Private ruling: Residency
Published: June 2012
Ruling period: Year ending 30 June 2011 | Year ending 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: No.

Relevant facts and circumstances: You were born in Australia and are an Australian citizen. You secured employment as Locally Engaged Staff with employer in Country X. You employment was for 12 months, and extended for a further 12 months. Your contract can be extended for further periods of 12 months. You left Australia in the 2010-11 income year. Your visa is a non-immigrant visa which allows foreign-accredited officials, not in the diplomatic category, to enter Country X to engage in official activities of their government. You have rented an apartment in Country X on a lease for two years, which can be extended. You have a bank account in Country X. You intend living and working in Country X indefinitely and have no intention of returning to Australia for several years. Before moving to the Country X you lived with your parents in Australia. You do not pay tax in Country X. You have established social and sporting connections in Country X. You are no longer a member of social and sporting clubs in Australia You were not an employee of the Commonwealth Government of Australia before commencing employment with DFAT. You are not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), nor are you the spouse of such a person.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Summary: The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is an Australian resident for taxation purposes. These tests are: · the resides test · the domicile test · the 183 day test · the superannuation 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 an Australian resident for taxation purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have 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'. As you have lived and worked in the Country X since leaving Australia, you are not considered to be residing in Australia. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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 his or her 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. Although you maintain an association with Australia through your family, your associations with the Country X are more significant as you have: · leased accommodation in the Country X · intend residing there indefinitely · opened a bank account, and · obtained full time employment Based on these facts, it is considered that you have established a permanent place of abode in the Country X. Therefore, you are not considered an Australian resident for taxation purposes under the domicile test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, 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 do not satisfy this test as you have established a permanent place of abode outside of Australia. | Detailed Reasoning - The superannuation test: An individual is still considered a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not a member of a Commonwealth superannuation scheme such as the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. Therefore, you will not be treated as a resident under this test. | Detailed Reasoning - Your residency status: As you are not deemed to be an Australian resident for taxation purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered an Australian resident for taxation purposes from the date you left Australia. | Detailed Reasoning - Note: From the date you become a foreign resident, your foreign-sourced income will be exempt from tax in Australia. Foreign residents are only required to lodge an Australian tax return if they earn Australian-sourced income such as rental income or salary and wages from employment in Australia. As you were an Australian resident for taxation purposes until you left Australia, you are eligible to a pro-rated tax-free threshold for this period. Medicare levy will also apply on a pro rata basis for the number of days that you were an Australian resident in the 2010-11 income year.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.