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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your private ruling

Authorisation Number: 1012457574968

Ruling

Subject: Residency

Questions and answers

1. Are you an Australian resident for tax purposes?

Yes.

2. Are you a temporary resident for the purpose of the exempt foreign income provisions?

Yes.

3. Is your foreign income assessable in Australia?

No.

This ruling applies for the following period:

Year ending 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

Year ending 30 June 2016

The scheme commenced on:

1 July 2012.

Relevant facts and circumstances

You are a citizen of another country.

You arrived in Australia early in the relevant year.

You hold a temporary visa which allows you to stay until 20XX.

You intend to stay in Australia until 20XX.

You have a joint 12 month lease with your partner.

Neither you nor your partner are Australian citizens.

You have an Australian bank account.

You are working part time in Australia.

You have applied for an ABN.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 768-910

Social Security Act 1991 Section 7

Reasons for decision

Residency for tax purposes

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 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'.

Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia emphasises the quality and character of an individual's behaviour while in Australia assists in determining whether the individual resides here.

All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

In your case you moved to Australia in 20YY. You have a visa which allows you to stay until 20XX and you intend to stay until then. You have a 12 month lease in Australia with your partner who is living with you. You have a part time job here in Australia and you have applied for an ABN. You are living in Australia for a considerable time. Therefore, you are residing in Australia according to the ordinary meaning of the word and are a resident of Australia for tax purposes.

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. 

Temporary residency

To be eligible for the exemptions in section 768-910 of the Income Tax Assessment Act 1997(ITAA 1997), a person must be a "temporary resident" when the ordinary or statutory income is derived.

A temporary resident is a person who satisfies three tests (definition of "temporary resident", section 995-1(1)) of the ITAA 1997. The person:

Under subsection section 7(2) of the Social Security Act 1991 an Australian resident is a person who resides in Australia and is an Australian citizen.

In your case you have a temporary visa and neither you nor your spouse is an Australian resident according to the Social Security Act 1991.

Therefore, you satisfy the requirements of being a temporary resident as defined in subsection 995-1(1) of the ITAA 1997.

Foreign sourced income

From 1 July 2006, taxpayers considered to be temporary residents will not have to pay tax in Australia on most of their foreign income if they:

Section 768-910 of the ITAA 1997 provides that ordinary income derived from a foreign source (excluding employment related income and capital gains on shares and rights acquired under employee share schemes) and is exempt from income tax in Australia when derived by a temporary resident in Australia.

Therefore, as you are a resident of Australia for tax purposes and satisfy the requirements of being a temporary resident your foreign sourced income will be exempt from income tax in Australia under section 768-910 of the ITAA 1997.

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