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Ruling

Subject: Residency status

Questions and answers:

Were you a resident of Australia for income tax purposes while travelling through continent D?

Yes.

Were you a resident of Australia for income tax purposes while living in country F?

No.

Were you a resident of Australia for income tax purposes while travelling through continent E?

Yes.

This ruling applies for the following period:

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts

You were born in Australia and are citizen of Australia.

You were single with no dependants.

You left Australia to travel and work overseas for an extended period.

You travelled through continent D for a short period on your way to country F. During this period you did not earn any assessable income.

You arrived in country F on working visa.

Shortly after you arrived in country F you gained employment. You started on a short term contract before being made a fulltime employee.

You left your employment position after an extended period, due to the expiration of your working visa.

Shortly after leaving your employment, you travelled though continent E before returning to Australia. During this period you did not earn any assessable income.

While in country F you lived in long term rental townhouses and apartments

You did not own any assets in Australia.

The assets that you held overseas consisted of bank accounts.

While overseas you met a partner who returned with you to Australia.

Your social and sporting ties in Australia consisted of family and a network of friends.

Your social and sporting ties overseas consisted of a network of friends.

You have never been a Commonwealth Government of Australia employee.

You returned to Australia after travelling through continent E.

Relevant legislative provisions

Income Tax Assessment Act 1997, Subsection 995-1(1).

Income Tax Assessment Act 1936, Subsection 6(1).

Income Tax Assessment Act 1997, Subsection 6-5.

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: 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 first question to be asked in considering the residency status of a person 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 apply any of the other tests. The person is a resident of Australia for income tax purposes.

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 left Australia to travel and work overseas for an extended period. After a period of travel you arrived in country F and gained long term full time employment. You had a network of friends overseas and lived in long term rental accommodations. After you work visa expired, you left country F to travel through continent E before returning to Australia.

Travelling through continents D and E

During these periods you were travelling and were not residing in any particular place, as you had no settled abode or dwelling in any place. Therefore, you were not residing in Australia according to the ordinary meaning of the word 'resides' during this period.

Accordingly, for these 2 periods you were not a resident of Australia for income tax purposes under section 6-1(1) of the ITAA 1936 and section 995-1 of the ITAA 1997.

Living in country F

After leaving Australia and travelling for a few months, you settled in country F where you lived and worked during this period. For this period, it cannot be said that you were dwelling in Australia, or that you had an abode in Australia. It is considered you were residing in country F during this period. Therefore, you were not residing in Australia according to the ordinary meaning of the word 'reside' for this period.

Accordingly you were not a resident of Australia for income tax purposes under section 6-1(1) of the ITAA 1936 and section 995-1 of the ITAA 1997.

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. 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.  From the information that you have provided, you have did not demonstrate an intention to become a citizen of the country F and were still a citizen of Australia. Therefore it is considered your Australian domicile 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.

For the period X 200X until Y 20YY your circumstances were the following:

· you left Australia to travel and work overseas for an extended period.

· after travelling for a short period through continent D you arrived in country F;

· on arrival in country F you gained long term employment;

· you lived in long term rental accommodations in country F;

· you had a network of friends in country F;

· you left country F in after your visa expired and travelled for a period though continent E before returning to Australia;

· you did not own any assets in Australia;

· you stayed with your parents prior to your departure; and

· you did not return to Australia during the entire period of travel.

Travelling through continents D and E

Based on the above, as you were travelling through continents D and E and did not earned any assessable income for these periods it is considered that you had not set up a permanent place of abode outside of Australia. However, as you maintained your Australian domicile for these periods, you continued to be an Australia resident for income tax purposes under the 'domicile test'.

Accordingly, for these periods you were a resident of Australia for income tax purposes under section 6-1(1) of the ITAA 1936 and section 995-1 of the ITAA 1997.

Living in country F

During this period, you arrived in country F, gained full time employment, lived in long term accommodations and had a network of friends. Based on these facts, for this period it is considered that you had established a permanent place of abode in country F.

Accordingly, you were not a resident of Australia for income tax purposes under the 'domicile test', for this period under section 6-1(1) of the ITAA 1936 and section 995-1 of the ITAA 1997.

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.

You were not physically present in Australia during the periods included in this ruling, therefore, you are not a resident of Australia under the 183 day test.

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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS.

In your case, you have never been a Commonwealth Government of Australia employee and therefore you are not able to contribute to the above mentioned superannuation schemes.

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

Conclusion

Travelling through continents D and E

For these periods as you were deemed a resident of Australia under the 'domicile test' you were therefore a resident of Australia for income tax purposes for these periods.

Living in country F

As you were 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 for this period, you were not an Australian resident for income tax purposes.