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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

20 November 2011

Relevant facts

You were born in Australia and are an Australian citizen.

You are recently divorced and have adult children.

You departed Australia to take up an employment contract in country X for an extended period.

You entered country X on live and work visa.

The nature of the visa is that you are required to renew on a yearly basis.

Your overseas employment contract is for an extended period, however this may be extended further depending on the progress of the project you are working.

Since leaving Australia you have returned on one occasion for a short period. The purpose of your visit was to tie up loose ends in Australia and to visit family.

You will return to Australia in the future for short periods during each year to visit family.

You have rented an apartment in country X on a 12 months lease.

You are in the process of signing over your home in Australia to your ex-spouse as a result of a divorce settlement.

You have closed all your Australia bank accounts and have no other assets in Australia.

You do not have any assets overseas.

You do not have any sporting or social ties in Australia or overseas.

You have never been a Commonwealth Government of Australia employee.

You expect that your pattern of travel will remain relatively consistent for the years contained within this ruling.

You intend to remain in Country X for the duration of the project and then look for other overseas work opportunities.

You have no intention of returning to Australia in the short term.

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 an extended period. As you are living and engaged in working overseas for an extended 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 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.

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 an employment contract in country X for an extended period;

· have no plans to return to Australia on a permanent basis in the short term;

· have returned to Australia on one occasion for a short period since you first left Australia to tie up loose ends and visit family;

· entered country X on a visa that allows you to live and work for a period of 12 months and must be renewed every year;

· live in long term rented accommodation in country X;

· have independent adult children;

· have signed over your residence in Australia to your ex-spouse as a result of a divorce settlement;

· have closed all your Australian bank accounts;

· do not have any other assets in Australia; and

· do not have any sporting or social ties in Australia.

On the balance and based on the above, the Commissioner is satisfied that you have a permanent place of abode outside of Australia and so considers that 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 will not be in Australia for a period greater than 183 days for the years requested in this ruling and this pattern is expected to continue for future years, 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.