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Ruling

Subject: Residency

Question and answer:

Were you an Australian resident for income tax purposes for the period mid 20XX to late 20YY?

Yes.

Were you an Australian resident for income tax purposes for the period late 20XX to mid 20YY?

No.

Should you include income derived overseas on your Australian tax return?

No.

This ruling applies for the following period:

1 July 2011 to 30 June 2012.

The scheme commenced on:

1 July 2011.

Relevant facts:

You are a citizen of Australia.

Your country of origin is Country A.

You hold a staff migrant visa in a Country B.

You have an employment contract in Country B from late 20XX. You went to Country B to assess whether you would have better employment opportunities within your career specialty.

You earn income from your employer in Country B. You have had no contact with your employer in Country A since leaving Australia.

Your partner also travelled to Country B in late 20XX. Your partner subsequently extended their employment contract to match the length of yours.

From late 20XX until early 20YY you and your partner lived in accommodation provided by your partner's employer in Country B. From early 20YY you and your partner have rented your own accommodation on a renewable lease in Country B.

You have opened bank accounts in Country B and shipped all your personal belongings to Country B. You own no other assets in Country B.

You have joined a member of a local gym in Country B.

You still own property in Australia. You view this property as an investment property. This property is currently being used by members of your family as their primary residence. These family members' maintain the property and contribute to the mortgage. You pay the rest of the mortgage through your Australian bank account.

You have maintained your membership in an Australian professional association. This membership is necessary for your employment in Country B. You have no other social or sporting connections in Australia,

You have removed yourself from the Australian electoral roll.

You have discussed extending your employment contract with your employer in Country B. You are also considering employment within Country B outside of your current employer should employment opportunities arise.

You are required to return to Australia once your employment contract expires as applications to extend your working visa can only be made from outside Country B.

Your partner has recently returned to Australia to extend their work visa. Their work visa is now valid until late 20ZZ.

You have not returned to Australia since you left and you currently have no short-term plans to return.

You have long-term plans to return to Australia, although this is dependent upon the decisions of your partner, and employment opportunities within Country B.

You are a member of a non-government superannuation fund in Australia. This account is still active, although you have not contributed to it since you left Australia.

Neither you nor your partner has been a Commonwealth Government of Australia employee, or eligible to contribute to a Commonwealth Government of Australia superannuation fund.

Relevant legislative provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency for taxation purposes - general

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.

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 IT 2650 Income Tax: residency - permanent place of abode outside Australia specifies that a person's place of abode is where they live.

In your case, you left Australia in late 20XX on an employment contract in Country B. You live with your partner in Country B in accommodation leased in both of your names. You plan to remain in Country B although this is dependent on employment opportunities. You are not residing in Australia according to the ordinary meaning of the word 'reside'.

The domicile and permanent place of abode test

Domicile

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. A person's domicile of origin will not usually change but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a domicile by choice outside of their domicile of origin, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person becomes a citizen of a country outside of their domicile of origin.

Taxation Ruling 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 of time for example. Taxation Ruling IT 2650 further states, at paragraph [21], 'a working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice'.

Your domicile of origin is Country A; however you obtained an Australian domicile of choice when you became an Australian citizen. The fact that you are currently on a work contract in Country B is not sufficient evidence of an intention to acquire a new domicile of choice, especially as you are required to leave Country B and return to Australia should you wish to re-apply for another working visa.

Permanent Place of Abode

Taxation Ruling IT 2650 outlines the Commissioner of Taxation's view on the application of the term 'permanent place of abode'. This view is considered through discussions on the decisions in FC of T v Applegate 79 ATC 4307; (1979) 9 ATR 899 and FC of T v Jenkins 82 ATC 4098; (1982) 12 ATR 745.

The Ruling concludes that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules, it is a question of fact to be determined in the light of all the circumstances of each case.

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

· Any intention 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 the individual may have had in Australia;

· The duration and continuity of the individual's presence in the overseas country; and

· The durability of association that the individual has with a particular place in Australia.

The weight given to each factor will vary with individual circumstances and no single factor is conclusive. However, IT 2650 states that as a general rule, the establishment of a home in another country for a period of two years or more would generally be regarded as sufficient to establish a permanent place of abode in another country.

From the facts provided in your application, it is considered that have you have established a permanent place of abode overseas and therefore remain a resident of Australia/ are not a resident of Australia for taxation purposes. The reasons for this are as follows:

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

o Your intended length of stay when you left Australia, as this was the length of your employment contract and the time it would take you to assess overseas employment opportunities.

· Any intention either to return to Australia at some definite point in time or to travel to another country -

o You have not returned to Australia since leaving in late 20XX. You have stated that you will return at some point in the future, although this is dependent on employment opportunities, the decisions of your partner, and whether you wish to renew your working visa.

· The establishment of a home outside of Australia -

o You and your partner have entered into a renewable lease in your own names for a rented property in Country B.

· The abandonment of any residence or place of abode the individual may have had in Australia -

o You have maintained an investment property in Australia. This property was not sold as it is used, and maintained, by members of your family. They pay a small portion of the mortgage and you pay the rest from your Australian bank account.

· The duration and continuity of the individual's presence in the overseas country -

o You have opened bank accounts in Country B, and have had all of your personal belongings shipped to Country B.

· The durability of association that the individual has with a particular place in Australia -

o You have family in Australia and an investment property. However, you have removed yourself from the Australian electoral roll, and no longer have any sporting or club connections in Australia.

o You are still a member of an Australian professional association, although this is required for your employment in Country B.

It is considered that even though you have established associations in Australia through your family and investment property, your association in Country B is more significant as you are residing and working full time overseas.

The Commissioner is satisfied that you have a permanent place of abode outside Australia, and therefore you are not a resident for Australia for taxation purposes from the date you left Australia.

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 will not be a resident of Australia for taxation purposes under this test in the relevant income tax year because you were not in Australia for more than 183 days during the relevant income tax year.

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, and you are not a member of the PSS or an eligible employee for the purposes of the CSS.

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

Accordingly, you are not a resident of Australia for taxation purposes under this test.

Conclusion - your residency status

Based on the facts in this ruling, you are not resident of Australia for taxation purposes from the date you left Australia.

As you are not a resident of Australia for taxation purposes from late 20XX your assessable income for the relevant income year only includes income gained from sources in Australia.