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

Ruling: Q1: Were you a resident of Australia for taxation purposes for the period you were on a working holiday? | A1: Yes

Relevant facts and circumstances: You were born in Australia and you are a citizen of Australia. You were away from Australia for less than 300 days. You went overseas on a working holiday and your visa was for a short term. You returned to Australia prior to your visa expiring. You intended on returning to Australia at the end of your working holiday. You rented a room in a private residence overseas for the duration of your stay. You took most of your belongings such as clothes, laptop camera etc with you. Your parent stored some of your personal possessions while you were oversas. You ceased your rental agreement on a property in Australia prior to going overseas. None of your family members accompanied you overseas. You do not have a spouse. The commonwealth super test does not apply to you.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(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; • 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. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | 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 IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia . It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. You went overseas on a working holiday. You are a citizen of Australia and have not taken up citizenship of any other country. You entered the overseas country on a working holiday visa which was for short term. You rented a room in a private residence for the duration of your stay overseas. You intended on returning to Australia at the end of your working holiday. You stored some of your personal belongings at your parents. In your case, although you were physically absent from Australia, there are various factors that indicate that you did not cease to be a resident of Australia. These are primarily: • you are a citizen of Australia • you were born in Australia • you intended to return to Australia at the end of your working holiday • You rented a room in a private residence for the duration of your stay overseas Based on the above, you retained a continuity of association with Australia while you were overseas and were residing in Australia according to the ordinary meaning of the word. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument. | Detailed Reasoning - The domicile test: If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. Your domicile of origin is Australia. You have not changed your domicile as you are not a permanent resident or citizen of another country and you have not made any effort to live permanently in another country. 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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. The Commissioner is not satisfied that you have set up a permanent place of abode outside Australia for the following reasons: • You intended to return to Australia at the end of your working holiday • Your working holiday visa was for a short term. • You were only overseas for less than 300 days • You rented a room in a private residence for the duration of your stay overseas You were a resident under this test. | Detailed Reasoning - Residency Status: You were a resident of Australia for taxation purposes for the period you were overseas.