Private ruling: Residency
Published: May 2012
Ruling period: Year ended 30 June 2010 | Year ended 30 June 2011
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes. | Q2: Is your foreign sourced income assessable in Australia? | A2: Yes

Relevant facts and circumstances: You are an Australian citizen. You were born in Australia. You work in the security industry in foreign country X. You are an independent contractor employed by a foreign company. Their head office is based in foreign country Y. As an independent contractor you sign a new contract outlining terms and conditions periodically. However, you have been working for the same company thus far. You are issued with a six month multiple entry visa each time, in either foreign country X or Y. These visas keep rolling into each other as it is your employer's responsibility to renew them. All pay is paid and transferred into your Australian bank account by the company's finance manager. You do not get paid whilst in Australia; only when abroad. You first left Australia several years ago. You have no immediate or long-term plans to return to Australia. Due to the uncertainty of the environment in which you work, you are uncertain about your future plans but envisage continuing with similar work (and therefore similar living circumstances) for the foreseeable future. You have no current plans to return to Australia, apart from vacations, whilst still working in your current industry. Any leisure time spent outside your countries of employment is spent in Australia. You own no overseas assets or bank accounts. You own two properties in Australia. One is occupied by a relative but you receive no rent for this property. The second property is occupied by you when you visit Australia. It remains vacant when you are abroad and has not been rented out. The only other assets you have in Australia are bank accounts with an Australian bank. You have no spouse or children. None of your family members have accompanied you overseas. You have no social or sporting connections in Australia, other than extended family. You have no sporting connections in foreign country X or Y. Your only social connections are work colleagues. You were in the Australia Defence Forces before you went overseas. Superannuation was settled on discharge. You no longer pay into this fund and do not hold a position within the government. In the first income year you spent more than 183 days working abroad. In the second income year you spent more than 183 days working abroad. In both income years, time spent in Australia by you was entirely leisure time; you did not work during these visits to Australia. You work full-time whilst abroad. No annual leave or extended breaks are taken. While in foreign country X you live on a military base. All costs associated with this are paid by your employer. You do not have or pay into a superannuation fund in Australia. In the second income year you took out private health insurance for the sole purpose of minimising tax payable. You are uncertain whether you are assessable or not so you lodged tax returns anyway with a view to applying for a ruling to resolve the issue. You are over 16 years of age. Relevant legislation provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) Income Tax Assessment Act 1936 Subsection 6(1) Income Tax Assessment Act 1997 Subsection 6-5(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 provides 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, it cannot be said that you reside in Australia according to ordinary concepts. You live in foreign country X and make only short visits to Australia. Accordingly, it is considered that you are residing in foreign country X and, therefore, are not a resident of Australia under the resides test. | 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, as you are still an Australian citizen while living in Country X, your domicile is Australia and remains unchanged. 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. In your case, you have lived on a military base in foreign country X in accommodation supplied by your employer. You retain a house in Australia which to live in on your periodic visits to Australia. It is left vacant and has not been rented while you are overseas. The accommodation you have on a military base in foreign country X is temporary and transient in nature as it will only exist as long as a particular army and you remain employed there. The Commissioner is not satisfied that you have established a permanent place of abode outside of Australia. Therefore, you are a resident under the domicile test. As you have passed one of the tests of residency, it is not necessary to consider the 183-day and superannuation tests. | Detailed Reasoning - Conclusion: As you are a resident of Australia under the domicile test, you are an Australian resident for taxation purposes as defined in subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936. Assessable income of a resident Subsection 6-5(1) of the ITAA 1997 states that residents are assessable on ordinary income derived from all sources whether inside or outside Australia. The income you earn in foreign country X in your chosen industry is ordinary income under this subsection and is, therefore, assessable in Australia.

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