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Ruling

Subject: Residency

Questions and answers:

1. Are you a resident for taxation purposes from the date you first arrived in Australia until the date your employment ceased?

No.

2. Are you a resident for taxation purposes for the relevant year?

No.

This ruling applies for the following period:

Year ended 30 June 2008

Year ended 30 June 2009

Year ended 30 June 2012

The scheme commenced on:

1 July 200X.

Relevant facts:

You are from overseas.

You came to Australia in 200X.

You came to Australia to work full time using a VISA (sponsored by your employer).

You rented a house and worked whilst here.

In 200Y your employment ended and you left Australia.

In 20ZZ you were re-employed by your employer and have been working using a VISA.

You live in an employee share house provided by your employer.

You have never had a car or any other assets in Australia. Most of your assets are located overseas.

You have a lot of friends in Australia as well as overseas.

You are not a member of any social organisations.

You have never had a driving licence or any private health insurance in Australia.

All of your family are located overseas and they have never been to Australia.

You often return overseas to visit friends and family whenever you are provided time off from work.

You are thinking about applying for permanent residency under employee sponsorship and bringing your family to Australia, but no steps have been taken to get residency at present.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 6-5.

Income Tax Assessment Act 1936 Subsection 6(1).

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:

· 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 will 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. 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 TR 98/17 provides guidelines in determining the residency status of individuals entering Australia. There are many factors to be considered in determining an individual's residency status.

Broadly, the main issues are:

o Behaviour while present in Australia,

o Intention or purpose of presence,

o Family and employment ties,

o Maintenance and location of assets,

o Social and living arrangements, and

o Period of physical presence in Australia.

TR 98/17 states the following:

The individual's intention, purpose or reason for being in Australia assists in determining whether an individual resides here. While individuals may have multiple reasons, there is usually a main purpose to their presence.

A settled purpose, such as employment or education, may support an intention to reside in Australia. However, the intention must be more than merely being a traveller or visitor who may supplement their savings by obtaining casual employment. Staying for a short period for work purposes is normally insufficient to establish that an individual is a resident.

The visa notation on the passport is an indicator of the individual's purpose for being in Australia. However, the criteria for determining residency for tax purposes are not the same as the criteria used by the Department of Immigration and Multicultural Affairs. The visa notation is not the only consideration in determining residency for tax purposes, as all the facts surrounding the individual's presence need to be taken into account.

In most cases, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as residing here. When determining whether individuals are residing here, if their visit is for six months or more, the Commissioner considers their behaviour while in Australia.

In your case, your time spent in Australia since the 200X financial year has been dependent on your employer's sponsorship. You have not made concerted efforts to establish any connections with Australia outside of your employment, and were forced to return to overseas when your employment ended in 200Y. You returned in 20ZZ when more work became available.

Your living arrangements are intended to allow you to be here ready for work, and you return home to your family and friends overseas as often as your work schedule allows you to.

You do have friends in Australia and an idea to take up residence here, but have not as yet made any efforts towards doing so. You do not have any assets or major personal affects here and none of your family have accompanied you to Australia.

Therefore, according to Section 6-5 of the ITAA 1997, you will not be considered a resident under the resides test.

The domicile test and permanent place of abode test

If a person is considered to have 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.

A person's domicile is established at birth when they acquire a domicile of origin, being the country of their father's permanent home. The domicile of origin is retained until such time as a domicile is established by choice or by operation of law in another country.

In order to show that a new domicile of choice in or outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. A domicile may be changed by operation of law for example where a person has obtained a migration visa.

In your case you were required to gain a visa to work in Australia. You gained this visa via sponsorship by your employer. As your visa is currently dependent on your employment status, and you have not yet made efforts to gain permanent residency, you have not demonstrated a change to your overseas domicile, by legal means or otherwise.

Place of abode

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night.  In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life.  An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

In your case you have a permanent place of abode in overseas with your family, and have failed to establish any thing other than a temporary living arrangement with your employer, created for convenience in order to work in Australia. We consider that you have not exhibited any behaviour or made any efforts towards changing your domicile to Australia as you have been living and working here on a temporary basis, failing to establish habitual behaviours.

The 183-day test

In your case, you were located in Australia for 183 days or more in a year of income. However your usual place of abode is outside of Australia, and although you have expressed an idea to pursue taking up residence in Australia you are yet to make any efforts towards doing so. As such you are not an Australian 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.

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Your residency status

As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident during your time working here.

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