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Ruling

Subject: Residency

Question and answer:

Were you a resident of Australia for taxation purposes for the relevant year?

No.

This ruling applies for the following period:

1 July 2011 to 30 June 2012.

The scheme commenced on:

1 July 2011.

Relevant facts and circumstances:

You were born in Australia.

You are an Australian citizen.

You are not a citizen of any other country.

You left Australia a number years ago and travelled to another country where you have lived ever since and where you intend to continue living for at least the next X years.

You are living with your partner in a rental property in the other country.

You might apply for permanent residency in the other country but have not ruled out the possibility of returning to live in Australia at some stage in the future.

You have a job in the other country.

You are paying income tax in the other country.

Your only asset outside Australia is a bank account in the other country.

Most of your family and friends are in Australia.

Since leaving Australia you have returned on a number of occasions to visit your family and friends. These visits have been for relatively short periods of time.

You have no permanent place to live in Australia.

Your only assets in Australia are shares and two bank accounts.

Prior to leaving Australia you were a permanent employee of the Australian Public Service (APS). You have since resigned from your employment in the APS.

Through your employment in the APS you were a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

Following your resignation you became a preserved benefit member of the PSS.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976?

You do not have a spouse who is a member of the PSS or an eligible employee in respect of the CSS.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 subsection 6(1).

Reasons for decision

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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 (and permanent place of abode) test,

· the 183 day test, and

· the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

Taxation Ruling No. IT 2650 Income Tax: residency - permanent place of abode outside Australia (which contains the Australian Taxation Office (ATO) view on whether individuals who leave Australia temporarily cease to be Australian residents for income tax purposes) specifies that a person's place of abode is where they live.

You have resided in another country for a number of years. Accordingly, you are not a resident of Australia for taxation purposes under this test.

The domicile (and permanent place of abode) test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin' and will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice but to do so, a person must have an intention to make their home indefinitely in a country outside their domicile of origin.

Taxation Ruling No. IT 2650 specifies that a person with an Australian domicile who is living outside Australia will retain their Australian domicile if they intend to return to Australia on a 'clearly foreseen and reasonably anticipated contingency' - at the end of a specific period for example.

Because you were born in Australia your domicile of origin is Australia.

At this point, we consider you have retained your Australian domicile while you have been living in another country. In reaching this conclusion, we note that although you have stated you may apply for permanent residency in the other country this is not a certainty. Furthermore, you have not discounted the possibility of returning to Australia at some time in the future. Accordingly, it cannot be said that you have an intention of making your home indefinitely outside of Australia.

Because you have retained your Australian domicile, we must consider whether or not you have established a permanent place of abode outside Australia to determine your residency status under this test. If the Commissioner is not satisfied your permanent place of abode is outside Australia during the relevant time, you will be a resident of Australia for taxation purposes under this test.

The word 'permanent' in the context of this test of residency is not taken to mean everlasting or forever, but rather, is used in the sense of being contrasted with temporary or transitory.

IT 2650 notes that generally speaking, an overseas stay for a period of less than two years is considered transitory and that a taxpayer who returns to Australia after a transitory stay overseas is likely to have retained their Australian residency for taxation purposes during their absence from Australia. However, IT 2650 also notes that:

· the length of a taxpayer's stay overseas is not conclusive in determining whether or not a permanent place of abode was established by the taxpayer in the overseas location, and

· the fact that a taxpayer knows they will return to Australia at a definite point in time does not mean that they cannot establish a permanent place of abode outside Australia.

To properly determine whether or not a taxpayer has (or will) establish a permanent place of abode overseas during their absence from Australia requires consideration of a number of factors that have been identified by the Courts and Boards of Review/Administrative Appeals Tribunal as being relevant in reaching a state of satisfaction as to a taxpayer's permanent place of abode. These factors are identified in IT 2650 as:

(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.

Having considered the facts of your case, and noting that IT 2650 specifies that while no single factor is decisive, greater weight should be given to factors (c), (e) and (f) than to the other factors identified above, we are satisfied that you have established a permanent place of abode in Germany. To support this we note that:

· You left Australia and travelled to the other country a number of years ago and have been residing there ever since.

· You are working in the other country and paying income tax there. You may consider applying for permanent residency in the other country when your current visa expires. These things indicate a certain durability of association with the other country.

· The fact that you are living in rented accommodation with your partner in the other country suggests to us that you have established a home (in the sense of a dwelling place, house or other shelter) that is your fixed residence in the other country.

· Although you have not discounted the possibility of returning to Australia, this will not be for at least several years and possibly later and we do not consider this detracts from our conclusion that you have established a permanent place of abode in the other country (noting that IT 2650 states that even when a taxpayer knows they will return to Australia at a definite point in time does not prevent establishment of a permanent place of abode outside Australia in the meantime).

The Commissioner is satisfied that you have a permanent place of abode outside Australia. Therefore, you were not a resident of Australia for taxation purposes under this test for the relevant period.

The 183-day test

Where a person is present in Australia for 183 days during an income year, the person will be a resident of Australia for taxation purposes unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for 183 days during the relevant period. Accordingly, this test does not apply to your circumstances during that time.

The superannuation test

Under this test, an individual will be considered a resident of Australia for taxation purposes if:

1. they are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990,

2. they are an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976, or

3. they are the spouse or a child under 16 of a person who is a member of the PSS or an eligible employee in respect of the CSS.

In your case:

· you are over the age of 16,

· you are not an eligible employee for the purposes of the CSS,

· you are a preserved benefit member of the PSS, and

· you do not have a spouse who is either a member of the PSS, or an eligible employee of the CSS.

The Rules of the PSS (the Rules) are contained the Schedule attached to the Public Sector Superannuation Scheme Trust Deed, as amended.

Rule 1.2.1 of the Rules defines a preserved benefit member as a former member of the PSS.

Being a preserved benefit member of the PSS has no bearing on your residency status for taxation purposes and you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status

You did not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 during the financial relevant period. Accordingly, you were will not be an Australian resident for taxation purposes during that period of time.