Private ruling: Residency - Working Overseas
Published: April 2012
Ruling period: Year ended 30 June 2009 | Year ended 30 June 2010 | Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2008

Ruling: Question and answer | Are you a resident of Australia for tax purposes? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. Australia is your country of origin. You have a wife who is your only dependant. You took up a full-time employment contract in Country X in early 2008 which continued until early 2010. Your employment contract specified a minimum period of two years with the possibility of an extension to three years. You rented a house while you were working in Country X. Your wife did not live with you in Country X and stayed living in your jointly owned house property in Australia. Your wife did not wish to live with you in Country X, mainly because she was caring for a relative. While you were working in Country X your wife visited you on several occasions for a total of 42 weeks. You did not visit Australia during the period you were working in Country X. When you originally left for Country X you had not formed an intention to return to Australia at any specific point of time in the future. Your employment would dictate when and if you returned to Australia on a permanent basis. You returned to Australia in early 2010 and stayed until mid 2010. You did not undertake paid employment during this period. Whilst in Country X you engaged in discussions regarding future employment in Country Y and you decided to proceed with the offer of employment after you returned to Australia. You took up an employment contract in Country Y in mid 2010 which continued until late 2011. Your employment contract was initially for a five month period to late 2010. It was extended by four months and then by a further seven months to late 2011. You rented accommodation while you were working in Country Y. Your wife did not accompany you to Country Y, nor did she visit you while you were there. During the period of your employment in Country Y you visited your wife in Australia on two occasions. You returned to Australia in late 2011 and have been seeking employment both in Australia and overseas since that time. In Country X you worked under an 'employment pass' and in Country Y you worked under a 'business visa'. You have a hobby which you pursue in Australia. You also pursued this hobby in Country Y when you worked there. In Country X you worked most days and had little time for social or sporting activities. You do not have any overseas assets apart from a bank account in Country X. Your salary payments from the employment contracts in Country X and Country Y were paid into the Country X account. You transferred some funds from your employment to Australia to pay for the running and utility costs of your house. Your Australian assets include the house you own with your wife, a small share portfolio, a superannuation policy and bank accounts. Neither you, nor your wife has ever been employed by the Commonwealth of Australia.

Relevant legislative provisions: Income Tax Assessment Act 1936 - subsection 6(1), and | Income Tax Assessment Act 1997 - section 6-5

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 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 meet the conditions of one of the other three tests. | Detailed Reasoning - 1. The 'resides' test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 5 th edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; have 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'. | Detailed Reasoning - 2009, 2010 and 2011 financial years: In your case, you lived and worked in Country X for the entire 2009 financial year and for the first ten months of the 2010 financial year before returning to Australia. In the 2011 financial year you lived and worked in Country Y for the entire year, apart from the first week of that year. Therefore, as you were physically present overseas for the great majority of the 2009, 2010 and 2011 financial years you are not considered to have been residing in Australia according to ordinary concepts during those years. | Detailed Reasoning - 2012 financial year: In your case, you were living and working overseas before you returned to Australia in late 2011. As the 2012 financial year is still in progress it is not currently possible to apply the resides test to your individual circumstances. The other tests of residency must now be considered. | Detailed Reasoning - 2. 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. | Detailed Reasoning - Domicile: "Domicile" is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin, being the country of his or her father's permanent home. This rule is subject to some exceptions. For example, a child takes the domicile of his or her mother if the father is deceased or his identity is unknown. A person retains the domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law. In your case, you were born in Australia and are an Australian citizen. Therefore your domicile of origin is Australia. Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law. 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; for example, by obtaining a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice. In your case, it is not considered that you proved an intention to make your home indefinitely in either Country X or Country Y because: · you worked and lived in both countries with the aid of working visas (or equivalents); · you are no longer working or living in either country; and · your wife remained in Australia and did not live with you in either country. Based on these facts, the Commissioner is satisfied that you have maintained your Australian domicile. | Detailed Reasoning - 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 person could be expected to have some type of durability of association or ties with a particular place that was considered to be their place of abode. 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. A person's permanent place of abode cannot be ascertained by any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. In regard to case law, one of the leading cases on whether a permanent place of abode is outside Australia is Federal Commissioner of Taxation v Applegate 79 ATC 4307; (1979) 9 ATR 899. In this case the taxpayer, whose domicile was in Australia, was sent to the New Hebrides by his employer for an indefinite period, however he returned to Australia after two years. The taxpayer's wife accompanied him to the New Hebrides and he had no assets in Australia apart from a life policy. He was deemed to be a non-resident by the court. In a more recent case, Iyengar and Commissioner of Taxation [2011] AATA 856, a taxpayer whose domicile was in Australia worked in Dubai under an employment contract for a period of approximately two and a half years. The taxpayer and his wife jointly owned assets in Australia which included a house property, household items, furnishings and two vehicles. The taxpayer's wife and children remained living in the Australian house property and his wife made three short visits to Dubai while he worked there. The taxpayer stayed in employer provided accommodation in Dubai and transferred funds from his salary to Australia to pay off his home loan. There was nothing to show that he had an enduring relationship with, or ties to, Dubai and he was deemed to be an Australian resident for taxation purposes. In your case, you lived and worked in Country X for most of the 2009 and 2010 financial years, lived and worked in Country Y for most of the 2011 financial year, rented your own accommodation in both countries and operated a bank account in Country X. However, your association with Australia is considered to be more significant because: · your wife remained in Australia and did not live with you while you worked in Country X; · although your wife visited you in Country X on several occasions for a total of 42 weeks, this was less than half the time you lived in that country and she is considered to have been living in Australia for the period you worked there; · your wife remained in Australia and did not live with you while you worked in Country Y; · you jointly own a house property with your wife in Australia; · you have other Australian assets comprising of a small share portfolio, a superannuation policy and bank accounts; · while you worked overseas you transferred funds from your salary to Australia to pay for the running and utility costs of your house; and · you returned to Australia in late 2011 and have been seeking employment since that time. Based on these facts, the Commissioner is satisfied that you did not establish a permanent place of abode outside Australia for the 2009, 2010 and 2011 financial years, and have not established a permanent place of abode outside Australia for the 2012 financial year. Therefore, you are an Australian resident for taxation purposes for the 2009, 2010, 2011 and 2012 financial years. | Detailed Reasoning - 3. The 183-day test: An individual may be considered to be an Australian resident for income tax purposes under this test if that person is present in Australia continuously or intermittently for more than half the income year. In your case, this test does not need to be considered as you have already been deemed to be an Australian resident for income tax purposes under the domicile test of residency. | Detailed Reasoning - 4. The superannuation test: An individual is considered to be an Australian resident for income tax purposes 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. In your case, this test does not need to be considered as you have already been deemed to be an Australian resident for income tax purposes under the domicile test of residency. | Detailed Reasoning - Your residency status: As you are deemed to be an Australian resident for income tax purposes under the domicile test of residency as outlined in subsection 6(1) of the ITAA 1936, you are an Australian resident for taxation purposes for the 2008-09, 2009-10, 2010-11 and 2011-12 income years.

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