Private ruling: Are you an Australian resident for taxation purposes
Published: June 2012
Ruling period: Year ending 30 June 2013
Date scheme commenced: July 2012

Ruling: Q1: Are you an Australian resident for taxation purposes after your departure in July 2012 ? | A1: Yes | Q2: Are you exempt from the Medicare levy surcharge? | A2: No.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision: Summary: Residency status is a question of fact. Your residency status is relevant in determining your liability to Australian income tax. The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are: · the resides test · the domicile and permanent place of abode test · the 183 day test and · the Commonwealth superannuation fund 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 to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident as a person who is a resident of Australia for the purpose 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. 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 ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'. 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. In your case, you intend to leave Australia in 2012. From this date on you will not be residing in Australia according to ordinary concepts. | 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 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. | Detailed Reasoning - In your case:: Whilst in foreign country you will be staying in accommodation supplied by your employer. You will return to Australia at Christmas to visit family. Although you are renting out your home in Australia there is a clause in the .rental agreement which allows you to return at any time. Your wages will be deposited in your Australian bank account. Based on these facts, it is considered that you have not established a new permanent place of abode outside Australia. Consequently, you satisfy the domicile test. | Detailed Reasoning - Your residency status: As you satisfy the domicile test you are considered to remain an Australia resident for taxation purposes whilst posted in foreign country. | Detailed Reasoning - Medicare Levy Surcharge: As a resident of Australia, you are subject to the Medicare levy and any applicable increase in the Medicare levy (the Medicare levy surcharge). As you are married, section 8D of the MLA imposes the Medicare levy surcharge if the sum of you and your spouse's taxable incomes and reportable fringe benefits (if any) exceeds the family surcharge threshold, for the period you or any of your dependants, who are not prescribed persons, are not covered by an insurance policy that provides private patient hospital cover. Whilst we appreciate that you will be overseas for the majority of the next three years and will therefore have no have access to medical services in Australia, there is no discretion within the legislation to exempt you from the Medicare levy surcharge.

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. | You are an Australian citizen. | You are an Australian public servant. | You have been posted overseas to serve in a diplomatic role overseas. The posting is for X years. | You will leave Australia in 2012 | You expect to return to duties in Australia after this posting. | Your family is going with you overseas | The embassy is providing you with accommodation overseas | You will rent out your Australian home while overseas. There is a clause in the rental lease that allows you to remove the tenants at any time. | You are on an Australian passport which is entirely contingent on your employment with the Australian government. | You wages will be paid into an Australian bank account. | You will return to Australia at Christmas to visit your parents. | You currently have private health insurance cover in Australia. | You are a member of the Public Sector Superannuation Accumulation Plan (PSSap) | Your employer is contributing to the fund while you are overseas. | Neither you nor your family are members of the Commonwealth Service Superannuation (CSS) Scheme or the Public Sector Superannuation (PSS) scheme. | The PSSap was established by the Superannuation Act 2005 .