Edited version of your written advice

Authorisation Number: 1012812799683

Ruling

Subject: Residency - working overseas

Questions and answers

Are you a resident of Australia for taxation purposes while you were working in Country A?

Yes

This ruling applies for the following period

Year ended 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts

You are a citizen of Australia.

You were employed by an Australian company.

You left Australia to commence work in Country A.

This was for a 12 month period.

During the first month of your employment, you lived in temporary accommodation provided by your employer.

During the rest of your time in Country A you lived in rented accommodation with a co-worker.

When you lived in Australia you lived in rented accommodation with your spouse.

When you moved to Country A your spouse remained in Australia.

You have not lodged a tax return in Country A.

You returned to Australia at the completion of your contract.

You and your partner are not and have not been employees of the Commonwealth Government of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1).

Income Tax Assessment Act 1997 Section 6-5.

Reasons for decision

An Australian resident for taxation purposes is defined in subsection 995-1(1) of the ITAA 1997 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' are defined in subsection 6(1) of the ITAA 1936. The definition gives us a series of tests which assist in determining whether a person is a resident of Australia. These tests are:

1. residence according to ordinary concepts;

2. the domicile/permanent place of abode test;

3. the 183 day/usual place of abode test; or

4. the 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 you do not reside in Australia according to ordinary concepts, you may still be a resident of Australia for tax purposes if you meet the conditions of any one of the other three tests.

We refer to Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia which provides guidelines for determining whether individuals who leave Australia to live overseas cease to be Australian residents for income tax purposes during their overseas stay.

Residency according to ordinary concepts 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'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of Place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive.

In your case, you will not be residing in Australia for the purposes of the resides test for the following reasons:

• You are not physically residing in Australia

• You have lived in rental accommodation in country A for 12 months, initially for one month provided by your employer and then for the following eleven months sharing with a co-worker.

• You did not maintain a residence in Australia

• Your contract in country A was for a period of 12 months.

• You did not return to Australia during this 12 month period.

Other residency tests

Even where a taxpayer is not considered to 'reside' in Australia in accordance with the ordinary meaning of the term, the taxpayer will still be considered to be a resident of Australia for domestic taxation purposes where they meet one of the other three residency tests, being the domicile and permanent place of abode test, the 183 day test and superannuation fund test.

The domicile 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 new domicile by choice, 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 is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

While you were living in Country A you were living in rented accommodation, had left your car with your family, and your partner had remained in Australia to continue their employment.

Although you were living in rented accommodation in Country A, it could not be said that you intended to live there indefinitely.

The contract you had with your employer was for a period of 12 months only and you were then to return to Australia.

As you did not have a permanent place of abode in Country A, the principle of "domicile of origin" should be considered.

As your country of birth is Australia your domicile of origin is Australia.

As your domicile of origin is Australia and you have not established a permanent place of abode outside Australia you are an Australian resident under this test. It is not necessary to consider the other tests.

Conclusion - your residency status

Based on the facts you have provided, you satisfy the domicile test and are therefore a resident of Australia for the period you were working in Country A.