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Edited version of private ruling
Authorisation Number: 1011834140465
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Ruling
Subject: Residency for tax purposes
Question and answer:
Were you a resident of Australia for tax purposes, during the time you spent working in Australia?
Yes
This ruling applies for the following period:
Year ending 30 June 2007
The scheme commences on:
1 July 2006
Relevant facts and circumstances:
You are a citizen of Country X.
You are single with no children.
You arrived in Australia to work in early 200X on a two year work visa.
You worked in Australia for about three months.
You did not have an employment contract with your employer in Australia.
Your employment in Australia was arranged by an international company.
Your employer sponsored you to come and work in Australia.
Initially you intended to remain and work in Australia for at least a year. After one year you intended to assess your employment situation and to decide whether or not to remain in Australia for another year.
However you realised that opportunities in your field of employment were limited in Australia.
Therefore you decided to return to Country X after working only for about three months in Australia.
You resided at three different places in Australia.
In Country X you lived at your family home. This was your permanent residence in Country X.
You paid taxes in both the countries for your employment in Australia.
You had no social or sporting connections in Australia.
Reasons for decision
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:
1. the resides test,
2. the domicile test,
3. the 183 day test, and
4. 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.
The resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:
· whether the person is physically present in that country at some time during the year of income
· the history of the person's residence and movements
· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits
· if the person is outside the country for part of the relevant income year, the purpose of the absences
· the family and business ties which the person has with the particular country, and
· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.
Taxation Ruling TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'resides' within the definition of resident in subsection 6(1) of the ITAA 1936.
When an individual has entered Australia with no intention of migrating or settling permanently, all the facts surrounding their stay must be examined when determining their residency status for taxation purposes. Broadly, the main issues are:
· Period of physical presence in Australia
· Behaviour while present in Australia
· Intention or purpose of presence
· Family and employment ties
· Maintenance and location of assets
· Social and living arrangements
Paragraph 22 of TR 98/17 states that six months is a considerable time when deciding whether the individual's behaviour is consistent with residing here.
However as per paragraph 24 of TR 98/17 residency is a question of fact. Individuals who are in Australia for less than six months may establish they reside here. Conversely, individuals may establish that they do not reside here, even if they have been in Australia for a longer time.
You came to Australia to work with a two year work visa. Your initial intention was to stay for at least a year in Australia. However your intention changed when you realised that the employment and educational situation in Australia did not meet your professional requirements. Therefore you returned to Country X after four months.
You were single. You rented and shared apartments during your stay in Australia. You were working during most of your stay here. Although you were here for less than six months it is considered that you were residing in Australia.
Therefore, you were a resident of Australia under this test.
As you were a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency.
Your residency status
As you meet the 'resides test' you were a resident of Australia for tax purposes during your stay here in the 2006-07 financial year.
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