Private ruling: Residency
Published: December 2011
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer | Are you a resident of Australia for tax purposes while you are living and working overseas? | Yes


Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | 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, and § 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other 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 will be living and working overseas for approximately two years, and accordingly you will not be residing in Australia. As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. Domicile Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. 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. Your domicile is Australia because you are an Australian citizen and you intend to return to Australia after you have completed your employment project in Country X. Therefore, you will be a resident of Australia unless the Commissioner considers you have established a permanent place of abode outside of Australia. Permanent place of abode 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. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayer's presence in the overseas country; and (f) the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. The Commissioner is not satisfied that you have a permanent place of abode outside Australia because: § You intend to return to Australia at the end of your employment contract § You are not intending to live in Country X permanently § You live in camp accommodation located at a construction site in Country X provided by your employer § You return to Australia on every rest and recreation break for 2 weeks at a time every 2 months § All of your belongings including a car and furniture are stored at your parents Australian house where you stay when you return to Australia § You have no social or sporting connections in Country X, you are there purely for work purposes and will return to Australia when the project is completed. As the Commissioner is not satisfied that you have established a permanent place of abode outside Australia you are a resident of Australia under the domicile test. | Detailed Reasoning - Your residency status: As you are a resident of Australia under the domicile test of residency there is no need to examine the remaining tests. | Detailed Reasoning - Conclusion: As you are domiciled in Australia, and the Commissioner is satisfied that you do not have a permanent place of abode outside Australia, you are a resident of Australia for the duration of your employment overseas. Your foreign income is assessable in Australia and you are required to lodge a tax return in Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid.

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. | Relevant facts: Your country of origin is Australia and you are an Australian citizen. | You are single with no dependants. | You left Australia to commence work in Country X. | You are employed under Country X laws and conditions and pay Country X tax on your salary. | Your employment contract in Country X does not have an end date but will end when the project you are working on is completed which is expected to take approximately two years. | You live and work on site. You also work in an office as well as on the project site. | Your employment arrangement is as follows: | § When working in the office you are entitled to Y weeks rest and recreation (R&R) after working 6Y weeks. | § When you work on the project site you are entitled to Y weeks R&R after 4Y weeks working. When on site you work over 10 hours per day, 7 days per week for 4Y weeks straight. | You have a work permit to work in Country X which is arranged by your employer. | You plan to return to Australia permanently when the project you are working on is completed. | During your R&R leave periods which is approximately every 2 months you return to Australia for approximately Y weeks. | When you return to Australia you stay at your parents' home. | You return to Australia to relax and have a break after working long days and hours in Country X. | During your time working and living in Country X you live on the construction site which consists of an accommodation camp which includes kitchen, laundry, running water, sewer, power etc. | The accommodation, laundry, food and services are provided and paid for by your employer. | You do not have any assets overseas. | Your assets in Australia include a car, furniture, shares and bank account. | Prior to leaving Australia you were renting a house but you have now vacated this property as it was not worth you paying the lease as it was empty most of the time. | Your belongings are stored at your parents' house and when you return to Australia for 2 week periods of R&R you stay at your parent's house. | You do not have any social and sporting connections in Country X. | You maintain social contacts with friends and family in Australia. When you return to Australia for R&R breaks for 2 week periods, you spend your time shopping, going to restaurants, reading, watching television and generally relaxing. | You are or never have been a Commonwealth Government of Australia employee.