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Ruling

Subject: Residency

Questions and answers:

1. Were you a resident of Australia for taxation purposes for whole 2010-11 financial year?

No.

2. Were you a resident of Australia for taxation purposes for part of the 2010-11 financial year?

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of both Australia and country X. You hold Australian and country X nationality and passports.

Your country of origin is Australia. Your spouse was born in country X.

You have a position in Australia.

You hold a continuing position in country X. You have been a continuing contract there for several years.

Your tenured contract with the country X employer is ongoing for a few more years. Periodically the country X exmployer grants you unpaid leave to work at the Australian employer.

You took unpaid leave during the 2009-10 financial year until the 2011-12 income year.

You were living in country X and working at your position for the 2010-11 financial year and beyond.

You then took unpaid leave from the country X employer in order to return to your post at the Australian employer.

You were in Australia briefly during the 2010-11 financial year for mixed personal and work-related purposes.

You pay tax in country X while working there, as well as country X National Insurance and country X pension contributions into the relevant country X's superannuation scheme. These taxes were deducted at source from your salary.

Your spouse accompanied you to country X. Your children are grown up and are leading their own lives. Therefore they did not accompany you to country X.

During the period of time away from Australia you rented your Australian residence, received rental income and earned interest from your Australian bank accounts.

During the period away you also received other passive income.

While in country X you resided in your own house and rented and received rental income from a flat attached to your country X residence.

You also have some country X bank accounts from which you received income.

You have certain belongings that remained in Australia which you will hand on to your adult children in due course.

You own a bicycle and jointly own a motor vehicle with your spouse. You own no other property or shares in Australia.

As an employee of the Australian employer you are a contributing member of a pension scheme.

In country X you have your clothes as well as furniture that you own jointly with your spouse. In addition you have a motor vehicle in country X. You hold some country X unit trusts.

You have friends and family in Australia.

When in Australia you swim at a pool. You do not need to be a member to swim there.

You have friends and family in country X. You were a member of a health club during your country X sojourn because you wished to use the swimming pool there.

Neither you nor your spouse have ever worked for the Commonwealth Government of Australia.

You have provided a breakdown of your living arrangements while you have been working in Australia and country X since you commenced working at the country X employer until the present time, not including short holiday breaks.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 6(1)

Reasons for decision

Residency Status

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 which will help us ascertain whether you are a resident of Australia for income tax purposes when you leave Australia to live and work in Country X. These tests are:

(i)   residence according to ordinary concepts;

(ii)  the domicile/permanent place of abode test;

(iii)   the 183 days/usual place of abode test; and

(iv)   the Commonwealth superannuation test.

The primary test for deciding your residency status is whether you reside in Australia according to the ordinary meaning of the word resides.  However, where you do not reside in Australia according to ordinary concepts, you may still be a resident of Australia for tax purposes if you satisfy the conditions of one of the other three tests.

The residence according to ordinary concepts 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 a dwelling in Australia which you made available for rent for the duration of your time working in country X. You also have a dwelling in country X where you stayed for this period.

Results of the residence according to ordinary concepts test

You were not a resident of Australia for taxation purposes under the residence according to ordinary concepts test because:

§ your Australian dwelling was rented out and not available for your use; and

§ you stayed in your permanent dwelling in country X for the period in question.

The domicile/permanent place of abode test

If a person has their domicile in Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside Australia.

There are essentially 3 types of domicile that an individual can have:

§ the domicile of origin;

§ the domicile of choice; and

§ the domicile of dependency.

Basically, your domicile of origin is where you were born, or the country of your father's permanent home. As you were born in Australia, your domicile of origin is Australia.

In order to show that you have chosen a new domicile of choice in a country outside Australia, you must be able prove an intention to make your home indefinitely in that country.

In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

As you are a citizen of both Australia and country X, you do not need to apply for a visa to live and work there. However, you have not indicated an intention to make your home permanently outside Australia; you travel between Australia and country X for work purposes.

There is not sufficient evidence to suggest that you have chosen a new domicile of choice in country X. Therefore your domicile remains in Australia.

Having established that your domicile remains in Australia, subparagraph (a)(i) of the definition of resident requires the Commissioner to be satisfied that your permanent place of abode is not outside Australia.

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 a person intends to live for the rest of his or her 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.

Income Tax Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia lists the following relevant factors to be taken into account in determining a person's permanent place of abode:

(a) the intended and actual length of the individual's stay in the overseas country;

(b) whether the individual intended to stay in the overseas country only temporarily and then move on to another country or to return to Australia at some definite point in time;

(c) whether 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) has been established outside Australia;

(d) abandonment of residence or place of abode in Australia;

(e) duration and continuity of the individual's presence in overseas country; and

(f) durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments he or she is leaving permanently, family ties and so on.

The weight given to each factor varies with the circumstances of each individual taxpayer. When we apply your circumstances to the above criteria:

§ You were in country X for the whole of the 2010-11 financial year until you returned to Australia.

§ While you were in country X, you always intended to return to your home in Australia and your position at the Australian employer.

§ You lived in your own residence while in country X.

§ Your residence in Australia was made available for rent for the duration of your absence.

§ You have equal association of family, friends, personal belongings and assets in country X and Australia.

§ Your spouse accompanied you to country X.

Results of the domicile/permanent place of abode test

When we take all these facts into consideration, it is clear that you have an established permanent place of abode outside Australia.

You were not a resident of Australia for taxation purposes under this test.

The 183-day test/usual place of abode test

You are a resident under this test if you were actually in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that your usual place of abode is outside Australia.

Results of the 183-day test/usual place of abode test

You were not in Australia for more than 183 days during the 2010-11 financial year.

You were not a resident of Australia for taxation purposes under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Commonwealth Superannuation Scheme (CSS) or Public Service Superannuation Scheme (PSS), or that person is the spouse or child under 16 of such a person.

Results of the superannuation test

In your case, neither you nor your spouse are members of the CSS or the PSS.

You were not a resident of Australia for taxation purposes under this test.

Your residency status

As you have not satisfied any of the tests of residency contained in section 6(1) of the ITAA 1936, you were not a resident of Australia for taxation purposes for the 2010-11 financial year.