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Ruling

Subject: Resident of Australia for tax purposes

Question and answer:

Are you a resident of Australia for taxation purposes?

No.

This ruling applies for the following period:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

XX XX 2009

Relevant facts and circumstances

Your country of origin is Australia and you are an Australia citizen. You have no other citizenship.

You were born in Australia and have lived here all of your life, except for the time in the foreign country.

In Australia, you worked in a casual position.

You moved to the foreign country with the intention of living there for at least two years.

You were employed in the foreign country.

Your employer sponsored your work visa during this time.

You paid taxes in the foreign country.

You were given the option to extend your contract but you chose not to.

You were very involved with your partner (now spouse) and their family in the foreign country. You had met your spouse in Australia. Whilst you were not dating them at the time, you were still looking forward to catching up with them.

Your main goal in moving to the foreign country was to get involved with a new culture and learn a new language.

You travelled alone to the foreign country. You have no children and no spouse (until you were married on a date).

After your work contract ended, you lived with your parents-in-law on a visa until you moved back to Australia.

You were overseas for all of the period in question.

You believe that you were a non-resident because you lived in the one place in the foreign country the whole time that you stayed in the foreign country.

You rented your own apartment during the years in question (your employer contributed to the rent). You started renting the apartment in the foreign country as soon as you got there.

Between the day when you arrived in the foreign country and a later date, when you commenced your employment there, you did not travel around.

You did not visit Australia while you lived in the foreign country.

You don't own property in Australia or the foreign country.

Before leaving for the foreign country, you were renting accommodation in Australia but you gave up the lease when you moved to the foreign country.

While living in the foreign country, you opened a bank account that is still open now. You used it for all of your banking needs.

You kept your Australian bank accounts open, but you didn't use them.

Your religious institution is your only social connection you have with Australia. You have no sporting connections with Australia.

Your social connections with the foreign country are a religious institution and your spouse's family. You have no sporting connections with the foreign country.

You and your spouse have never been Commonwealth Government of Australia employees.

You are more than 16 years of age.

Relevant legislation 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 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 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 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.

In your case, you were living and working in the foreign country. You established a residence there in rented accommodation. You did not own or lease a residence in Australia during this period.

Accordingly, you are not considered to be 'residing' in Australia and, therefore, were not a resident of Australia under the resides test during the period.

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 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.

In your case, as you were still an Australian citizen while living in the foreign country, your domicile was Australia and remained 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, during the period, you:

· lived and worked in the foreign country

· lived in rented accommodation there

· had no residence in Australia

· did not leave the foreign country during your stay there

· lived with your spouse there (you were married on a date during the period of the ruling)

· became socially involved with your spouse's family and a religious institution

· did not visit Australia while you lived in the foreign country

· opened a bank account in the foreign country

· kept your Australian bank accounts open

Based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the period. Therefore, you were not a resident under the domicile test during this period.

The 183-day test

Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

In your case, in the period you did not return to Australia. Accordingly, you were not present in Australia for more than 183 days in the income years. Therefore, you were not a resident of Australia under the 183-day test during the period.

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. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have stated that neither you nor your spouse has ever worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test.

Conclusion

As you are 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 are not considered to have been an Australian resident for taxation purposes during the period.