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Ruling

Subject: Residency

Are you an Australian resident for income tax purposes for the period you will be residing in Country X?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commences on:

1 July 2012

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are relocating to Country X for a period of 8 or more years commencing in early 2013

Your employment in country X is for the construction of a significant amount of infrastructure with a possible option to extend the contract, which you intend to accept if offered.

You do not intend to come back to Australia for holiday periods

You will not be holding any assets in Australia during your stay in Country X.

You will not have any Australian sourced income during your stay in Country X and will not be holding any bank accounts in Australia

You will be going to Country X by yourself as you and your former partner are going through a separation.

You will not leave any dependants in Australia.

You will be working as an individual employee for Company X and won't be working under your ABN.

Relevant legislative provisions

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

Income Tax Assessment Act 1997 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:

ð the resides test,

ð the domicile and permanent place of abode test,

ð the 183 day test, and

ð 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 will be living and working in Country X for a period of between 8 to 10 years. Therefore, according to the resides test you will not meet the resides 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. 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.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include:

ð the intended and actual length of the taxpayer's stay in the overseas country;

ð 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;

ð 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;

ð whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

ð the duration and continuity of the taxpayer's presence in the overseas country; and

ð 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.

In your case your domicile of origin is in Australia and you have not made a decision to make your domicile outside of Australia. However you are making a decision to make your permanent place of abode outside Australia. This is evidenced by the period you intend to stay in Country X, which is a significant period of 8 or more years with an option to extend your contract. You do not intend to visit Australia in your holiday breaks suggesting a continuous stay in Country X. Furthermore, you won't have a place of abode in Australia whilst overseas and won't maintain bank accounts in Australia or have any assets here. This suggests your place of abode in Australia will be abandoned. You won't have any dependants here as you are going through a separation. This suggests that there won't be any durability of association with Australia whilst you are in Country X. Therefore you will not be considered an Australian resident under the domicile test.

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 after you leave Australia as you don't intend to be in Australia for a period of longer than 183 days. For the year you are leaving Australia you will be a resident up until you leave Australia as your usual place of abode will then be outside Australia.

The superannuation test

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

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

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

ð 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

You will not be considered an Australian resident for tax purposes during your stay in Country X.