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Ruling

Subject: Residency

Question

Are you an Australian resident for taxation purposes?

Answer

Yes

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts and circumstances

You are an Australian citizen.

You were born in Australia.

You departed Australia on 1 July 2011.

You are in Country X on a business visa valid for one year.

You are in Country X to work as an Officer at the Australian Government Organisation A.

You do no intend to reside overseas permanently.

You will return to Australia within two years

You have not returned to Australia since first leaving.

In Country X you are living in a rental apartment with a one year lease.

You have a bank account in Country X.

Before you left Australia you were living in a rental house with friends.

You do not have a permanent place to live in Australia.

You have several Australian bank accounts. You have a car which is being stored on your father's property. The registration on this vehicle has lapsed. You also have personal belongings in a storage facility in Australia, which you have paid up front for 12 months worth of storage, with the possibility of extending.

You commenced a 12 month contract with your employer on 1 July 2011, with the possibility of extending the contract.

Your parents and siblings are in Australia. You are not married and you have no children.

You maintain contact with your family and friends in Australia. You have also made new friends in Country X. You have no connections to clubs or associations in Australia or overseas.

You are an ongoing employee at the Australian Government Organisation C. You have taken 12 months leave without pay from your job with the Australian Government Organisation C. Your superannuation is the PSSap plan with ARIA (not PSS or CSS).

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 6-5(2)

Reasons for decision

Residency

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

· 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'.

In your case you have been residing in Country X since 1 July 2011, therefore you are not considered to be residing in Australia under this 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. 

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.

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.

Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments cease to be Australian residents for income tax purposes during their overseas stay. Factors to consider include:

· the intended and actual length of the individual's stay in the overseas country

· the establishment of a home outside Australia

· the duration and continuity of the individual's presence in the overseas country, and

· the durability of association that the individual has with a particular place in Australia.

 Paragraph 27 of IT 2650 provides that generally a taxpayer who leaves Australia with an intention of returning to Australia at the end of a transitory stay overseas would remain a resident of Australia for income tax purposes. As a general proposition, an overseas stay for a duration of less than two years would be considered as being of a transitory nature.

In your case,

You do not intend to reside overseas permanently

You have obtained a business visa valid for 12 months only

You have taken leave without pay from your permanent ongoing position with the Australian Government Organisation C

You have not resigned from your position with the Australian Government Organisation C

The contract with the Australian Government Organisation A is for an initial period of 12 months

You rented an apartment in Country X on a 12 month lease

You have maintained Australian bank accounts, and

You have placed your belongings in storage in Australia for 12 months rather than relocated them to Country X.

Based on these facts, Commissioner is satisfied you will maintain your Australian domicile and you have not established a permanent place of abode outside Australia. You have rented a property in Country X for the term of your engagement; however we consider this arrangement to be temporary and transitory until you return to Australia. You will therefore be considered to be a resident of Australia for tax purposes under the domicile test.