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

Ruling: Questions and answers | 1. Are you a resident of Australia for tax purposes? | Yes. | 2. Are you entitled to claim a foreign income tax offset? | Yes.

Relevant facts and circumstances: You are a citizen of Australia. You were born in Country X. You gave up your Country X citizenship when you became a citizen of Australia. You and your family moved from Country X to Australia. You own a house in Australia which you live in with your family. You work in Country X. When you are in Country X you stay in hotel accommodation supplied by your employer. Your family do not accompany you when you go to work in Country X.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1997 Division 770 | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Detailed Reasoning - Residency for tax purposes: 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. | 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'. You are residing in Australia as you live in Australia with your family in a home that is owned by you. Although you spend a considerable amount of time in Country X, you only go there to work, and you stay in a hotel. You do not have a home in Country X. Because you are residing in Australia, you are a resident of Australia according to the "resides 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. In your case, your domicile is Australia, as you are a citizen of Australia and you have set up a permanent home in Australia. Therefore, you are a resident of Australia according to the "domicile test". | Detailed Reasoning - Your residency status: As you meet the "resides test" and the "domicile test" you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia. | Detailed Reasoning - Foreign income tax offset: The foreign income tax offset rules are designed to protect a taxpayer from the double taxation that may arise where the taxpayer pays foreign tax on income that is also taxable in Australia. This is achieved by allowing a taxpayer to claim a tax offset where they have paid foreign tax on amounts included in their assessable income. Under Division 770 of the ITAA 1997, a foreign income tax offset is available where: · the taxpayer is a resident of Australia, and · the taxpayer has earned foreign income, and · the taxpayer has paid tax on that foreign income, and · the taxpayer is liable for tax in Australia on the foreign income. In your case: · you are a resident of Australia · the salary your earn in Country X is foreign income · you pay tax on your salary in Country X, and · your salary is assessable in Australia. Therefore, you meet all the requirements of Division 770 of the ITAA 1997, and you are entitled to claim a foreign income tax offset. You can claim the foreign income tax offset when you lodge your income tax return. Detailed instructions on how to calculate the foreign income tax offset and how to complete your income tax return are available from our website www.ato.gov.au.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.