Private ruling: Residency for tax purposes
Published: June 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Questions and answers | Were you a resident of Australia for tax purposes prior to obtaining a one-year work visa in Country X (Period 1)? | Yes. | Are you a resident of Australia for tax purposes from the time you obtained a one-year work visa in Country X onwards (Period 2)? | No.

Relevant facts and circumstances: You are an Australian citizen. You lived in Australia with your relatives. You travelled to Country X for three months. You returned to Australia for several months. You then decided that you would reside in Country X and you applied for temporary residence in Country X. Your application was approved several months later. You returned to Country X on a one-year work visa. Your spouse also returned to Country X. You accepted an offer to extend your work contract. You obtained a temporary residence permit for Country X when your work contract expires. There is the possibility that you may stay in Country X beyond the expiration of the contract if you receive further funding for research. Most of your belongings are in your relatives' house in Australia. You and your spouse currently rent an apartment in Country X. You will be considered a Country X resident for tax purposes for the Country X tax year. You have bank accounts in both Australia and Country X. You pay tax in Country X on your salary and wages. Neither you, nor your spouse, have ever been Commonwealth government employees.

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

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test, · the domicile test, · the 183 day test, and · the superannuation 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 meet the conditions of one of the other three tests. | Detailed Reasoning - The resides test: 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'. Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. | Detailed Reasoning - Period 1 - time prior to obtaining a one-year work visa: You were residing in Australia prior to obtaining a Country X work permit for the following reasons: · Your trip to Country X was only temporary · You did not intend to reside in Country X · You did not have a job in Country X · You intended to continue residing in Australia Therefore, you meet the 'resides' test and are a resident for tax purposes for Period 1. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. | Detailed Reasoning - Period 2 - time after obtaining a one-year work visa: In your case, you decided to move to Country X to live there with your spouse. You have lived in Country X since this time, with your spouse, in an apartment you both rent. Your employment is also based in Country X. Therefore, for Period 2, you are not residing in Australia. Therefore, you are not a resident of Australia under this test. | 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 - Period 2 - time after obtaining a one-year work visa: Your domicile is Australia because you were born in Australia and you are an Australian citizen. In your case, the Commissioner is satisfied that for Period 2 you had a permanent place of abode outside of Australia. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The 183 day test: Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here. | Detailed Reasoning - Period 2 - time after obtaining a one-year work visa: Although you may have been physically present in Australia for more than 183 days in the income year, as discussed above, the Commissioner is satisfied that you have a permanent place of abode in Country X and it is your intention to reside in Country X. Therefore, you are not a resident of Australia under this test. | Detailed Reasoning - The superannuation test: A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. | Detailed Reasoning - Period 2 - time after obtaining a one-year work visa: As neither you, nor your spouse, have ever been Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes and are not a resident of Australia under this test. | Detailed Reasoning - Period 1 - time prior to obtaining a one-year work visa: As you meet the 'resides' test, you are a resident of Australia for tax purposes for Period 1. As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia. | Detailed Reasoning - Period 2 - time after obtaining a one-year work visa: As you do not meet any of the above tests, you are not a resident of Australia for tax purposes for Period 2. As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.

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