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

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

Relevant facts and circumstances: Your country of origin is Australia and you are an Australian citizen. You are moving to country X for two years on a working visa. You do not have an employment contract yet but will look for work when you arrive in country X. You intend to travel initially for several weeks and then stay in hotel accommodation until you find a rental property. You intend to live in fully furnished shared accommodation. Your assets in Australia include a motor vehicle, personal belongings and a bank account. Your employer in Australia is holding your position for 12 months while you are on leave without pay. You will then need to resign if you decide to continue living in country X for the remainder of your visa. You are single with no dependants. You have removed your name from the electoral roll and cancelled your health insurance. You are not a member of a Commonwealth Government Superannuation Fund.

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

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. | Detailed Reasoning - The resides (ordinary concepts) 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. The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), 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.' In considering the definition of 'reside', the court noted in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 that the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, it was stated that the widest meaning should be attributed to the word 'reside'. The question of whether an individual 'resides' in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant: (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. The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine each of these factors in the context of your 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 intend to live in country X for a period of two years on a working visa. | Detailed Reasoning - (ii) Nationality: Your country of origin is Australia and you are a citizen of Australia. | Detailed Reasoning - (iii) History of residence: You lived and worked in Australia prior to going to country X for a working holiday. | 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 are going to country X on a working holiday for two years • you plan to live in furnished rental accommodation • you will find employment when you arrive in country X after travelling for several weeks initially | Detailed Reasoning - (v) Frequency, regularity and duration of visits to Australia: During the time you are away from Australia you intend to return to Australia for a short visit. | Detailed Reasoning - (vi) Purpose of visits to or absences from Australia: The purpose of going to country X is for a working holiday. | Detailed Reasoning - Family: You are single with no dependants. | Detailed Reasoning - Business or economic: Your assets in Australia include a bank account, vehicle and personal belongings which are in storage. | Detailed Reasoning - (viii) Maintenance of Place of abode: You do not own any property in Australia. | Detailed Reasoning - Summary - resides test: You will be residing in Australia due to the following factors: • you have a temporary visa while in country X that only allows you to work there for two years • you will return to Australia at the end of your working holiday • you have left your vehicle and personal items in storage in Australia • you do not intend to live in country X permanently as you are on a working visa In consideration of the factors outlined above, even though you be physically absent from Australia during the years ended 30 June 2015 and 2016, you will be a resident of Australia for tax purposes according to the ordinary meaning of the word 'reside'. | Detailed Reasoning - Conclusion - 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. Based on the facts, we have determined that you are a resident of Australia for tax purposes. As you are a resident of Australia, according to section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997), your assessable income includes income gained from all sources, whether in or out of Australia. You may, however, be entitled to a foreign income tax offset for the foreign tax you paid overseas. Please refer to our website www.ato.gov.au for further information regarding foreign income tax offset.