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Ruling

Subject: Residency for tax purposes

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2006

Year ended 30 June 2007

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

Year ending 30 June 2012

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commenced on:

1 July 2005

Relevant facts and circumstances

You are a citizen of Australia.

You moved overseas a number of years ago to live and work.

You obtained suitable rental accommodation and moved all your personal belongings overseas.

You intend to continue to live and work overseas indefinitely.

You consider the overseas country to be your home.

You have a life insurance policy overseas.

You have assets in Australia.

You have made trips back to Australia since leaving for overseas.

All of the trips were of a limited duration.

Prior to leaving Australia you were living in your parent's property.

When you return to Australia for visits you stay with a family member.

You pay tax overseas.

No family members accompanied you overseas, you are single and have no children.

You have no social or sporting connections in Australia.

You have social connections overseas.

You are not currently or have ever been a Commonwealth government employee.

You do not intend to return to Australia to live.

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 left Australia to live and work overseas for an indefinite period. You are therefore not residing in Australia according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test.

The domicile test

If a person has 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

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. 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 and are a citizen of Australia. Your domicile of origin is Australia.

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.

In your case:

You left Australia to live overseas indefinitely

You have a work contract

You have been in the same job for a number of years

You rent an apartment and have all your personal belongings in this apartment

You do not intend to return to Australia in the near future to live

The Commissioner is satisfied that you have established a permanent place of abode overseas.

You are not a resident under this test.

The 183 day test

When 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 does not intend to take up residence in Australia.

The Commissioner is satisfied that your usual place of abode is overseas.

Therefore you are not a resident under this test.

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.

In your case, you are not a current Commonwealth government employee and therefore you are not able to contribute to the abovementioned superannuation schemes.

Therefore, you are not a resident of Australia under this test.

Your residency status

You are not a resident of Australia for taxation purposes.

As a non-resident for taxation purposes you are required to declare all income derived in Australia in your Australian tax return.