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

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: No

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 12 month working holiday subclass 417 visa. Your relative lives in Australia and you stayed at this address and used it as a base while you visited tourist destinations nearby. You worked during your time in Australia. It was your intention to work for different employers and to travel around Australia. You had to return to country X for family reasons. You left Australia after four months. Prior to leaving country X for Australia you lived with a relative and returned to the same address when you returned to country X. You were not employed by the Commonwealth of Australia whilst you were in Australia.

Relevant legislative provisions: 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. In your case, after consideration of all factors during your time in Australia, your behaviour and intention indicates that you were not residing in Australia under the resides test. The factors indicating that you did not reside in Australia according to the resides test are: • You were in Australia on a one-year working holiday visa which has certain restrictions regarding employment in Australia. • You intended to work for different employers while travelling around Australia. • You stayed at a relative's address but used this as a temporary base while you did some travelling. • Although you intended to be in Australia for one year, you were here for only four months. Based on the information you have provided, it is considered that your behaviour in Australia does not reflect a degree of continuity, routine or habit that is consistent with residing in Australia. As you do not meet the resides test, we will need to consider whether you meet any of the other three tests of residency. | Detailed Reasoning - The domicile test: Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia. | Detailed Reasoning - Domicile: Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases. Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence. Your domicile is country X as you are a citizen of country X and your country of origin is country X. You are therefore not a resident of Australia under the domicile test. | Detailed Reasoning - 183 day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the persons usual place of abode is outside Australia and the person does not intend to take up residence in Australia. In your situation you were present in Australia for only four months. Even if you did stay in Australia for your initial intention of 12 months, the Commissioner is satisfied that your usual place of abode is outside of Australia (in country X living at a relative's house) and you had no intention of taking up residence in Australia (you were on a temporary working holiday visa). Taxation Ruling 98/17 Income tax: residency status of individuals entering Australia provides a number of examples in relation to residency. Your situation has similarities to example 9 at paragraph 101: Janine Edgerton is a British national who has longed to spend twelve months 'down under'. After saving for years, she takes twelve months leave from her work and departs for Australia on her twenty-fourth birthday. Although she travels with considerable savings, her intention is to spend at least part of her time working. She has obtained a restricted working visa enabling her to work for no more than three months with one employer. Through a contact in Australia she is assured of work in Perth for the first three months. After that period, she decides to travel to the east coast via Adelaide. She spends a month in Adelaide where she works for two weeks and continues her journey to Melbourne. Once there, she meets some friends from back home. After working for a further three months, she decides to spend the balance of her time in Melbourne and uses her savings for living expenses. To keep costs down, she leases a house with two other friends. At the end of her twelve months in Australia, she returns to the United Kingdom. Although Janine obtains work, by travelling from place to place she has not established a pattern of habitual behaviour, even though she is physically present in Australia for twelve months and she co-leases a house. Janine's main purpose for being here is to have a holiday and she is merely supplementing her savings by working. Decision: non-resident. As you were not present in Australia for more than 183 days and your usual place of abode is outside of Australia and you did not intend to take up residence in Australia, you are not a resident of Australia under the 183 day test. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident of Australia if that person is eligible to contribute to the Public Service Scheme (PSS) of the Commonwealth Service Superannuation Scheme (CSS), or if that person is the spouse or child under 16 of such a person. Generally Commonwealth Government employees are eligible to contribute to the PSS or CSS. As you have never been an employee of the Commonwealth of Australia and therefore do not meet the above conditions you are not a resident under this test. | Detailed Reasoning - Conclusion: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997 , your assessable income includes income gained from sources in Australia.