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Ruling
Subject: Residency
Question and answer:
Will you be a resident of Australia while you are working overseas?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
Your country of origin is Australia and you are an Australian citizen.
You are commencing a X month employment contract on secondment in an overseas country.
You will return to work for your current employer in Australia following the completion of your overseas contract.
You will rent an apartment in the overseas country.
You will discontinue the lease on your rental accommodation in Australia when you leave for the overseas country.
You have a partner who will remain in Australia as they were unable to obtain a visa for the overseas country.
You will return to Australia for a holiday during your employment contract.
You have a rental property and bank accounts in Australia.
You have friends in Australia and go to the gym.
You have no assets or personal connections in the overseas country.
Relevant legislative provisions
Income Tax Assessment Act 1997 - section 6-5
Reasons for decision
Generally 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 within the tax provisions. 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.
Relevant to your situation are the first two tests which are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650). In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests. A copy of this ruling is available from www.ato.gov.au.
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.
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'.
In your case, you will be working on secondment in an overseas country for a fixed period of X months. You will return to Australia for a holiday during your employment contract and then return to work for your current employer in Australia as soon as your contract is completed.
Although you will have economic ties to the overseas country by way of your employment, your ties to Australia will be stronger as you have a partner and friends in Australia, you have assets in Australia by way of a house and bank accounts and you will return to Australia during your employment contract and immediately following its completion.
While you are working overseas you will retain a continuity of association with Australia and will be residing in Australia according to the ordinary meaning of the word. Therefore, you will meet the 'resides test' and be a resident of Australia for tax purposes.
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.
In your case, your domicile is Australia as you were born in Australia and are an Australian citizen.
The Commissioner is not satisfied that you will have a permanent place of abode outside of Australia.
Therefore, you will meet the 'domicile test' and be a resident of Australia for tax purposes.
Your residency status
You will remain a resident of Australia for tax purposes while you are working overseas.
As you are a resident of Australia, according to section 6-5 of the Income Tax Assessment Act 1997, your assessable income includes income gained from all sources, whether in or out of Australia.