Private ruling: residency
Published: January 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Question and answer: | Are you a resident of Australia for taxation purposes? | No.

Relevant facts and circumstances: You were born in foreign country X. You have been a full time senior person with a company for several years. Your job requires you to work in different locations around the world for an average of three to four years per location until you retire when you will return to Australia. During these periods your spouse always accompanies you. In this case, due to restrictions and processing time for your visa, your spouse did not arrive in foreign country Y until a few months after you. They currently hold a visitor's visa due to the dependant pass restrictions and processing delays in country Y. They have been with you since a few months after you arrived in country Y, and has accompanied you on business assignments to country A and country B. During a posting to Australia you and your spouse became Australian citizens. Members of your family accompanied you. You also bought a house to live in here and lived there for some years after which time it was rented. This house was sold and you bought another house. Your intention was for family members to have somewhere to stay when they attend tertiary education. You return to Australia a few times a year to visit your family. Each vacation is a few weeks. Sometimes family members visit you while you are overseas. You have a bank account in Australia, but no other investments. You have no social and sporting connection with Australia. In the income year, you were in Australia for less than 183 days. You were posted to foreign country Y. You entered into a lease for a serviced apartment in the foreign country Y. You applied for and were granted permanent residency status in the foreign country Y. You and your spouse joined a local club as a family membership which provides Gym, Tennis, Pool and various social activities. Your intention is to reside overseas until you leave your employment or retire unless you are posted to Australia by your employer. You have a bank account in the foreign country Y. Your employer contributes to your superannuation. You have never been a Commonwealth Government of Australia employee. You are not a member of the PSS or the CSS or a spouse of such a person. You are more than 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 provide 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, you have been living and working (apart from business assignments outside country Y) in foreign country Y. You established a residence there in rented accommodation. You own a residence in Australia but this was purchased for your relatives to have somewhere to live while they attend tertiary education. Accordingly, you are not considered to be 'residing' in Australia and, therefore, were not a resident of Australia under the resides test during the period. | 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, you were an Australian citizen while living in foreign country Y, your domicile was Australia and remained unchanged. At a later date in the income year, as you were granted permanent residency status in foreign country Y, it is considered a new domicile of choice was granted. From the later date in the income year, your domicile was not in Australia so you were not a resident under the domicile test during the period. 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. Some of the factors which have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and which are used by the ATO in reaching a state of satisfaction as to a taxpayer's permanent place of abode include: · the intended and actual length of the taxpayer's stay in the overseas country · 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 · 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 · whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence · the duration and continuity of the taxpayer's presence in the overseas country and · 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. In your case, you: · intend residing overseas until you leave your employment or you retire · have entered into a lease for accommodation in foreign country Y · will not return to Australia to live unless your employer posts you here or after you retire · own a house in Australia, however, this was purchased for family members, who remain in Australia, to live in while they attend tertiary education · have no social ties in Australia, apart from your relatives attending tertiary education · have joined a club in foreign country Y · have mainly been accompanied by your spouse overseas. Based on the above, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia during the period. Therefore, you were not a resident under the domicile test during 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. In your case, during the period you were in Australia for less than 183 days. Accordingly, you were not present in Australia for more than 183 days. Therefore, you were not a resident of Australia under the 183-day test during the period. | 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 you are not a member of the PSS or CSS and are not a spouse of someone who is. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you are more than 16 years of age. Therefore, you are not a resident of Australia under the superannuation test. | Detailed Reasoning - Conclusion: 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 have been an Australian resident for taxation purposes during the period.

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