Private ruling: Residency
Published: June 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Questions and answers: | Are you a resident of Australia for taxation purposes while you are in foreign country X? | No. | Are you a resident of Australia for taxation purposes while you are travelling in developing countries? | Yes.

Relevant facts and circumstances: You are an Australian citizen and hold an Australian passport. Your spouse is a citizen of foreign country Y and holds a passport for that country. You were living in Australia. You obtained an employment contract in foreign country X. You left Australia and went to foreign country X. Your spouse followed a short time later. You have a multiple year visa for foreign country X. You have an employment contract in foreign country X for a fixed period. You have the right to renew your contract. Your spouse has a dependant visa, attached to your visa for the same period. Your original intention was to remain in foreign country X for a number of years. You have left Australia with the intention of returning someday, but not for a number of years. Your plans with foreign country X have changed as the role and the location of the job was not what and where you were originally hoping for. It is now your intention to head off on backpacking and volunteering travel around developing countries when your employment contract comes to an end. You expect this period of travel will be a few years. You will not have a permanent place of abode during this time. After this period, you plan to return to foreign country X, but look for more specific roles that are better suited to your skills sets/professions and in locations that are better suited to you. In foreign country X, you have been provided with a property to live in by the employer. You have a bank account in foreign country X. You both have mobile numbers in foreign country X. You have shipped many personal effects from Australia to foreign country X when you moved there. You were living in your personal residence in Australia, prior to moving to foreign country X. You own this residence. This property is now being rented out. You also own an investment property in Australia. This is being rented out. You have bank accounts in Australia with several banks. You sold your car and other personal items before you left Australia. You have cancelled your Australian mobile phone contracts. You have not been in Australia for more than 183 days in the income year. You and your spouse have never worked for the Commonwealth of Australia Government. You are over 16 years of age. Relevant legislation provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) Income Tax Assessment Act 1936 Subsection 6(1)


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) to be 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. 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 Income tax: residency - permanent place of abode outside Australia . 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 satisfy 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'. Taxation Ruling IT 2650 provides guidelines for determining whether individuals who leave Australia temporarily to live overseas, for example, on temporary overseas work assignments or on overseas study leave, cease to be Australian residents for income tax purposes during their overseas stay. The principles and guidelines adopted in IT 2650 can also be used for individuals who intend to reside overseas indefinitely. Paragraph 19 of IT 2650 states: The first question to be asked in considering the residency status of a person temporarily leaving Australia is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes. In your case, it cannot be said that you reside in Australia according to ordinary concepts. You have lived and worked in foreign country X and were joined by your spouse. You will continue to live and work there until your employment contract expires. Then you will travel for a few years with your spouse around developing countries, backpacking and volunteering. You will stay in accommodation like Backpackers during this time. Accordingly, it is considered that you are/will be residing in overseas countries and, therefore, are not a resident of Australia under the resides test. | 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 an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. In your case, as you are still an Australian citizen while living overseas, your domicile is Australia and remains unchanged. 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 you intend to live for the rest your life. An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere. | Detailed Reasoning - Foreign country X: In your case, you have established a permanent place of abode in foreign country X, where you have lived and worked as you have been provided with a property to live in by your employer. You have no plans to return to live in Australia and you have rented your residence in Australia. Based on the above, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia while you are in foreign country X. Therefore, you are not a resident under the domicile test during this period. | Detailed Reasoning - Developing countries: After your contract in foreign country X expires you will travel for a few years with your spouse around developing countries, backpacking and volunteering. You will stay in accommodation like Backpackers during this time. As your domicile is in Australia and you have stated you will not have a permanent place of abode during this time you are/will be a resident under the domicile test during this period. As you have passed one of the residency tests for the time you will be travelling in developing countries, it is not necessary to consider the 183-day and superannuation tests for this period. | Detailed Reasoning - The 183-day test: Under the 183 day test you are considered a resident of Australia if you are present in Australia for a total period of more than half of the year of income, i.e. 183 days, unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia. While in foreign country X, you have/will not be present in Australia for a total period of more than half of any year of income. Therefore you were not a resident of Australia under the 183-day test while you are in foreign country X. | Detailed Reasoning - The superannuation test: An individual is considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Service Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You have stated that neither you nor your spouse has ever worked for the Commonwealth of Australia Government and do not contribute to any of its superannuation schemes. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test while in foreign country X. | Detailed Reasoning - Foreign country X: As you are not a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are not considered to be an Australian resident for taxation purposes for the time period while you are in foreign country X. | Detailed Reasoning - Developing countries: As you are a resident of Australia under the domicile test for the time period you expect to be travelling in developing countries, you have passed one of the of residency tests outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997 and so are an Australian resident for taxation purposes during this period.

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.