| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of your private ruling
Authorisation Number: 1012345833583
This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.
Ruling
Subject: Residency
Questions and answers
1. Are you a resident of Australia for tax purposes?
No
2. Do you have to include foreign income in your Australian tax returns?
No
This ruling applies for the following periods
Year ended 30 June 2010
Year ended 30 June 2011
Year ended 30 June 2012
Year ending 30 June 2013
The scheme commenced on
1 July 2009
Relevant facts
Your country of origin is Australia and you are an Australian citizen.
You have been working in Country X for more than ten years.
Your spouse and child are living with you in Country X.
You are working on an approved project.
You are entitled to 2 lots of leave per year for a length of Y weeks each time. During your leave periods you return to Australia.
Your spouse and child travel back with you to Australia and sometimes they stay in Australia for longer periods.
You, your spouse and child live on a compound provided by your employer in Country X.
You have been living at your current premises for a number of years.
Your child attends school in Country X.
Your assets in Country X include a car and personal household assets.
You own a house in Australia where you stay when you return. When you are back in Country X the house remains vacant.
The assets you have in Australia include: family home, investment properties, block of land, bank accounts.
Your employment contract in Country X does not have an end date.
You have been working under the same contract since you started working in Country X.
You do not pay tax in Country X.
Australia does not have a tax treaty with Country X.
You plan to return to Australia to live at the conclusion of your employment in Country X but this may not be for another few years.
You will receive a severance payment when you finish your employment in Country X. The payment is paid because of the time spent with the company.
Neither you or your spouse are Commonwealth Government of Australia employees.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6-1
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1997 Section 995
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, and
· the superannuation test.
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.
If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.
Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.
The resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
You have been living and working in Country X since 200X and accordingly you will not be residing in Australia.
As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency.
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 the place that is considered by law to be your permanent home. It is usually something more than a place of residence.
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.
Your domicile is Australia because your country of origin is Australia and you are an Australian citizen and you intend to return to Australia after your time away overseas.
Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia.
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.
Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:
a) the intended and actual length of the taxpayer's stay in the overseas country;
b) 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;
c) 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;
d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;
e) the duration and continuity of the taxpayer's presence in the overseas country; and
f) 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.
The Commissioner is satisfied that you have a permanent place of abode outside Australia while you are in Country X because:
· You have been living in Country X with your spouse for more than ten years
· You live in fixed residence
· You have been living in the same premises with your spouse and child for more than Z years
· Your child attends the local school in Country X
· You own a car in Country X and numerous personal household assets
· When you return to Australia it is during your holiday leave and for a maximum of Y weeks at a time
· You spend more time in Country X than you do in Australia
As the Commissioner is satisfied that you have established a permanent place of abode outside Australia you are a non resident of Australia under the domicile test.
The 183 day test
Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person nodes not intend to take up residence in Australia.
As you will not be present in Australia for more than one-half of the income year you will not be a resident under the 183 day test.
The superannuation test
An individual is still considered to be a resident of Australia 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.
As you do not meet the above conditions you are not a resident under this test.
Conclusion
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.
Foreign income
As you are a non resident of Australia for taxation purposes, your foreign employment income should not be included in your Australian taxation return as the income is not sourced in Australia.
Serverance payment
Please note that the Commissioner does not rule for hypothetical circumstances or for arrangements that are not known with certainty. Furthermore, the Commissioner does not rule for extended periods as there may be changes to the facts of the arrangement or the law in question.
Therefore, we are unable to provide advice regarding the severance payment as it is unclear what the payment will be made up of or when it will be paid.