Private ruling: residency
Published: February 2012
Ruling period: Year ended 30 June 2008 | Year ended 30 June 2009 | Year ended 30 June 2010
Date scheme commenced: 1 July 2007

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

Relevant facts and circumstances: You are an Australian citizen. You were born in Australia. You moved to a foreign country on a visa. When that visa expired you were granted a another visa. When that visa expired you were granted another visa. During this time, you received Australian government payments because you were a student enrolled in an Australian course on placement in the foreign country. Before leaving Australia you enrolled in a course. The course was run by an Australian company. The course was delivered over approximately 3 years. You were studying overseas because the nature of the course was such that a student had to demonstrate their ability to establish and enterprise in the field. Because of networks and experience working in the foreign country, it was deemed appropriate to allow your placement to be in the foreign country. Therefore you were a "student on placement" in the foreign country. You would travel back to Australia at various intervals to study and participate in lectures. You advised an Australian Government department that you were studying overseas. You came back to Australia on several occasions. You have stated that you had a permanent place to in the foreign country. You had some assets in the foreign country. Before leaving Australia you were studying for a qualification and as a result you were placed for short periods of time in different parts of Australia, staying with families, or renting with friends. While in Australia you resided with your parents. You had no income overseas. You survived on donations people gave to you. You received Australian Government payments for the course you undertook. While overseas your parents visited you once. You have numerous social and sporting connections with Australia. After your return to Australia, you did tax returns for several years which resulted in a large debt. You were only taxed on your Australian Government payments. You were taxed at non-resident rates. On your tax return you indicated you were not an Australian resident. You had social and sporting connections in the foreign country. You have never been an employee of the Commonwealth Government. You have no spouse and 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(3)


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, for the years in question, it cannot be said that you resided in Australia according to ordinary concepts. You were working and residing in the foreign country, apart from several short trips to Australia. Accordingly, it is considered that you were residing overseas while you were employed there 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 overseas, 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. 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 were living and working in the foreign country both before and during the period in question and had established a permanent place of abode there in several locations; even although you retained many links with Australia throughout the period. On balance and based on the above, the Commissioner is satisfied that you established a permanent place of abode outside of Australia during the period in question. Therefore, you are 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. As the Commissioner is satisfied that your usual place of abode was outside Australia and you did not intend to take up residence in Australia during this period, you were not a resident of Australia under the 183-day test. | 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 have never worked for the Commonwealth Government of Australia. As such, you were not eligible to contribute to the PSS or CSS superannuation schemes. Further, you have no spouse or children and 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 be an Australian resident for taxation purposes.

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