Private ruling: Residency
Published: March 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: You arrived in Australia and started working shortly after. The purpose of your visit to Australia was to continue your research career. You were offered a one year employment contract with an option to extend. You were granted a 457 work visa. You departed Australia less than 4 months after arriving. You had to leave Australia and return overseas due to a family illness. During your time in Australia you lived in shared rental accommodation and contributed to the rental amount as you had a contract with the main tenant. You were a member of a number of sporting clubs. Assets in Australia include a bank account and superannuation. Assumption(s)

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5 | Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Residency: 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: • 'resides' test (ordinary concepts test) • domicile and permanent place of abode test; • 183 day test; and • Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (i) Physical presence in Australia (ii) Nationality (iii) History of residence and movements (iv) Habits and "mode of life" (v) Frequency, regularity and duration of visits to Australia (vi) Purpose of visits to or absences from Australia (vii) Family and business ties to different countries (viii) Maintenance of Place of abode. These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling TR 98/17 Income Tax: residency status of individuals who enter Australia, and Taxation Ruling IT 2650 Income Tax: residency status of individuals who temporarily live outside Australia. Taxation Ruling TR 98/17 states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. | Detailed Reasoning - (i) Physical presence in Australia: A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: "Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home." You were in Australia for less than four months. | Detailed Reasoning - (ii) Nationality: The nationality of a person is rarely a decisive factor in deciding whether or not a person resides in a location, however it is one factor that is considered along with all of the circumstances of each case. You indicated your country of origin is Country X and returned to Country X after your time spent in Australia. | Detailed Reasoning - (iii) History of residence: Prior to arriving in Australia you lived in Country Y for a number of years to complete your studies. You moved back to Country X when you left Australia and have been living there since. | Detailed Reasoning - (iv) Habits and "mode of life": The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You were employed by the same employer for the duration of your stay in Australia. You lived in share accommodation in a rental property with friends. You joined a number of sporting clubs. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You lived in Australia for nearly four months. You had intended to be in Australia for one year but had to return to Country X due to a family illness. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You came to Australia to work on a year contract. The contract had an option to extend. | Detailed Reasoning - (vii) Family and business ties to Australia and the overseas country or countries: Case law has established that the family or business ties that an individual retains with a country are relevant in determining whether an individual has remained or ceased to be a resident. | Detailed Reasoning - Family: Your partner and parents remained in Country X during your time living in Australia. | Detailed Reasoning - Business or economic: Assets in Australia • You have a bank account and superannuation. Assets overseas • You do not have any assets in Country X. | Detailed Reasoning - (viii) Maintenance of Place of abode: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. You lived in shared rental accommodation during your time in Australia and contributed to the rental amount as you had a contract with the main tenant. | Detailed Reasoning - Summary - resides test: You established a pattern of habitual behaviour consistent with residing in Australia due to the following factors: • You were employed with the same employer for the duration of time spent in Australia • You lived in rental accommodation and contributed to the rent with other tenants • You joined local sporting clubs • You had intended to be in Australia for at least one year, even longer but unforeseen circumstances meant you had to travel back to Country X • You do not have a house or assets overseas In consideration of the factors outlined above, you were residing in Australia according to the ordinary meaning of the word 'reside'. Therefore you are a resident of Australia under the resides test. | Detailed Reasoning - Conclusion - your residency status: As you have passed the resides we have determined that you are a resident of Australia for tax purposes. It is therefore not necessary to cover the remaining tests.