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Ruling

Subject: residency

Question and answer:

Were you a resident of Australia for taxation purposes for the period from the end of your working holiday in Australia until you returned to Australia to live?

No.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2009

Relevant facts

You were born and are a citizen of an overseas country.

You came to Australia on a working holiday.

You lived in rental accommodation throughout this period.

None of your family came to Australia with you.

You do not have any assets in Australia now or when you were here on the working holiday.

You have one bank account overseas.

You did not work for the Commonwealth government during your working holiday in Australia.

You returned to your home country at the end of your working holiday

You have returned to Australia to live permanently with your partner and child.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Subsection 995-1(1).

Reasons for decision  

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are an Australian resident for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source.

Subsection 995-1(1) of the ITAA 1997 defines an Australian resident as a person who is a resident of Australia for the purpose of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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 first two tests are examined in detail in Taxation Ruling IT 2650: Residency - Permanent Place of Abode outside Australia.

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 an Australian resident for tax purposes if they satisfy the conditions of one of the three other 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'.

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.

In your case you left Australia for a period of time, you returned to Australia. You were therefore not residing in Australia during the period you returned to your home country according to ordinary concepts and you are not a resident of Australia for tax purposes according to this test.

The domicile test

If a person has their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

There are essentially 3 types of domicile that an individual can have:


Basically, the domicile of origin of an individual is where the individual was born. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

In your case, you were born overseas and have lived there until you came to Australia for a working holiday a few years ago; therefore, your domicile of origin your country of birth.

As your domicile is your country of birth, you will not be a resident of Australia for taxation purposes under the domicile test.

The 183 day test

When 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 person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for more than 183 days during the period you returned to your country of birth and therefore you are not a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

In your case, neither you, nor your spouse, are current Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes.

Therefore, you are not a resident of Australia under this test.

Your residency status

As you do not meet any of the above tests of residency, you are a non-resident of Australia for taxation purposes for the period when you returned to your home country.

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