Private ruling: Residency
Published: July 2014
Ruling period: Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Were you a resident of Australia for taxation purposes for the period of time you worked overseas? | A1: No.

Relevant facts and circumstances: You were born in Australia and are an Australian citizen. You departed Australia to take up overseas employment contract overseas. The employment contract was indefinite but required to be reviewed annually under domestic law of the foreign country. When you left Australia you intended it to be for a two year period. You were offered a contract renewal for a further year. You turned this down as you had also received an offer to work in a second foreign country later in the year and would be unable to accept that position if you accepted the renewal. You were provided an apartment. You were able to elect to have a housemate or not. You elected to have one. You and your housemate had exclusive occupation of the accommodation and you were able to furnish it as you pleased. You sold your car and belongings in Australia. Your only Australian assets were a rental property and an account to support that. You had an account in the overseas country that your pay went into in local currency. You did not return to Australia for any reason in the time you were employed overseas. You were removed from the Australian Electoral Roll. You have never been a Commonwealth Government of Australia employee.

Relevant legislative provisions: Section 995-1(1) of the Income Tax Assessment Act 1997 | Subsection 6(1) of the Income Tax Assessment Act 1936 | Domicile Act 1982

Reasons for decision: Summary: An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (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, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936, which provides four tests to ascertain whether a taxpayer is an Australian resident for income tax purposes. These tests are: 1. The resides test; 2. The domicile test; 3. The 183 day test; and 4. The superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650). 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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other tests. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. 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; 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'. In your case, you were living in accommodation overseas in the same manner you would live in shared accommodation in Australia. You were in that accommodation for 12 months. Therefore, you are not a resident of Australia under this test as you were not residing in Australia according to the ordinary meaning of 'reside'. | Detailed Reasoning - The domicile test: Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. Domicile 'Domicile' is a legal concept to be determined according to the Domicile Act 1982 and common law rules. The courts have defined it as the legal relationship between a person and a territory subject to a distinctive legal system that invokes that system as the individual's personal law ( Henderson v Henderson [1965] 1 All ER 179 at 180-181). A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. Your domicile of origin is Australia. You did not acquire a new domicile of choice by moving to the foreign country for an employment contract. Permanent place of abode The leading authority on the meaning of 'permanent place of abode' is Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1; 9 ATR 899 ( Applegate ), which says that a person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. In Applegate , the court found that 'permanent' does not mean everlasting or forever but it is to be contrasted with temporary or transitory. The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night. In Applegate , Fisher J made the following comments when analysing the expression 'permanent place of abode': To my mind the proper construction to place upon the phrase 'permanent place of abode' is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place. In your case you: • travelled overseas to take up an employment contract • intended to be overseas for two years, but returned to Australia after 12 months • were given the option to stay for another year • lived in accommodation provided by your employer, but in which you had exclusive occupancy (with a housemate) and were free to furnish the accommodation • sold all of your belongings in Australia including your car • removed yourself from the Australian Electoral Roll Based on the reasons discussed above, the Commissioner is satisfied that you had a permanent place of abode while overseas. Therefore, you were not a resident of Australia under this test for the period of time you were working outside Australia. | Detailed Reasoning - The 183 day test: When a person is present in Australia for 183 days or more 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. In the year ended 30 June 20XX you spent more than 183 days in Australia. In the year ended 30 June 20YY you spent less than 183 days in Australia. In this time, the Commissioner is satisfied that your usual place of abode was outside Australia during the period you worked overseas. | Detailed Reasoning - The Superannuation test: An individual is still considered to be 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 contributing member of the PSS or CSS. Further, you are over 16 years of age. Therefore, you are not a resident under this test. | Detailed Reasoning - Your residency status: You were not a resident of Australia for taxation purposes for the period of time you were working overseas.