Private ruling: Tax rates
Date of advice: 23 October 2018
Published: January 2019
Ruling period: Year ended 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you an Australian resident for income tax purposes from January 2018? | A1: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5. | Income Tax Assessment Act 1997 section 995-1 | Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Rates Act 1986 section 3A

Reasons for decision: Summary: Residency The term Australian resident is defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) to mean a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936). Subsection 6(1) of the ITAA 1936 provides four tests to determine whether a person is a resident of Australia for income tax purposes. These tests are: ● the resides test; ● the domicile and permanent place of abode test; ● the 183 day test; and ● the Commonwealth superannuation fund test. The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests. In your case, as you now have a 457 visa and living and working city B, it is considered that you are an Australian resident under the ‘resides test’ from January 2018. An Australian resident is entitled to a tax free threshold. However, the tax-free threshold does not apply to working holiday makers. Working holiday maker has the meaning given by subsection 3A(1) of the Income Tax Rates Act 1986 and includes an individual who holds a subclass 417 (working holiday) visa is a working holiday maker. As you are a working holiday maker for part of the income year, the working holiday maker tax rates apply to income derived during that period. In your case you are only entitled to a pro-rata tax free threshold for the six month period you are an Australian resident and not holding a 417 visa. From January 2018, you are regarded as an Australian resident and will be taxed at the Australian resident tax rates with a part tax free threshold of $9,100. That is your income over $9,100 and less than $37,000 derived as an Australian resident is taxed at 19%. Rates of tax The rates of tax that apply to Australian residents and to working holiday makers are set out below. Residents The general rates of tax that apply to resident individuals for the 2017-18 income year are: | Detailed Reasoning - (marginal rate): 18,200 Nil 19 37,000 3,572 32.5 87,000 19,822 37 180,000 54,232 45 Medicare levy is payable at the rate of 2% of taxable income, subject to relief for low income earners. An additional levy, the Medicare levy surcharge, of 1%, 1.25% or 1.5% (depending on income for surcharge purposes) is imposed on higher income earners who do not have private patient hospital insurance cover. Working holiday maker rates The tax rate for working holiday maker rates is 15% for income which does not exceed $37,000. The rates of tax applicable to individuals who are working holiday makers for 2017-18 are: | Detailed Reasoning - ($): Nil Nil 15 37,000 5,550 32.5 87,000 21,800 37 180,000 56,210 45 Completing your tax return When completing your tax return, please ensure you include your income from both your payment summaries at income question 1. Please also ensure you complete Adjustments questions: ● A2 part-year tax free threshold and ● A4 working holiday maker net income.

Relevant facts: You are a Citizen of country A. | Your working holiday (subclass 417) visa was granted in January 2017. | Your payment summary shows income earned as a working holiday maker. | In January 2018 you were granted a temporary work (skilled) (subclass 457) visa. | You have worked with the same employer during the 2017-18 income year. | You plan to continue to work with the same employer and continue to work and live in city B.