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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes for the period that you lived and worked in country X?

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on

1 June 2010

Relevant facts

You are over 16 years of age.

You have no dependants.

You were born in country X to Australian parents.

You are an Australian citizen with an Australian passport.

You left Australia to live and work in country X with your long time girlfriend.

You left Australia with the intension of living and working overseas for an extended period.

You entered country X on a 1 year working holiday visa.

When you arrived in country X you rented an apartment.

Due to you having difficulties finding full time employment, for a short period you worked for an Australian company via correspondence.

After a short period you found fulltime employment and therefore ceased working for the Australian company.

You paid income tax to the government of country X.

After a period you decided to return to Australia due to employment concerns for your girlfriend.

Before you returned to Australia you travelled on a holiday for a short period with no fixed abode.

You did not return to Australia for any period during your time overseas.

Your assets that you hold in Australia consist of;

· a unit (which was your main residence before being tenanted while you were overseas); and

· bank accounts.

You parents reside in Australia and you have a sibling that lives in country X.

Your assets that you held overseas consisted of a bank account.

Your Australian sporting and social ties consist of a network of friends.

Your overseas sporting and social ties consist of a network of friends as well as a football team whom you played for.

You have never been a Commonwealth Government of Australia employee.

You have returned to Australia to reside permanently after returning from overseas.

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.

You left Australia in June 2010 to live and work in country X for an extended period. As you were living and working in country X you are not considered to have been residing in Australia during that period. Accordingly, you were not residing in Australia and so are not a resident for taxation purposes under the 'resides test' for the 2010-11 financial year.

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 were born in country X however you moved to Australia and became an Australian citizen, therefore adopting Australia as your domicile of choice. When you travelled to country X you did not demonstrate an intention to become a country X citizen electing to remain a citizen of Australia. Therefore it is considered your Australian 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.

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:

· departed Australia to live and work in country X;

· lived in country X for an extended period, before travelling on a holiday with no fixed address;

· entered country X on a year working holiday visa;

· rented an apartment in country X;

· have a sibling that lives in country X;

· decided to return to Australia due to employment concerns for your girlfriend;

· have a residence in Australia that had been abandoned as it was leased to tenants when you travelled overseas;

· did not return to Australia during the period that you were overseas;

· have no dependants; and

· have a network of friends in Australia and are a member of social clubs in Australia.

On the balance and based on the above, the Commissioner is satisfied that you had a permanent place of abode outside of Australia while you lived in country X and so considers that you are not a resident for taxation purposes under 'the domicile' test for the 2010-2011 financial year.

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, 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 for the period you lived and worked in country X.