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Ruling

Subject: Residency status

Questions and answers:

1. Are you a resident of Australia for income tax purposes from the time that you arrived in the country X?

No.

2. Did you cease being a resident of Australia for income purposes for a period after you arrived in country X?

Not applicable.

3. Does the Australian and country X Double Tax Agreement apply to make you a resident of the country X for tax purposes from the time you arrived in country X?

Not applicable.

4. Does the Australian and country X Double Tax Agreement apply to make you a resident of the country X for tax purposes for a period after you arrived in the country X?

Not applicable.

This ruling applies for the following period

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

20 October 2010

Relevant facts

You were born in Australia and are an Australian citizen.

You are single with no dependents.

You are employed by an international company in Australia.

You departed Australia to take up an employment contract with your current employer in country X.

The employment contract that you have with your employer in country X does not have an expiry date, however the completion of your overseas employment contract is dictated by the expiry date of your visa.

You entered country X on a working visa which expires after an extended period.

The nature of the visa is that you are required to work for your employer and must return prior to the expiry of the visa.

When you arrived in country X you rented an apartment for a short period, while you were waiting for country X specific identification number.

Once you received a country X identification number, your employer provided hotel accommodation adjacent to your place of employment.

After a short period you found more permanent accommodation when you rented another apartment which has remained you current address.

As a condition of your employment contract, you are required travel between offices in country X as well as outside of country X. You spent a number of days away from your usual country X residence for both work and personal reasons.

Your country X employer has provided you with an allocated a work station and computer etc, however when you are required to travel the workstation is made available to others.

The assets that you hold in Australia are;

§ a family home (currently being tenanted);

§ bank accounts, and a visa credit card;

§ a share portfolio consisting of a number of ASX listed shares; and a

§ a country X stock purchase plan obtained from multinational companies you have worked for in Australia.

When you moved to country X you disposed of you motor vehicle.

Your assets that you hold overseas consist of a bank account.

Your wages from your country X contract are paid into your over seas bank account.

You are paying income tax on your salary in country X.

You have returned to Australia on one occasion for a short period for family reasons.

You have maintained your Australian sporting and social ties and various memberships that include hold.

You have not established any substantial sporting or social ties in country X to be temporary in nature.

The only social ties are friendships that you have formed in country X are with work your colleagues.

You have never been a Commonwealth Government of Australia employee.

You expect that your pattern of travel will remain relatively consistent up until your visa expires.

You intend to return to Australia once your visa expires.

Relevant legislative provisions

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

Income Tax Assessment Act 1936, 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

§ the superannuation test.

The first two tests are examined in detail in Taxation Ruling IT 2650.

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 a resident of Australia for tax purposes if they 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'.

TAXATION RULING IT 2650: RESIDENCY - PERMANENT PLACE OF ABODE OUTSIDE AUSTRALIA, provide guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay.

The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states:

The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.

In your case, you left Australia to live and work in country X for a period of 3 years. As you living overseas and are engaged in working overseas for a long period, you are not considered to have been residing in Australia. Accordingly, you are not residing in Australia and so are not a resident 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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.  From the information that you have provided, you have not demonstrated an intention to become a citizen of the country X and are still a citizen of Australia, therefore it is considered your domicile is unchanged.

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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Paragraphs 16 and 17 of IT 2650 state;

16. The case of F.C. of T. v. Jenkins 82 ATC 4098; (1982) 12 ATR 745, involved a bank officer who had been transferred to the New Hebrides for 3 years. He returned to Australia after only 18 months because of ill health. The taxpayer had tried to sell the family home before going overseas but was unable to find a buyer. The Australian home was eventually leased and the taxpayer retained a bank account in Australia.

17. The Supreme Court of Queensland held that the taxpayer had a permanent place of abode outside Australia during the period he was overseas even though he had not at any material time formed an intention to remain indefinitely in the New Hebrides in the sense in which the word "indefinitely" is used in Applegate. Sheahan J considered that if a stay of 10 years could not sensibly be regarded as "temporary", neither should a stay of 3 years be so regarded. In giving evidence, the taxpayer had said that, under normal circumstances, he and his wife would have applied for an extension after the 3 years had lapsed. In addition, they had no fixed date on which to return to Australia until the taxpayer fell ill.

Paragraph 28 of IT 2650 states;

28. The fact that an individual has established 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. Acquisition of a home in the overseas country would be a very relevant though not conclusive factor. On the other hand, individuals or a family group who "make do" in temporary accommodation with limited resources and facilities such as in barracks, singles' quarters, aboard ships, oil rigs, or mining towns, will be less likely to be considered to have established a permanent place of abode overseas.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO 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, i.e. 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.

In your case you:

§ have departed Australia to take up a long term employment contract with your current Australian employer in country X;

§ entered country X with a visa that allows you to work in country X for an extended period;

§ have a country X specific identification number;

§ have lived in country X since leaving Australia;

§ live in long term fixed accommodation in country X;

§ although have been required to travel to a number of destinations as a consequence of your employment and for personal reasons during your country X tenure, after your travel commitments were complete you return to a fixed address;

§ have no dependants;

§ have a residence in Australia that has been abandoned as it is currently being leased to tenants;

§ have returned to Australia for a short period for family reasons;

§ have maintained both sporting and social ties in Australia that include sporting clubs, family and friends; and

In considering the above, the fact that you have established a home (long term leased accommodation) in country X indicates that your place of abode in country X is permanent, this view is consistent with the view expressed in paragraph 28 of IT 2650. This is despite of your intension to return to Australia at the end of your employment contract. In paragraph 17 of IT 2650, it was considered that if a stay of 10 years could not sensibly be regarded as "temporary", neither should a stay of 3 years be so regarded. Therefore, consistent with the views expressed in paragraph 17 of IT 2650, the time that you will spend in country X is not considered to be temporary. Although you are often required to travel to other destinations as a consequence of your employment and for personal reasons, you always return to a fixed location. On the balance and based on the above, the Commissioner is satisfied that you have a permanent place of abode outside of Australia, therefore you are not a resident for taxation purposes under the 'domicile test'.

The 183-day test

Where a person is present in Australia for more than183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for a period greater than 183 days during the 2010-11 financial year and this pattern is expected to continue for the future years included in this ruling, therefore you are not considered to be a resident of Australia for income tax purposes under this test.

Accordingly, you are not a resident of Australia for income tax purposes under 'the 183-day test'.

The Superannuation test

An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service 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 over the age of 16 years and have not, or have you ever been a member of a CSS or PSS you are not a resident of Australia under this test.

Accordingly, you are not a resident of Australia under 'The Superannuation Test'.

Your residency status

As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not an Australian resident for income tax purposes.