Private ruling: Residency for tax purposes
Published: August 2011
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014 | Year ending 30 June 2015
Date scheme commenced: 1 July 2011

Ruling: Question and answer: | Are you a resident of Australia while you are living and working in Country X? | No.

Relevant facts and circumstances: You are an Australian citizen and Australia is your country of origin. You recently moved to Country X. You are working in Country X. Your contract is for 12 months. There is an option to re-contract for a further 12 months each year up to a total of five years, at the discretion of the contracting organisation. It is your intention to seek to re-contract after your first year. You intend to be in Country X for a period of two or three years. While in Country X you will be renting an apartment. You have a bank account in Country X. You pay tax on your salary in Country X. Prior to leaving Australia, you were living at home with your parents. You do not have any specific plan to return to Australia while working in Country X, but you may return for one to two weeks for a holiday after approximately 18 months in Country X. For the last three years you had casual work and your employer has given you twelve months' leave and can go back to this job if your stay in Country X ends after one year. You are maintaining your existing bank accounts in Australia. You are single. You have never been a Commonwealth government employee.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 Income Tax Assessment Act 1936 Subsection 6(1)

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, 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. 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 - 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: · whether the person is physically present in that country at some time during the year of income · the history of the person's residence and movements · if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits · if the person is outside the country for part of the relevant income year, the purpose of the absences · the family and business ties which the person has with the particular country, and · whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In your case you are not residing in Australia for the following reasons: · you have moved to Country X to work and live · you will be in Country X and only returning to Australia briefly for a holiday · you intend to remain in Country X for two to three years · you are renting an apartment in Country X · you do not have your own place of abode in Australia Therefore, you are not a resident of Australia under this test. | 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 a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is Australia because you were born in Australia and you are an Australian citizen. Permanent place of abode It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case. The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression." A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller. Paragraph 23 of IT 2650 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: (g) the intended and actual length of the taxpayer's stay in the overseas country; (h) 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; (i) 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; (j) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (k) the duration and continuity of the taxpayer's presence in the overseas country; and (l) 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 relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states: The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant. In your case you have moved to Country X for at least 12 months and intend to apply to have your work contract extended and remain in Country X for at least 2 years. You have established a home in Country X and you only intend to return to Australia briefly for a holiday. Therefore the Commissioner is satisfied that you have a permanent place of abode outside of Australia. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here. In your case you were not physically present in Australia for more than 183 days. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds: · established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or · established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or · the spouse or child under 16 of a person covered by either of the above funds. As you have never been a Commonwealth employee, you are not eligible to contribute to the above funds and therefore you are not a resident of Australia under this test. | Detailed Reasoning - Your residency status: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.

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