Private ruling: Residency status
Published: August 2011
Ruling period: Year ending 30 June 2010
Date scheme commenced: 1 July 2009

Ruling: Q1: Are you an Australian resident for taxation purposes for the period between July 2009 to May 2010? | A1: No. | Q2: Is your income derived in country A assessable in Australia? | 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: Detailed Reasoning - Residency: 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 · 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. | Detailed Reasoning - The resides test: The Macquarie Dictionary defines reside as to dwell permanently or for a considerable time, have ones abode for a time. The Shorter Oxford English Dictionary defines reside as to dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place. The period of physical presence in Australia is not by itself decisive when determining whether an individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant in determining the residency status. No single factor is necessarily decisive. The following factors are useful when determining whether a person is residing in Australia: · intention or purpose of presence · family and/or employment ties · maintenance and location of assets · social and living arrangements. In your case, you lived and worked in country A for 10 months. The purpose in returning to Australia was for work. During your time in country A you stayed in rented accommodation. Although, your stay in country A was for only 10 months, your original intention was to live and work in country A for at least five years. Based on the factors listed above, we consider that you were not residing in Australia from July 2009 to May 2010. Consequently you do not satisfy the 'resides test' and therefore it is necessary to consider the other three tests. | Detailed Reasoning - The domicile test and permanent place of abode: 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, for example, through having obtained a migration visa. Although you were accepted as a resident in country A and your visa allowed you to live and work there, we do not consider that your domicile is in country A. A permanent place of abode does not have the meaning of everlasting or forever. It does not mean an abode in which a person intends to live for the rest of his or her life. Rather, it is used in the sense of being contrasted with a temporary or transitory place of abode outside Australia. The nature and quality of use which a taxpayer makes of a particular place of abode overseas is important ( F.C. of T. v. Applegate 79 ATC 4307; (1979) 9 ATR 899). The expression 'place of abode' refers to a person's residence, where one lives with one's family and sleeps 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. Taxation Ruling IT 2650 examines the factors to be taken into account in determining whether a person who leaves Australia temporarily to live overseas ceases to be an Australian resident during the absence. IT 2650 provides that the following factors are considered in determining a taxpayer's permanent place of abode: · the intended and actual length of stay in the overseas country · any intention to stay in the overseas country only temporarily and then either to return to Australia at some definite point in time or to travel to another country · the establishment of a home outside Australia · the abandonment of any residence or place of abode in Australia · the duration and continuity of presence in the overseas country · the durability of association with a particular place in Australia. Applying the facts of your situation to the above criteria, it is considered that your permanent place of abode was in country A from July 20XX to May 20XX. This is because you intended to live in country A for at least five years. You resigned from your Australian employment and had full time employment in country A. As such your financial ties are predominantly in country A. Although you have an investment property in Australia, you did not have a home here. Your rented accommodation in country A was your place of abode for that period and was not merely temporary or transitory. Rather, it was intended to be and was in fact your home for that period. Due to unforeseen circumstances you returned to Australia after ten months. Although you maintained an association with Australia with family and your rental property, your association with country A for the ten months is more significant than those in Australia due to your employment and living arrangements. These circumstances support the view that your permanent place of abode was outside Australia during this period. As a result, you would not be considered a resident of Australia for income tax purposes under the domicile test. | Detailed Reasoning - The 183-day test: You were not actually in Australia for 183 days in the 2009-10 financial year and are not considered to be a resident of Australia under this test. | Detailed Reasoning - The superannuation test: This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age). A person is a resident under this test if they are: · a member of the superannuation scheme established by deed under the Superannuation Act 1990 (SA 1990); or · an eligible employee for the purposes of the Superannuation Act 1976 ; or · the spouse, or a child under 16, of a person covered by either of the above. The SA 1990 established a scheme called the Public Sector Superannuation Scheme (PSS). To determine whether you are a resident under the Commonwealth superannuation fund test, it is necessary to determine whether you are a ' member ' of the PSS for the purposes of the SA 1990. A ' member ' of the superannuation scheme is defined in subsection 6(1) of the SA 1990 to include a person who is a ' permanent employee '. A ' permanent employee ' is defined by section 3 of that Act to mean: (a) a person who is an officer for the purposes of the Public Service Act 1922 (PSA 1922); and (b) any other person employed in a permanent capacity by the Commonwealth or by an approved authority. An ' officer ' is defined in subsection 7(1) of the PSA 1922 to mean: 'a person appointed or transferred to the Service, whether before or after the Commencement of this Act, but does not include an employee.' You do not meet any of the other requirements of the definition of 'member' in paragraphs 6(1)(b) to 6(1)(j) or subsections 6(2) to 6(8) of the SA 1990. During your time in country A you resigned from your Australian employment and were not employed by the Commonwealth. You are not regarded as an eligible employee. Consequently, you are not a resident under the superannuation test. | Summary: You do not satisfy any of the tests for Australian residency for the period from July 2009 to May 2010. Therefore you are not considered a resident of Australia for taxation purposes for this period. A person who is not a resident of Australia is a foreign resident. Australian tax liability Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident includes all the ordinary income derived directly or indirectly from all Australian sources during the income year. Salary and wages are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. The source of income derived from employment is generally considered to be the place where the duties or services are performed ( Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76). In determining your Australian tax liability on your foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 . Australia does not have a tax treaty with country A. As your employment income from country A is not sourced in Australia and you were a foreign resident for this period, you are not liable to Australian income tax on your employment income from country A. Where a person is an Australian resident for part of a financial year, the tax free threshold that applies is on a pro-rated basis. In your case, as you are a resident for three months of the 2009-10 financial year, your tax free threshold for that year is $1,500.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Relevant facts: In July 2009 you travelled to country A to take up a permanent employment position. | You previously resigned from your Australian employment. | You intended to stay for at least five years. You stayed in rented accommodation. | You ceased setting up a self managed superannuation fund as you were advised that as a non-resident you were not able to proceed with the setup. | You returned to Australia in May 20XX as you were not qualifying for any commission as promised and found that the base salary was too low. No other similar positions were available in country A. | You have a rental property in Australia. | You have no family in country A. | You previously lived with your parents in Australia. | You have since obtained employment in Australia. | You are not a current employee of the Public Service.