Private ruling: Residency
Published: October 2014
Ruling period: Year ending 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes | Q2: Are you a temporary resident of Australia for tax purposes? | A2: Yes

Relevant facts and circumstances: You are a resident of Country A. You were granted a temporary work visa (457) to Australia. You arrived in Australia in the year ended 30 June 20XX. Prior to arriving in Australia you lived in Country A with your family The purpose of obtaining the Visa is for you to work in Australia on a short term engagement to provide advice and knowledge to your employer. You expect to be in Australia until the end of 20YY. Your spouse is living with you in Australia. You children, grandchildren and siblings do not plan to join you in Australia. You have properties and other assets in Country A. You have social connections in Country A You do not own any assets in Australia. In Australia you live in an apartment rented by your employer. The initial lease term was one year, and subject to renewal. You will ultimately be responsible for the rental expenses and other costs in relation to your accommodation. You will travel to other cities in Australia, two other countries for work purposes. You do not have any social connections in Australia. You will return to Country A every Christmas and New Year from a specific month to a week in January You will return to Country A for approximately two months every year.

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) | Income Tax Assessment Act 1997 Subsection 768-910

Reasons for decision: Summary: 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. • 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: • Physical presence in Australia • Nationality • History of residence and movements • Habits and "mode of life" • Frequency, regularity and duration of visits to Australia • Purpose of visits to or absences from Australia • Family and business ties to different countries • 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 - 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 arrived in Australia under a 457 work visa which allows you to live and work in Australia. | Detailed Reasoning - 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 are a national and resident of Country A. | Detailed Reasoning - History of residence: Prior to arriving in Australia you lived in Country A with your family. You will return to Country A at the end of 20YY. | Detailed Reasoning - 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. Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia. (TR 98/17, paragraph 43) You were granted a temporary work visa (457) to Australia on a date. You arrived in Australia in the financial year ended 20XX Prior to arriving in Australia you lived in Country A with your family The purpose of obtaining the Visa is for you to work in Australia on a short term engagement to provide advice and knowledge to your employer. You expect to be in Australia until the end of 20YY. Your spouse is living with you in Australia. You have properties and other assets in Country A. You have social connections in Country A You do not own any assets in Australia. In Australia you live in an apartment rented by your employer. The initial lease term was one year, and subject to renewal. You will ultimately be responsible for the rental expenses and other costs in relation to your accommodation. You will travel to other cities in Australia, two other countries for work purposes. You do not have any social connections in Australia. | Detailed Reasoning - Frequency, regularity and duration of visits to Australia: Where a person is living in a country and visits another, the frequency and regularity of their visits is an important factor to be considered in determining whether or not they are resident in that other country. In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 the Court noted that the mere fact that visits to a country are of short duration does not of itself exclude residence in that country. The taxpayer in Case 5/2013 [2013] AAA 394; 2013 ATC 1-054 (Case 5/2013) was considered a resident of Australia despite only being present in Australia for five of the 52 weeks under consideration, as the Tribunal considered that his visits indicated that he retained a 'continuity of association' with Australia. Simarlily: • the taxpayer in Sneddon's case was considered to reside in Australia notwithstanding that he had only been present in Australia in the 2008-09 income year for separate periods of only two weeks, three weeks and two and half weeks; and • the taxpayer in Iyengar's case had only been present in Australia for two separate periods of two weeks and ten days during a period of two years and seven months. You arrived in Australia in the year ended 30 June 20XX. You will travel to other cities in Australia, two other countries for work purposes. You will return to Country A for approximately two months every year. | Detailed Reasoning - Purpose of visits to or absences from Australia: The purpose of your visit to Australia is stay untill the end of 20YY to provide advice and knowledge to your employer. | Detailed Reasoning - 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. The Macquarie Dictionary defines 'family' as: • parents and their children, whether dwelling together or not. • one's children collectively. • any group of persons closely related by blood, as parents, children, uncles, aunts, and cousins. | Detailed Reasoning - Family: Your spouse is living with you in Australia. You children, grandchildren and siblings do not plan to join you in Australia. | Detailed Reasoning - Business or economic: You work in Australia on a short term engagement to provide advice and knowledge to your employer. Assets in Australia You do not own any assets in Australia In Australia you live in an apartment rented by your employer. The initial lease term was one year, and subject to renewal. You will ultimately be responsible for the rental expenses and other costs in relation to your accommodation. Assets overseas You have properties and other assets in Country A. | Detailed Reasoning - Maintenance of Place of abode in Australia: The maintenance of a place of abode in Australia is an important factor when considering the residency status of a taxpayer. In Australia you live in an apartment rented by your employer. The initial lease term was one year, and subject to renewal. You will ultimately be responsible for the rental expenses and other costs in relation to your accommodation | Detailed Reasoning - Summary - resides test: You established a pattern of habitual behaviour consistent with residing in Australia due to the following factors: • You are employed with the same employer for the duration of time spent in Australia. • You live in a rented apartment which is for your sole purpose. • Your spouse has travelled with you. In consideration of the factors outlined above, you have business ties in Australia through your employment. Furthermore, your physical presence in Australia is not considered transitory whilst you are working in Australia under the 457 work visa. Therefore you are residing in Australia according to the ordinary meaning of the word 'reside'.and are a resident of Australia for tax purpose under the resides test. | Detailed Reasoning - Your residency status: As you have passed the resides test we have determined that you are a resident of Australia for tax purposes. It is therefore not necessary to cover the remaining tests under the domestic tax law. | Detailed Reasoning - Temporary Residency: A temporary resident is defined in subsection 995-1(1) of the ITAA 1997 as an individual if they: • hold a temporary visa granted under the Migration Act 1958 . • are not an Australian resident within the meaning of the Social Security Act 1991 , and • do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991. The Social Security Act 1991 defines an Australian resident as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa, or a protected special category visa holder. You are not an Australian resident within the meaning of the Social Security Act 1991 as you are not an Australian citizen, the holder of a permanent visa, or a protected special category visa holder. You are a temporary resident because: • you hold a temporary visa granted under the Migration Act 1958 • you are not an Australian resident within the meaning of the Social Security Act 1991, and • you do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991. You will remain a temporary resident when you periodically return to Country A while you work in Australia. | Detailed Reasoning - Foreign source income: From 1 July 2006, those taxpayers considered to be temporary residents do not have to pay tax in Australia on most of their foreign income if they: • are an individual who is an Australian resident for tax purposes, and • satisfy the requirements of being a temporary resident. Section 768-910 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that ordinary income derived from a foreign source (excluding employment related income and capital gains on shares and rights acquired under employee share schemes) is exempt from income tax in Australia when derived by a temporary resident in Australia.