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: Your country of origin is Country X and you are a citizen of Country X. You came to Australia on a six month work placement. You were offered the placement before you left Country X. You arrived in Australia and started work several days later. You travelled for three weeks before returning to Country X. Prior to leaving Country X you were living with your parents. During your time working in Australia you lived in a furnished apartment which you shared with another person and rented it through your employer. You joined the gym and was a member of a sporting team and you took part in a sporting tournament. 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 lived and worked in Australia for seven 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. Your country of origin is Country X and you are a citizen of Country X. | Detailed Reasoning - (iii) History of residence: Prior to arriving in Australia you lived with your parents in Country X. You lived at the same address for the duration of your stay except for the last three weeks when you travelled before returning to Country X. | 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 came to Australia on a six month internship and gained work placement. You were offered the placement before you left Country X. You lived in rental accommodation at the same address for approximately six months. You joined several sporting clubs during your time living and working in Australia. | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: You lived in Australia for seven months and for most of the time you lived and worked at the one location. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: You came to Australia on a six month internship and gained work placement which you had secured prior to arriving in Australia. | 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: You came to Australia on your own. | 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. | 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 the same rental accommodation and contributed to the rent with another tenant • You joined several sporting clubs • You only travelled at the end of your employment placement for a period of three weeks prior to returning to Country X. 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.