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Ruling

Subject: Residency

Question and answer: Are you an Australian resident for tax purposes from the date you departed Australia?

No.

This ruling applies for the following periods:

1 July 2008 to 30 June 2009

1 July 2009 to 30 June 2010

The scheme commenced on:

1 July 2008

Relevant facts:

You are a Country X citizen.

You have permanent residency in Country Y.

You commenced work with the Company Z in X.

You plan to take a period of 'no pay leave' from Company Z, expected to be from

X to X.

You will be caring for your seriously ill parent

You expect to get an initial contract for 1 year with the Company Y, with the intention of extending the contract.

Your spouse will travel with you overseas.

You have bought a home overseas for you and you spouse.

You will maintain your credit cards and bank accounts in Australian banks.

You will maintain your credit cards and bank accounts with Country X banks.

You will be taking your personal effects and car to Country X.

If circumstances change, you intend to cease employment in Australia.

Your accommodation in Australia will be rented out whilst you are overseas.

You may take temporary positions in different countries for durations up to total of less than 45 days per annum in order to supplement your income in Country X.

You will be maintaining your professional registration.

Neither you nor your spouse have ever been employed by the Commonwealth Government.

Relevant legislative provision:

Subsection 6(1) of the Income Tax Assessment Act 1936.

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia.  However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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, and

· 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 will still be considered to be a resident of Australia for tax purposes if they meet 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. 5^th 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 and your spouse are not residing in the Australia as evidenced by:

· renting out your residential property in Australia,

· buying residential property overseas,

· residing with your spouse overseas,

· working full time overseas, and

· your intention to live overseas indefinitely.

Under the resides test, you are not an Australian resident for taxation purposes from date you left Australia.

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.

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.

In your case you can chose to stay in Country X permanently without applying to the government, as you retained your Country X citizenship.

You intend to stay indefinitely in Country X so your Domicile is not Australia.

You are not a resident under the Domicile test.

The 183-day test

This test does not apply to you as it has been identified that your permanent place of abode is in Country X.

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. 

You will not be treated as 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.

Your residency status

As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident from the date of your departure from Australia under subsection 995-1(1) of the ITAA 1997.