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Ruling

Subject: Residency status

Question and Answer

Are you a resident of Australia for tax purposes for the duration of your stay in Country X?

No

This ruling applies for the following periods:

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You were born in Australia and are an Australian citizen.

Your country of origin is Australia.

You left Australia for Country X on date A in the 2009-10 income year.

You have a student visa.

The purpose of your visit to Country X is to undertake a Masters and Ph D at a University.

You have been employed as a research assistant as part of your study program and this will continue for the duration of your studies. You also work part-time during the summer.

Your intentions are to complete your studies which will be near the end of the 2013-14 income year at the earliest. You then intend to find a job in Country X.

It is possible that you may return to Australia to live and work. You have no plans to return permanently yet.

You visited Australia for a week during the 2010-11 income year to see your family as well as to renew your visa. You visa was originally was for a master's degree. You got a 3 year extension to complete your Ph D.

You are planning a visit to Australia in the 2012-13 income year to visit your family.

You are currently renting an apartment in Country X and have been doing this since you moved there.

In Country X your assets are an account with a credit union.

Whilst in Australia you were living in an apartment with friends. You do not have a permanent place to live in Australia.

You have two bank accounts in Australia. You have withholding tax deducted from one of your accounts.

No family members have accompanied you overseas. Your parents and siblings live in Australia. You are not married and have no children.

You are not a member of any social or sporting clubs in Australia.

In Country X you are an active member of a club. 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:

1. The resides test

2. The domicile test

3. The 183 day test

4. 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.

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 have been residing in Country X since date A, you are not a resident of Australia for taxation purposes under the resides test.

The domicile test

If a person is considered to have 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. In your case your domicile is in 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.

Your parents and siblings live in Australia. You have two bank accounts in Australia and it is your intention in the distant future to return to live and work. You have not indicated that you wish to make Country X your home indefinitely. Thus you have maintained your Australian domicile.

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 period 1 July 2010 until 30 June 2014 it is considered that you are not an Australian resident for taxation purposes under the domicile test for the following reasons:

§ You went to Country X for study purposes and plan to seek employment after completing your studies.

§ You have been living in an apartment in Country X since your arrival there on date A and thus have established a regular place of abode in Country X.

§ Whilst in Australia you were living in an apartment with friends. You do not have a permanent place to live in Australia.

§ You possess no assets in Australia apart from two bank accounts. You have withholding tax deducted from one of your accounts.

§ You are employed in Country X as a research assistant. You have a part-time job in the summer.

§ In Country X you are an active member of a club.

As mentioned, the expression 'place of abode' refers to where a person lives and sleeps at night. In your case you are renting an apartment in Country X. You have been living in the one location since your arrival there on date A.

Based on these facts, it is considered that you have established a permanent place of abode in Country X since date A.

Thus you are not a resident of Australia under the domicile test as you have established a permanent place of abode overseas.

The 183-day test

Under this test, a person is required to be actually present in Australia for a total period of more than half the year of income, unless it can be established that the person's usual place of abode is outside Australia and there is no intention to take up residence here.

As you were not in Australia for 183 days or more, you were not a resident of Australia under this test.

The superannuation test

An individual is still considered to be 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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

As you are not eligible to contribute to the Public Service Superannuation Scheme or the Commonwealth Superannuation Scheme, you were not a resident under this test.

Your residency status from 1 July 2010 until 30 June 2014

From 1 July 2010 until 30 June 2014 as you are not a resident of Australia under any tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not a resident of Australia for taxation purposes.