Edited version of your private ruling

Authorisation Number: 1012104552770

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Subject: Residency

Question and answer:

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts

You were born in and are a citizen of Australia.

You left for Country x a few years ago with your spouse to work.

You packed your belongings and furniture and moved to Country x.

You purchased furniture in Country x to furnish your house.

You and your spouse left Country x to work in Country z.

You sent some of the furniture purchased in Country x to Australia and some went with you to Country z.

You purchased additional furniture for Country z.

You had a work visa for Country x which expired when you resigned from work in Country x.

You have a work visa for Country z.

You were employed on a permanent work contract with no end date while in Country x.

You are on fixed term contracts in Country z. These contracts are renewed as many times as the employer desires and as work allows.

You have a home in country z which is furnished and has all your personal belongings such as photos and collectables.

You paid money into your superannuation policy in Australia.

You put money in an Australian bank account for mortgages and to pay bills.

You saved money into a fund in Australia.

Your family member became ill when you were in Country x.

Them being sick was one of the reasons you and your spouse moved to Country z to be closer to them.

You purchased a house in Australia.

Your spouse has been looking after your family member.

You and your spouse will be moving back to country x from Country z for work.

You will keep your Australian rental properties and will establish a home in Country x.

You do not have any assets overseas.

You pay tax in Country x.

Neither you nor your spouse are or have been a Commonwealth Government employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision  

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

Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose 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: Residency - Permanent Place of Abode outside Australia.

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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.

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. In your case you work in country z.

Your spouse remained in Australia.

Your spouse made three short trips to country z.

You made regular trips back to Australia.

You retained a 'continuity of association' with Australia which is evidenced by the fact that your spouse remained in Australia at all times other than the three short visits to country z, a property was purchased in Australia which your spouse lived in and you returned to when back in Australia, you purchased furniture for this property, you had a fixed contract in country z.

Your personal and emotional ties are in Australia as your family lives and works in Australia.

Although you may have purchased household items in Country z you also had household items in Australia and purchased new items for your home in Australia which is consistent with being a resident of Australia.

Your behaviour is consistent with someone who is residing in Australia according to ordinary concepts and you are merely choosing to work in Country z rather than in Australia.

You are therefore residing in Australia according to ordinary concepts and you are a resident of Australia for taxation purposes according to this test.

Domicile

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, the domicile of origin of an individual is where the individual was born. 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 e.g., through having obtained a migration visa, a working visa. Even for a substantial time such as 2 years would not be sufficient evidence of an intention to acquire a new domicile.

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

You were born in Australia and are a citizen of Australia. Therefore, your domicile of origin is Australia.

You are not a citizen of any overseas country and you have not taken steps to become a permanent resident of any overseas country. Therefore you retain your Australian domicile.

As your domicile is Australia, you will be a resident of Australia for tax purposes unless the Commissioner is satisfied that you have a permanent place of abode outside of Australia.

Permanent place of abode

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 the taxpayer in the meantime setting up a permanent place of abode elsewhere.

An individual who establishes his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent.

In your case:

Your spouse has remained in Australia

You return to Australia on a regular basis

You have a home in Australia which you return to

You have household items and personal affects in Australia

You have family in Australia

The Commissioner is not satisfied that you have established a permanent place of abode outside Australia; therefore you are a resident under this test.

As you are a resident under both the resides and domicile tests it is not necessary to consider the 183 day and superannuation tests.

Your residency status

You are a resident of Australia for taxation purposes.

As a resident of Australia for taxation purposes you are required to declare income derived both in Australia and outside Australia in your Australian tax return.