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Ruling
Subject: Residency
Question and answer
Are you a resident of Australia for income tax purposes for the financial year ended 30 June 2012?
No.
This ruling applies for the following periods:
Year ended 30 June 2012
The scheme commences on:
1 July 2011
Relevant facts and circumstances
You were born in Australia and are an Australian citizen.
You moved to Country X in late 2010 and have not returned to Australia.
You had no permanent place of residence in Australia prior to your departure.
You are currently renting a residence in Country X with your partner.
You have been employed full time in Country X since late 2010.
You have an employment contract in Country X until late 2012 and you intend to renew it.
You plan to spend approximately Y years in Country X in total.
Neither you nor your partner are employed by the Australian Commonwealth government.
Relevant legislative provisions
Income Tax Assessment Act 1936 - subsection 6(1)
Income Tax Assessment Act 1997 - section 6-5
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
· 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 (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.
1. The 'resides' test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 5th edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have 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 were living with your partner and working in Country X from your departure and intend to continue living there for another two years.
You were not residing in Australia according to ordinary concepts for the period of your absence.
Therefore, you are not a resident of Australia for income tax purposes under the resides test for the 2011-12 financial year and the other tests of residency must now be considered.
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
The domicile of an individual is the place that is considered by law to be his or her permanent home. Domicile by origin is attributed to individuals at birth and is usually decided according to the domicile of the person's father.
In your case, you were born in Australia and are an Australian citizen. Therefore, your domicile by origin is Australia.
Individuals may change their legal domicile by choice if there is both a change of residence to another country and an intention of making the change permanently or at least indefinitely. IT 2650 explains that persons leaving Australia temporarily would usually 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 Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.
In your case, you have stated that you may spend a total of Y years in Country X which does not prove an intention of adopting a new domicile by choice in that country.
Therefore, you 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.
In your case, you have been working full time in Country X since late 2010, you have lived in the same residence with your partner, have not returned to Australia since you first arrived in Country X and intend to spend approximately Y years in Country X in total.
Based on the above, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia.
You are not a resident of Australia for income tax purposes under the domicile test for the 2011-12 financial year.
3. The 183-day test
An individual will be considered to be a resident under this test if that person is in Australia for 183 days or more in the income tax year, unless the Commissioner is satisfied that the usual place of abode of the individual is outside of Australia and the individual does not intend to take up residence in Australia.
In your case, you will not be a resident of Australia for income tax purposes under this test as you were not present in Australia for 183 days or more in the 2011-12 financial year.
4. The superannuation test
An individual is considered to be an Australian resident for income tax purposes 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 will not be a resident of Australia for income tax purposes under this test as you are not eligible to contribute to the PSS or the CSS, and you are not a spouse or a child under 16 of a person who is eligible to contribute to the PSS or the CSS.
Your residency status
As you are not an Australian resident for income tax purposes under any of the tests of residency as outlined in subsection 6(1) of the ITAA 1936, you are not an Australian resident for taxation purposes for the 2011-12 income year.