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Authorisation Number: 1012089860368

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Ruling

Subject: Residency

Questions and answers

1.Are you a non resident of Australia from the date you left Australia to live in Country X?

Yes

2. Is the income paid to you by an Australian Company for work you perform in Country X assessable in Australia?

No

This ruling applies for the following period

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You are an Australian citizen and a citizen of Country X.

You have been living in Country X since mid 2010. You have moved there for an unspecified time.

The purpose of your visit to Country X was to take up a missionary/voluntary role to assist migrants and to continue your Church missionary role.

You are unsure when you will return to Australia at this stage.

You met a partner in Country X who is also part of your Church group who you are marrying soon. You both have advised the Church of your availability and readiness to travel/move to wherever is required to continue your missionary/volunteer work. Therefore it is unknown how long you intend to live in Country X as you may be called up to move to another country at any stage.

Prior to departing Australia you worked as an employee for an Australian company, you worked for them for a number of years.

You are still employed by them but as a contractor under your own ABN and you carry out the work remotely. You are paid into an Australian bank account.

Prior to leaving Australia you lived with your parents.

When you arrived in Country X you stayed with relatives for about a year, then with a friend for a few months. You have been renting an apartment since then with an open rental agreement lease.

You have returned to Australia for one month since first leaving to visit family and friends.

You have an Australian bank account and superannuation.

You have no assets in Country X.

You remain on the Australian electoral roll.

You have never been a Commonwealth Government of Australia employee and have never been a member of the PSS or CSS superannuation funds.

You have not sought advice from Country X taxation authority.

You would like to remain a resident of Australia for taxation purposes.

Assumptions

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 subsection 6(1)

Income Tax Assessment Act 1997 subsection 6(3)

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: 

o the resides test,

o the domicile test,

o the 183 day test, and

o 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.

If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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'.

You have been living in Country X since you left Australia. Accordingly you are not residing in Australia.

As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your domicile is Australia because you are an Australian citizen, you would like to return to Australia at some stage but are not sure when. Although you are citizen of Country X you are not intending to live there permanently and would like to travel to various countries to continue your missionary work and then return to Australia at a future date.

Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

o the intended and actual length of the taxpayer's stay in the overseas country;

o 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;

o 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;

o whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

o the duration and continuity of the taxpayer's presence in the overseas country; and

o 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 relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

It is considered that your permanent place of abode is in Italy because:

· You have been living in Country X since you moved there nearly two years ago and you will continue to live there until you are sent somewhere else to carry out voluntary/missionary work

· You have been living in Country X in permanent accommodation - rented apartment

· You work from your apartment in Country X via your virtual office contracting to an Australian company

· You have no assets in Australia other than a bank account and superannuation

· You have advised that you have moved to Country X for an indeterminate period of time

Therefore, under the domicile test you are a non resident of Australia for tax purposes.

The 183 day test

Where a person is present in Australia for 183 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 nodes not intend to take up residence in Australia.

As you have not been present in Australia for more than one-half of the income year you are not a resident under the 183 day test.

The superannuation test

An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) of 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 have never been an employee of the Commonwealth of Australia and therefore do not meet the above conditions you are not a resident under this test.

Conclusion

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

Source of income

Subsection 6-5(3) of the ITAA 1997 provides that, as a non-resident you are liable to Australian tax on the ordinary income which has its source in Australia.

It is accepted by the Tax Office that salary and wage income is generally sourced where the duties or services are performed. Case law has determined that the source of income is to be determined on a factual basis. Cases such as C of T (NSW) v Cam & Sons Limited (1936) 4 ATD 32 of T v French (1957) 98 CLR 398; 11 ATD 288 have indicated that for an ordinary employee, working under a normal employment contract, the most relevant factor when determining the source of income is where the work was performed.

In your case you have been performing your work duties for an Australian company while you have been living in Country X. Therefore the income paid to you is sourced from overseas.

As you are a non resident, you are not assessable on this income in Australia.