Edited version of your private ruling

Authorisation Number: 1012513614690

Ruling

Subject: residency

Questions and answers:

1. Where you a resident for taxation purposes for year ended 30 June 2012?

No.

2. Where you a resident for taxation purposes from when you returned to Australia?

Yes.

3. Will you be a resident from the date you depart Australia overseas?

No.

This ruling applies for the following periods:

Year ended 30 June 2012,

Year ended 30 June 2013,

Year ended 30 June 2014.

The scheme commenced on:

1 July 2011.

Relevant facts:

You are an Australian citizen.

You accepted an employemnt contract overseas.

You left Australia with the intention of permanently migrating overseas.

When you left Australia you indicated on your custom documents that you would be working overseas.

No spouse or family accompanied you overseas.

You stopped physically working in Australia before you left.

You gave up your rental and sold all your belongings.

You attempted to sell some property but were unable to before your departure.

In order to meet your financial commitments rather than resign from your Australian employment, you took long service leave at half pay.

You intended to officially resign once your property was sold.

Whilst employed overseas, the company you were working for was experiencing difficulties.

Work became scarce at times and payment was sporadic.

You had spent a lot of money setting up an apartment, however without the job security you had no option but to return to Australia.

When you returned to Australia, you filled out your custom documents, stating that you were a resident returning, as you were not aware of any other options.

You returned to your previous employment in Australia.

Since returning to Australia you have been living with family, and planning how you can return overseas, as you intend to get married and live overseas.

You have accepted another position with your previous overseas employer and leave in the recent year, with intentions to permanently migrate overseas.

When you return overseas you will be taking leave without pay for up to 2 years.

You have supplied the address of an apartment overseas where you will live.

You are still trying to sell your Australian property.

Neither you nor your spouse has been a Commonwealth of Australia Government employee for superannuation purposes.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Non-resident

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 and provides four tests to ascertain the residency status.

Relevant to your situation are the first two tests which are examined in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, a copy of which is available from www.ato.gov.au.

In your case, when your first located overseas and from when you depart overseas permanently in certain month of the recent year, giving regard to your circumstances as a whole and a consideration of the relevant residency tests, it is accepted that you are not a resident of Australia for tax purposes.

Resident

During your return to Australia from certain month 20xx to certain month in the recent year the first two tests are relevant. In examining these tests, IT 2650 provides a number of factors which assist in assessing a taxpayer's situation against the tests.

The resides test

Whether the individual resides in Australia according to the ordinary meaning of the word resides.

In your case, you were working full time in Australia, having returned to your previous employer. You stayed with family. You made plans to return overseas permanently. You were unable to establish economic ties overseas, and as such returned to Australia where you had employment, accommodation and property you intended to sell.

Based on these facts, you are residing in Australia according to the ordinary meaning of the word. Therefore, you meet the 'resides test' and are 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. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

In your case the Commissioner is not satisfied that you have a permanent place of abode outside of Australia because:

· you left your apartment overseas due to employment problems and cost of living, and

· you maintain economic ties with Australia.

Therefore, you are a resident of Australia under this test.

Your residency status

As you meet the resides and domicile tests, you are considered to be a resident of Australia for tax purposes from 20xx to your date of departure overseas in the recent year.

Further issues for you to consider:

If you are a foreign resident, you must lodge an income tax return in Australia and pay tax on all your Australian sourced income, except any of the following from which Australian tax has already been withheld:

· interest

· unfranked dividends

· royalties.

If you are a foreign resident, ensure your Australian financial institutions have your updated overseas address and residency status so the correct amount of withholding tax is deducted. This will also help to reduce any follow-up action by Australia or a treaty country where discrepancies are found.

If you receive Australian employment income, your employer will generally withhold income tax at foreign resident rates from the income they pay you. You then report that income in your Australian income tax return and claim the withheld amounts as a credit against the tax assessed.