Private ruling: Residency status
Date of advice: 15 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2015
Date scheme commenced: 11 June 2014

Ruling: Question and answer: | Were you a resident of Australia for income tax purposes during your stay in Australia? | No.

Relevant facts and circumstances: You were born in Country Z and are a citizen of Country Z. You have a spouse with no dependants. You and your spouse arrived in Australia on a working holiday visa. The purpose of your visit was to work, holiday and to develop professional relations that would enable you to move to permanently to Australia in the future. While in Australia you stayed in backpacker style accommodations, with the exception of employer provided accommodation for a short period. You did not have any assets overseas. Prior to arriving in Australia you and your spouse were living at your parent's home in Country Z. Your assets in Australia consisted of bank accounts and a motor vehicle. While in Australia you gained employment in a particular industry for a short period. You did not maintain any overseas professional, social or sporting connections while in Australia. You did not establish professional, social or sporting while in Australia. Neither you nor your spouse, have ever been an Australian Commonwealth Government employee. You departed Australia after a number of months. You were in Australia for less than 183 days. It is you and your spouse's intention to return to live in Australia permanently sometime in the future.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1). | Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision: Summary: Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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. The tests are: • the resides test, • the domicile (and permanent place of abode) test, • the 183 day test, and • the superannuation test. The first two tests are examined in detail in TAXATION RULING NO. IT 2650 INCOME TAX: Residency - Permanent Place Of Abode Outside Australia . The latter two tests are relatively self-explanatory as they require the individual to either be physical present in Australia for a period greater than 183 days or be eligible to contribute to the PSS or CSS superannuation schemes. An individual need only satisfy the conditions of one of the four tests to be deemed a resident of Australia for income tax purposes. | Detailed Reasoning - The resides test: The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936. In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) (Dempsey's case) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word: bears its ordinary English meaning, which 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". Based on the facts of your case, you were not residing in Australia according to the ordinary meaning of the word during your stay in Australia. Significant in reaching this conclusion is that during this period you were only physically in Australia for a short period. Further for the majority of your visit, you holidayed around Australia and stayed in backpacker style accommodation. This behaviour is not consistent with having a permanent, settled or usual abode. Therefore consistent with the principles established in Dempsey's case you are not a resident of Australia under this test. | Detailed Reasoning - The domicile test: Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's permanent place of abode is outside Australia. In your case, your domicile of origin is Country Z. It is acknowledged that it is your intention to return to Australia permanently at a later stage, however during the period that you were in Australia you did not apply for citizenship or permanent residency. Consequently your Country Z domicile remained unchanged during this period. As it has been established that you do not have an Australian domicile you were not a resident of Australia under the domicile test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You were not physical present in Australia for a period of greater than 183 days, therefore you were not a resident of Australia under this 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. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. You have never been a member of a CSS or PSS. Accordingly, you were not a resident under this test. | Detailed Reasoning - Your residency status: As you were not a resident of Australia under any of the tests of residency outlined under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you were not an Australian resident for taxation purposes during your stay in Australia.