Edited version of your private ruling

Authorisation Number: 1012090615893

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

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.

Ruling

Subject: Residency for tax purposes

Questions and answers:

1. Were you a resident of Australia for tax purposes prior to the time that it was agreed with your employer that you would move to the Country X office on a permanent basis?

Yes.

2. Are you a resident of Australia for tax purposes from the time that it was agreed with your employer that you would move to the Country X office on a permanent basis?

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

Australia is your country of origin and you are a citizen of Australia.

You are single and have no children.

You have many friends and family in Australia, however, you have no formal social or sporting associations with Australia.

You live and work in Country X.

You are employed by an Australian entity.

You were transferred to your employer's Country X office for an initial period of several months.

During that time you agreed with your employer that you would move to the Country X office on a permanent basis.

After this time, your lease in Australia was not renewed; discussions around pay and conditions started; your Australian furniture was placed in storage; your lease in Country X was signed.

At no point did you return to work in the Australian office after the expiry of the temporary transfer agreement.

You lived in accommodation provided by your employer for several months before you established a private residence with a lease of 2 years.

You have purchased furniture and household goods and have utilities connected in your name.

You sub-leased your rental accommodation in Australia until that leased expired. You do not have any other residence in Australia.

You own an investment property which you have never lived in.

You have no plans to return to Australia at any definite point in time, as evidenced by your current residential lease and Country X employment contract.

You have made several trips back to Australia since leaving for holidays and work, amounting to around 2 weeks in total.

You have not worked in an Australian office since you first arrived in Country X.

You continued to pay Australian tax until you moved from your employer's Australian payroll to their Country X payroll. At that time, Australian tax deductions stopped.

You have been required to pay tax in Country X by their tax authorities since you first began working in Country X.

You are a member of professional organisations and fitness clubs in Country X.

You were previously employed by an Australian federal government organisation, however, that employment ended a number of years ago and you are no longer eligible contribute to the PSS superannuation fund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

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: 

o the resides test,

o the domicile test,

o the 183 day test, and

o 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.

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 have moved to Country X indefinitely to live and work. You have only returned to Australia for short holidays and work trips. You have purchased furniture and household goods in Country X, and have utilities connected in your name. You sub-leased the house you were renting while living in Australia, until the lease ended. You own a property in Australia however this is an investment property that you have never lived in.

As you are living and working in Country X and have not maintained a place of abode in Australia, you are not residing in Australia.

Therefore, you are not a resident of Australia under this test.

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:

· 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 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 live and work in Country X. You have a home in Country X which you have a two-year lease for. You have not maintained an abode in Australia.

Therefore, the Commissioner is satisfied that you have established a permanent place of abode outside of Australia.

Therefore, you are not a resident of Australia under this test.

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.

As you were not physically present in Australia for more than 183 days you are not a resident of Australia under this test.

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.

You were previously a Commonwealth government employee, however, you are no longer eligible to contribute to the PSS superannuation scheme and therefore are not a resident under this test.

Your residency status

As you do not meet any of the above tests from the time your temporary contract ended in September 2010, you are not a resident of Australia for tax purposes from this time.

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.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).