Private ruling: Australian resident for income tax purposes
Published: June 2012
Date scheme commenced: 1 July 2011.

Ruling: Q1: Will you be considered an Australian resident for income tax purposes for the entire 2011-12 income year? | A1: No. Income period: Year ending 30 June 2012. The scheme commenced on: 1 July 2011.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1936 subsection 6(1) Facts: | You are Australia born and an Australian citizen. | Since some time in the 2011-12 income year, you relocated to Country A under a working holiday visa. The visa is valid for two years and expires some time in the 2013-14 income year. The visa is however renewable for another two years after that. At this stage you intend on staying there for the full years. | Prior to leaving Australia, you were single with no dependants. | You currently live with your partner in a rental apartment in Country A. The lease commenced some time in the 2011-12 income year and expires some time later in the 2012-13 income year. | You stated that you were an Australian resident for income tax purposes during the 2010-11 income year. | You have not worked in Australia during the 2011-12 income year. | You are employed in a particular role in Country A. | Immediately prior to leaving Australia, you lived with some family in their home in Australia. You do not have a permanent place to live in Australia. | You do not have any assets in Australia. | Neither you nor your spouse are, or were Commonwealth Government of Australia employees. | You have social ties in Country A.

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that 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 in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test. · the domicile test. · the 183 day test. · the superannuation test. The first two tests are examined in detail in Taxation Ruling 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 a resident of Australia for tax 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; 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'. You are currently residing in Country A as evidence by: · renting an apartment. · residing with your spouse. · working full time and · your intention is to stay in Country A for at least four years. Therefore, 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. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. The expression 'place of abode' refers to a person's residence, where they live with their family and sleep 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 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. In your case, · you have advised that it is your intention to make Country A your home for at least four years, · you only maintain an association with Australia through some family and friends, · you are residing in Country A with your spouse, · you are working full time and · you have created social ties in Country A. Therefore, you are not considered to have maintained your Australian domicile. Based on these facts, the Commissioner is satisfied that you have established a permanent place of abode in Country A. | Detailed Reasoning - The 183-day test: This test does not apply to you as it has been identified that your permanent place of abode is in Country A. | 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 will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person. | Detailed Reasoning - Your residency status: As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident from the date of your departure from Australia under subsection 995-1(1) of the ITAA 1997. | Detailed Reasoning - Note:: As you are considered to be a foreign resident for income tax purposes in Australia from the day you left Australia - you will be eligible to a pro-rated tax-free threshold for the 2011-12 income year. From the date you become a foreign resident, any interest income and/or dividend income derived by you from sources in Australia will be subject to foreign resident withholding tax.

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.