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Ruling

Subject: residency

Question

Are you an Australian resident for taxation purposes from the relevant year?

Answer

No.

This ruling applies for the following period

Year ending 30 June 2012

The scheme commenced on

1 July 2011

Relevant facts

You were born in country A and came to Australian several years ago.

You lived with your family when in Australia.

You have many relations in Australia.

You also have relations in country A.

You worked when in Australia.

You left Australia in the relevant year for an extended career break and to spend time with family in country A.

You took extended leave break from your employment with a return date of X. You were on paid leave until Y, then on unpaid leave.

Due to changes you were requested to return to your Australian employment in Z. Due to your commitments in country A you had no option but to resign.

You remained an employee in Australia until Y. Superannuation contributions were being made by your employer to entity B. Your final pay was received in Y.

You intend to return to Australia to live permanently and work, but are uncertain when.

You are not a member of the Commonwealth Service Superannuation (CSS) Scheme or the Public Sector Superannuation (PSS) scheme. You do not have a spouse who is a member of the PSS or CSS.

You have been working full time in country A. You commenced your overseas employment in November X.

You live with a friend in country A and pay rent.

You have been living in the same house whilst overseas.

You have possessions in storage at your family's house in Australia and have an Australian bank account.

You have a car and bank accounts in country A.

You are an Australian and country A citizen.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency

Residency status is a question of fact. Your residency status is relevant in determining your liability to Australian income tax.

The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person 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 Commonwealth superannuation fund 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. 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 Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time.

The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place.

The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive. The following factors are useful when determining whether a person is residing in Australia:

· intention or purpose of presence

· family and/or employment ties

· maintenance and location of assets and

· social and living arrangements.

In your case, you were living in country A for the relevant financial year and have been working there since Y. You were not residing in Australia from X. Consequently you do not satisfy the 'resides test' and therefore it is necessary to consider the other three tests.

The domicile test and permanent place of abode

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 permanent place of abode does not have the meaning of everlasting or forever. It does not mean an abode in which a person intends to live for the rest of his or her life. Rather, it is used in the sense of being contrasted with a temporary or transitory place of abode outside Australia. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important (F.C. of T. v. Applegate 79 ATC 4307; (1979) 9 ATR 899).

The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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.

Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia temporarily to live overseas ceases to be an Australian resident during the absence.

IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode:

· the intended and actual length of stay in the overseas country

· any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country

· the establishment of a home outside Australia

· the abandonment of any residence or place of abode in Australia

· the duration and continuity of presence in the overseas country, and

· the durability of association with a particular place in Australia.

Applying the facts of your situation to the above criteria, it is considered that your permanent place of abode is in country A. This is because you intend to live and work in country A for a period of time. As you are working in country A, your financial ties are predominantly in country A. Although you have a bank account and possessions in Australia, this is not sufficient to conclude that your permanent place of abode is currently in Australia. Your rented accommodation in country A is your place of abode and is not merely temporary or transitory. Rather, it is intended to be your home for a period. These circumstances support the view that your permanent place of abode is currently outside Australia. 

As a result, you would not be considered a resident of Australia for income tax purposes under the domicile test. 

The 183-day test

You were not in Australia for 183 days for the 2011-12 financial year. You have not actually been in Australia since July 2011. Therefore you will not be a resident of Australian under this test.

The superannuation test

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

§ a member of the superannuation scheme established by deed under the Superannuation Act 1990 (for example, the Public Sector Superannuation (PSS)); or

§ an eligible employee for the purposes of the Superannuation Act 1976 (for example, many Commonwealth Superannuation Scheme (CSS) members);

§ the spouse, or a child under 16, of a person covered by either of the above.

You are a member of the entity B superannuation fund. This superannuation fund is not considered to be one of the eligible superannuation schemes indicated under subsection 6(1) of the ITAA 1936.

You are not a member of the CSS or PSS and you do not meet any of the other requirements of this test. Consequently, you are not an Australian resident under the superannuation test.

Summary

You do not satisfy any of the tests for Australian residency. Therefore you are not considered to be a resident of Australia for taxation purposes.