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Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes from 1 July 2009 to 30 June 2011?

Yes.

This ruling applies for the following periods

Year ended 30 June 2011

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You are a citizen of Australia and country B is your country of origin.

You departed Australia in May 2009 to live and work in country A.

You have a residential works permit for country A.

A residential work permit lasts for two years and is renewable. It allows you to work for one employer and if that employer changes then you have to apply for a new permit. The permit allows you to live and work in the areas indicated on the permit.

You are a resident of country A and intend to reside there on a permanent basis.

You live in a rental property provided by your employer in country A.

You do not have immediate plans to return to Australia but may do so for a holiday to see your children.

Your children live in Australia and you are not accompanied by family or friends while living in country A.

You have returned to Australia on the following occasions since mid 2009:

o Mid 2009 for four weeks - you returned due to marriage problems and a sick child.

o Late 2009 for five weeks - to move house.

o Early 2010 for approximately three weeks - you separated from your spouse and organised storage of your belongings, changes of address and bank details.

o Mid 2010 for approximately 4 weeks - your family home had been left vacant and you made arrangements in regard to securing it.

You have a bank account in country A.

You do not have any social or sporting connections in country A.

You do not have any social or sporting connections in Australia.

You do not have a permanent place to live in Australia. Your family home is being rented out and is currently on the market to be sold.

You have a bank account and credit cards in Australia.

You have a motor vehicle which is being kept by a relative until you are able to sell it.

You are working on a two year contract in country A which has just been renewed for another two years.

You pay tax on your salary in country A.

You or your ex-spouse were/are not a Commonwealth Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

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 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 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.

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'.

Taxation ruling IT2650 considers the residency status of individuals leaving Australia. Some of the factors which have been considered relevant by the Courts and Boards of Review/Administrative Appeals Tribunal and which are used by this Office in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

· the intended and actual length of the taxpayer's stay in the overseas country

· whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time

· whether the taxpayer has established 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), outside Australia

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

· the duration and continuity of the taxpayer's presence in the overseas country, and

· the durability of association that the person has with a particular place in Australia, that is, maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

You advised that:

You departed Australia in May 2009 to live and work in country A;

· you live in a rental property provided by your employer in country A,

· your spouse and children remained in Australia,

· you returned to Australia for short periods to tend to personal and family matters over the following year;

· you separated from your spouse in February 2010

· you live and work under a residential work permit in country A,

· your contract in country A was extended for another two years from May 2011,

· you own a property in Australia,

· you have a bank account and credit cards in Australia,

· you have a bank account in country A, and

· you do not intend returning to Australia to live.

Based on this information you were residing in Australia from the date you departed Australia until you separated from your spouse as your family and assets remain here. During this period of time your family home remains in Australia and you were only in country A to work.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law (Henderson v. Henderson [1965] 1 All E.R.179; Udny v. Udny L.R.1 Sc.& Div. 441; Bell v. Kennedy [1868] L.R.1 Sc.& Div. 307 (H.L.)) .

In determining a person's domicile for the purposes of the definition of "resident" in subsection 6(1), it is necessary to consider the person's intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency.

Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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 for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

In your case, you returned to Australia several times between 1 July 2009 to 30 June 2011, to attend to family/domestic matters. You only have a visa to remain in country A while you maintain your current employment. Therefore, you are considered to have maintained your Australian domicile.

In addition, although you lived and worked in country A from mid 2009, your associations with Australia are considered to be more significant as:

o you are an Australian citizen

o you were married up until early 2010

o you live in country A on a residential work permit which requires that you are employed by a specific employer and maintain a particular position to remain in the country

o you live in accommodation provided by your employer

o in Australia you have retained assets such as your motor vehicle, bank account, and family home which is being rented out, and

o your children live in Australia.

Based on these facts, it is considered that you have not established a permanent place of abode in country A. You are, therefore, considered to be a resident of Australia for income tax purposes under the domicile test.

The 183-day test

This test does not apply to as you will not be in Australia for 183 days or more in the period under consideration.

The superannuation test

An individual is 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. 

You will not be a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Summary

You domicile has remained Australia and as you have not established a permanent place of abode outside Australia you are a resident for taxation purposes under the domicile test for the entire period in question. In addition you were a resident under the 'resides test' until you separated from your spouse.