Edited version of your private ruling

Authorisation Number: 1012113696938

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Ruling

Subject: foreign sourced income

Question and answer

1. Were you a resident of Australia for tax purposes from 200x until 200y?

No.

2. Is your Country X sourced income assessable in Australia?

No.

This ruling applies for the following periods:

Year ending 30 June 2009

Year ending 30 June 2008

Year ending 30 June 2007

The scheme commences on:

AAA 20XX

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an Australian citizen by birth.

You left Australia in 200x.

You applied for and were granted a Country X work permit which allowed you to stay for a maximum of 4 years.

You moved to Country X to work. You had full time permanent employment.

It was your intention to be a resident of Country X and as such you sold your house in Australia.

You returned to Australia in 200y.

Before you returned to Australia to live you came back to visit on several occasions.

You had a permanent place to live in Country X

You held a personal bank account in Country X for general banking.

Prior to leaving Australia you lived in a house that you owned, you sold this house when you moved.

You still had bank accounts open in Australia whilst you were in Country X, minimal interest was earned.

You family accompanied you to Country X.

Your extended family remained in Australia.

Neither you nor your spouse have ever been Commonwealth Government Employees.

You are over 16 years of age.

Relevant legislative provisions

Subsection 6(1) of the Income Tax Assessment Act 1936

Section 6-5 of the Income Tax Assessment Act 1997

Subsection 995-1(1) of the Income Tax Assessment Act 1997.

Reasons for decision

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

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 foreign resident of Australia for taxation purposes, your assessable income includes only income from an Australian sources.

Are you an Australian resident for tax purposes?

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) and in Section 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997). The definition provides four tests to ascertain whether a taxpayer is an Australian resident for income tax purposes. These tests are:

1. The resides test

2. The domicile test

3. The 183 day test

4. The superannuation test

The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: 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.

 1. The resides test

The ordinary meaning of the word reside, according to the dictionary definition, 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 were living outside of Australia for more than 2 years. It cannot be said that you were residing in Australia during this time. Therefore, you are not a resident of Australia under the resides test.

 2. 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.

Domicile

Generally speaking, Australian citizens leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law.

In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Although you sold your house when you moved you have not indicated that the move was to be permanent, such as by applying for permanent residency or citizenship. Therefore, you are considered to have maintained your Australian domicile.

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.

Tax Ruling IT 2650 outlines the elements to be considered when determining whether a person has established a permanent place of abode outside of Australia. The ruling states that all of the circumstances of each case need to be considered and not one factor is determinative.

Factors to be considered include:

· Intended and actual stay overseas

· Intention to stay in one country or move between countries

· Whether a home has been established outside of Australia

· The duration and continuity of presence overseas

· The durability of association with Australia

You maintained economic ties with Australia through your bank accounts and had extended family here. However, you established your life with your immediate family, you had a settled place of abode, and were employed as a full time permanent employee.

You are considered to be a foreign resident of Australia under the domicile test as the Commissioner is satisfied that you established a permanent place of abode outside Australia.

3. The 183 day test

When a person is present in Australia for more than 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 does not intend to take up residence in Australia.

For the 200z and 200y income years, you are not a resident under this test as the Commissioner is satisfied that you have not been present in Australia for more than 183 days. For the 200x income year, you were present in Australia for more than 183 days, but for the period, the Commissioner is satisfied that your usual place of abode was outside Australia and that during this time you did not intend to take up residence in Australia.

4. The Superannuation test

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

You are not a member of the PSS or CSS or a spouse of such a person, or a child under 16 of such a person as nor you or your wife have ever been employed by the Commonwealth of Australia and you are over 16 years of age. Therefore, you will not be treated as a resident under this test.

Your resident status

You are not considered to be a resident of Australia under any of the tests of residency for tax purposes. Therefore you are a foreign resident of Australia for tax purposes from 2007 until 2009.

Assessability of foreign sourced income

As stated earlier, if you are a foreign resident of Australia for taxation purposed, you assessable income includes only income from Australian sources.

As you have been found to be a foreign resident of Australia from 200x until 200y, your foreign sourced income is not assessable in Australia.