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Ruling

Subject: Residence - leaving Australia

Questions and answers:

Are you a resident of Australia for tax purposes?

No

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of a foreign country.

Your country of origin is not Australia

You departed Australia in 2010.

You have returned to Australia once to attend a wedding for a period of a few weeks.

In Australia you have permanent resident status.

Your purpose for going overseas is to work and experience living in your home country with your Australian born spouse.

Your intentions in regard to residency are unclear at the moment. You are considering raising your children in either Australia or the overseas location. You currently have no children but are planning to have some in the future.

You are unsure when you plan to return to Australia. You believe that you eventually will return, but not sure when. If your work situation does not improve in the overseas location, you will return to Australia.

You have a permanent address in the overseas location.

You have a bank account in the overseas location.

When in Australia, you lived in a house with share mates.

You currently have no permanent place to live in Australia. If you have to return to Australia in an emergency, you would stay at a relative's place.

Your spouse and you have long-term deposit bank accounts in Australia.

You are currently employed on a full time contract in the overseas location.

You pay income tax on your employment income in the overseas location.

You have friends and family in Australia. You played various sports in Australia with your friends and work colleagues.

You have friends and family in the overseas location. You play the same sports in the overseas location with friends and work colleagues.

Neither you or your spouse hold a current position with the Commonwealth Government.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia 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, your assessable income includes only income derived from an Australian source. 

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 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, and

· 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 meet 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

You have remained in the overseas location for all but 2 weeks. You returned to Australia to attend your relatives wedding for those 2 weeks.

Your spouse has accompanied you to the overseas location. You have your family in the overseas location, therefore you have a family presence.

The purpose of your absence in the overseas location is to live in and experience your culture with your spouse.

You have a permanent address in the overseas location.

On the weight of these factors, you are not a resident under the resides test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your expressed intention as to which country you will make your indefinite home is vague. You are not a citizen of Australia.

You are not a resident under the Domicile test.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

As you were not present in Australia for more than 183 days in any of the income years, you are not a resident under this test.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees.

The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

· the spouse or child under 16 of a person covered by either of the above funds.

You have never contributed to the abovementioned superannuation schemes, therefore this test does not apply to you.

Your residency status

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia, and will therefore not include the income you receive from the overseas location.