is satisfied that your usual place of abode is outside Australia so you will not be a resident of Australia for this period.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person. You must be or have been a Commonwealth of Australia Government employee to be eligible to contribute to these schemes.

Results of the superannuation test

In your case, as you nor your spouse have never worked for the Commonwealth of Australia, you cannot be a member of the CSS or the PSS or a spouse of such a person. You are over 16 years of age. Therefore, you are not a resident under this test.

Conclusion

You are a resident of Australia for taxation purposes from 1 July until you departed Australia for country X. You are not a resident of Australia for taxation purposes from when you departed Australia for country X after completing your studies until you return to live permanently in Australia.