Edited version of your private ruling

Authorisation Number: 1012492264865

Ruling

Subject: Residency - relocation to foreign country

Question

Are you an Australian resident for taxation purposes for the period that you are working in an overseas country?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2012

Year ended 30 June 2013

Year ending 30 June 2014

The scheme commences on:

1 July 2011

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 were born in an overseas country and you retain your overseas citizenship.

You and your family moved from the overseas country to Australia a number of years ago and became citizens of Australia some years later.

You have an assignment contract in an overseas country for a minimum of two years in duration. This contract has been extended and will be reviewed at a later date.

The assignment contract does not have a definitive end date and you may not return to Australia on completion of the assignment. You have been offered a local contract of employment in the overseas country which you are currently considering.

You have been issued with a residency permit, allowing you to live and work in the overseas country. These permits are issued for a period of over 12 months and are renewable for up to two years on or before the issued expiry date.

Your family joined you in the overseas country after visa delays.

The family home in which you and your family resided in Australia (Australian property) has been rented out to tenants. The Australian property has been rented unfurnished. The property was initially leased from for a twelve month period but the lease has since been extended such that the current tenants will remain for longer. This is an ongoing lease arrangement, reviewed and updated on an annual basis.

You have been transferred to an international payroll system. You continue to be paid in Australian dollars in order to finance your commitment on your Australian property.

You do not anticipate the need to return to Australia for any purpose other than to inspect your Australian property or the occasional family vacation.

You and your family have holidayed in several countries during the relevant years staying in short term holiday accommodation in each country. You do not anticipate having to travel to Australia any further during the subsequent years.

You and your family are living together in leased accommodation in the overseas country in a designated compound for visitors/expatriates.

You and your family will remain living together as a family unit for the duration of your assignment.

You have signed a lease on a house and car in the overseas country, the cost of which has been funded by your employer. You have furnished the property with furniture and other personal effects transferred from your Australian property. You engaged the services of professional international removalist company. The company commenced packing the contents of your previous home and transported it by air and sea freight.

You sold your family cars in Australia prior to the commencement of your assignment in the overseas country.

Your children attend school in the overseas country and have secured places at the school for a number of years. You have paid a non refundable registration fee for your children to secure long term school placements for them.

You have arranged for your personal Australian mail to be collected and delivered to your residence in the overseas country.

You have opened a bank account in the overseas country and will use this account for your daily banking facilities and general personal expenses.

You have retained overseas and Australian bank accounts for investment purposes.

You have a publicly managed Australian superannuation fund and pension fund managed in an overseas country. Your Australian superannuation fund was not a Commonwealth superannuation fund.

You and your family have social and sporting connections both within and outside of the compound where you live. Your child has joined a sporting team which plays at different compounds and also different countries. Your child attends other classes within the compound. Your spouse has an active social life both within and outside the compound.

You and your family have established significant economic, domestic and social ties with the overseas country and your new local community. Your family is attending classes to learn the local language.

You have applied to be removed from the Australian Electoral register as you are no longer entitled to vote.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

The definition of a resident of Australia in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) provides four tests to ascertain whether a taxpayer is an Australian resident. These tests are the:

(1) residence according to ordinary concepts test

(2) domicile and permanent place of abode test

(3) 183 day test, and

(4) 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.

In your case, the most relevant test is the domicile and permanent place of abode test. You will not be an Australian resident for tax purposes according to ordinary concepts from the date of your departure from Australia, and the 183 day test and the Commonwealth superannuation fund test do not apply to your circumstances.

Taxation Ruling IT 2650 considers the domicile and permanent place of abode test.

Domicile

Domicile is a legal concept. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father' permanent home. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another county, or until he or she acquires another domicile by operation of law. The intention that the person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

In determining a person's domicile for the purposes of the definition of resident, it is necessary to consider the persons intention as to the country in which he or she is to make his or her home indefinitely. Thus, a person with an Australian domicile but living outside Australia will retain that domicile if he or she intends to return to Australia on a clearly foreseen and reasonably anticipated contingency.

Permanent place of abode

Persons who retain their Australian domicile can still be considered non residents if the Commissioner is satisfied that their permanent place of abode is outside Australia.

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.

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

IT 2650 provides the following factors to be taken into account in determining a person's permanent place of abode:

(a) the intended and actual length of the individual's stay in the overseas country

(b) whether the individual intends to stay in the overseas country only temporarily and then to move on to another county or to return to Australia at some definite point in time

(c) whether the individual has established a home (in the sense of a 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 individual's presence in the overseas county

(f) the durability of association that the person has with a particular place in Australia i.e. maintaining bank accounts in Australia, informing government departments that he or she is leaving permanently, place of education of the individual's children, family ties and so on.

In your situation, you intend to stay in the overseas country for an indefinite period. You do not intend to return to Australia for a considerable amount of time, if at all.

You have removed all of your furniture and personal belongings from your Australian property which is now rented to tenants on a long term basis. Your furniture and personal effect have been shipped to your new residence in the overseas country. This clearly indicates that you have abandoned your Australian property.

You and your family have established a home in the overseas country. Your children have been enrolled to attend school in the overseas country and this enrolment is for a period of several years. You and your family have developed community and social ties within the overseas country and you have advised the Australian Electoral Commission that you wish to be removed from the electoral register in Australia.

The Commissioner is satisfied that your domicile is now outside of Australia and even if this was not the case, it is clear that you have established a permanent place of abode in the overseas country. Accordingly, it is considered that you are not an Australian resident for taxation purposes.