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This edited version has been archived due to the length of time since original publication.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 written advice

Authorisation Number: 1012772221446

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods

Year ending 30 June 2014

The scheme commenced on

1 July 2013

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is also Australia.

Prior to your departure, you were living at home with your parents. Now that you are back, you are living with your parents again.

You arrived in the foreign country.

You departed the foreign country for Australia.

You were on a visa which did not allow permanent residency.

The purpose of your visit overseas was a working holiday. You also travelled around in other foreign countries on occasional weekends.

You did not come back to Australia for any period that you were in the foreign country.

Your foreign country employers did not provide accommodation for you. You lived friends at first and then in rented accommodation.

In the foreign country, you had a bank account and household effects; were given away when you left.

You do not own any property in Australia.

In Australia you have a bank account and a credit card. You also have household effects, which remained in your parents' house while you were in the foreign country.

In the foreign country you had several jobs. You did not have an employment contract. You did not have a job being held for in in Australia.

You do not have a partner or any children.

You have no social or sporting connections in Australia or in the foreign country.

You have never been a Commonwealth Government of Australia employee.

You remained on the Australian electoral roll while in the foreign country.

You have any investments in Australia or in the foreign country. Your Australian bank account earned a small amount of interest. Withholding tax was not deducted from it.

You put your Australian health cover on hold while you were in the foreign country.

You lodged a tax return in the foreign country and paid tax there.

When completing the Australian Immigration Outgoing passenger card you think you put working holiday as your reason for leaving Australia.

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) 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 first two tests are examined in detail in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia (IT 2650).

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 a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

Summary

As stated above it is important that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

There are several factors outlined above which indicate that you have not ceased to be a resident of Australia. Specifically, you:

Based on a consideration of all of the factors outlined above, your travel to the foreign country for a working holiday but you had no intention to stay there indefinitely. You remained a resident of Australia according to ordinary concepts as you maintained a continuity of association with Australia for the relevant period.

Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument.

The domicile and permanent place of abode 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.

Domicile

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country. The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

As you remained an Australian citizen while living in the foreign country, your domicile is Australia and remains unchanged.

Permanent 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 you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The taxpayers in Boer v. Federal Commissioner of Taxation [2012] AATA 574; 2012 ATC 10-269 (Boer's case) lived in employer provided accommodation overseas which was not indicative of them establishing or maintaining their 'own' accommodation. This aspect was a contributing factor to them being unable to establish that they had a 'permanent place of abode' overseas.

Your presence in the foreign country was dependent on a visa which did not grant you permanent residency. While there, you lived in rented accommodation and had temporary employment with several employers but no employment contract. It was not your intention to live and work in the foreign country indefinitely. This makes your presence in the foreign country temporary in nature.

You did not establish a permanent place of abode in the foreign country as your presence was temporary in nature. You cannot establish a permanent place of abode when your presence in a place is temporary.

The Commissioner is not satisfied you had a permanent place of abode outside of Australia.

Therefore, you remained a resident of Australia under the 'domicile and permanent place of abode' test of residency during the period of the ruling.

As you have passed the two of the tests of residency it is not necessary to consider the 183 day and superannuation tests.

Your residency status

As you are a resident of Australia under the resides (ordinary concepts) and the domicile and permanent place of abode tests of residency, outlined in subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997, you are considered to be an Australian resident for taxation purposes during the year of the ruling.

Assessable income

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) states that your assessable income includes income from ordinary concepts derived from all sources whether in or out of Australia.

The income you received from the foreign country for the income year of the ruling is ordinary income and so is assessable under section 6-5 of the ITAA 1997.

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