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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 worked overseas?

No.

This ruling applies for the following period

Year ended 30 June 2010

The scheme commenced on

1 July 2009

Relevant facts

You were born in Australia and are an Australian citizen.

You were single with no dependents.

You commenced employment for an international company.

You entered into a contract where you would be based in country Z.

The contract that you entered into was open for as long as you were required.

You departed Australia to commence work country Z.

You entered country Z on an unrestricted visa that allowed you to stay for an extended period.

You completed some training in country T.

You had returned to Australia for a number of short periods after your departure from Australia for personal reasons

In total you were in Australia for in a period not in excess of 183 days.

During the periods that you returned to Australia you stayed at your parents place.

Your employer provided you with permanently assigned accommodation in country Z.

You transported most of your personal possessions to country Z.

When you were required to attend training in country T your personal possessions remained in country Z.

The assets that you held in Australia consisted of savings accounts and a share portfolio consisting of a small amount of ASX listed shares.

The assets that you held overseas consisted of an offshore bank account and shares.

Your wages were paid into your offshore bank account.

You had no sporting ties in Australia and your social ties consisted of family and high school friends.

The only sporting and social ties that you formed in country Z were friendships that you made with your work colleagues.

You have never been a Commonwealth Government of Australia employee.

You intended to remain in country Z indefinitely, however you returned to Australia permanently after a period.

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 to live and work in the country Z for an indefinite period. As you lived in country Z and were engaged in long term employment, you are not considered to have been residing in Australia. Accordingly, you were not residing in Australia and so were 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 did not demonstrated an intention to become a citizen of country Z and remained a citizen of Australia, therefore it is considered your domicile was 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 take up a contract with your employer in country Z for an indefinite period;

· entered country Z with a visa that allowed you to work in country Z for an extended period;

· lived in long term fixed accommodation provided by your employer in country Z;

· had most of your personal possessions transferred to country Z;

· although had been required to travel to country T for training purposes, after your training you returned to your fixed accommodation in country Z;

· returned to Australia on a number of occasions for a total period not in excess of 183 days;

· had no dependants;

· did not have a residence in Australia; and

· had social ties in Australia that consisted of family and friends.

On the balance and based on the above, the Commissioner is satisfied that you did have a permanent place of abode outside of Australia, therefore you were 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 were not in Australia for a period greater than 183 days from the 12 September 2009 to 30 June 2010 income year, therefore you were not considered to be a resident of Australia for income tax purposes under this test.

Accordingly, you were 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 were over the age of 16 years and had not, or had you ever been a member of a CSS or PSS you are not a resident of Australia under this test.

Accordingly, you were not a resident of Australia under 'The Superannuation Test'.

Your residency status

As you were 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 were not an Australian resident for income tax purposes.