Edited version of private ruling

Authorisation Number: 1011686024521

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Ruling

Subject: Residency - Foreign Resident

Residency - Working Holiday visa

Question:

Are you a resident of Australia for income tax purposes?

Answer: No.

This ruling applies for the following period:

Year ended 30 June 2010.

The scheme commenced on:

1 July 2009.

Relevant facts

You are a citizen of Country A.

You are single with no dependants.

You are over 16 years of age.

You live in Country A with your parents.

Your parents did not accompany you to Australia.

You arrived in Australia in the 2009-10 income year under a Working Holiday visa.

You departed Australia several months later, returning to Country A.

Your intention was to have an extended holiday while supplementing the cost of your holiday through short-term employment in Australia.

You worked for a number of employers while in Australia for several months.

Prior to the commencement of your job, during your job, and on the completion of your job, you took a holiday for several weeks.

You stayed in hostels designed for travellers and backpackers while in Australia.

In Australia, you had no assets except a bank account which you opened for your pay to be deposited.

In Country A, you do not own any other assets except a bank account.

You have relatives and friends in Country A.

You do not pay income tax in Country A.

You have not worked in Country A. You have just completed schooling in Country A.

You are not, or have never been a Commonwealth of Australia Government employee.

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

An Australian resident is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes 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 resides test.

· the domicile test.

· the 183 day test.

· 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 if they meet the conditions of one of the other three tests.

1. 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; have 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 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

The ruling also states that visiting Australia on a holiday would not constitute behaviour that is consistent with residing 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:

· intention or purpose of presence

· family and business/employment ties

· maintenance and location of assets, and

· social and living arrangements.

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

In your case, it is considered that you are not an Australian resident for tax purposes under the resides test for the following reasons:

· you came to Australia on a working holiday visa with the intention to travel while supplementing your holiday through short-term employment

· you travelled around Australia staying in hostels and backpacker style accommodation

· you never intended to reside in Australia permanently, evidenced by your return to Country A and your failure to apply for a permanent residency visa

· your family did not accompany you, and

· you have no assets in Australia other than a bank account.

Your behaviour in Australia does not reflect a degree of continuity, routine or habit that is consistent with residing here.

2. The domicile test

Generally, 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.

Domicile

Taxation Ruling IT 2650 states that a person's domicile is in their country of origin unless and until he or she acquires a different domicile of choice in another country, or until he or she acquires another domicile by operation of law. To obtain a different domicile of choice, a person must intend to make their home indefinitely in another country and also be able to prove this (usually by applying for a permanent residency visa).

A working holiday visa is not sufficient evidence of an intention to acquire a new domicile of choice.

In your case, you came to Australia on a working holiday visa and you returned to Country A after 11 ½ months. There is no evidence of you applying for a permanent residency visa. Therefore, you are not considered to be a resident of Australia for tax purposes under the domicile test.

3. The 183-day test

Where 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.

Although you were present in Australia for more than 183 days, your usual place of abode is outside of Australia. There was no evidence of your intent to remain in Australia permanently. You normally live with your parents in Country A and you were only in Australia on a working holiday. Therefore, you would not be considered a resident for tax purposes according to the 183 days test.

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

Your residency status

Based on the information you have provided, it is considered that you were not an Australian resident for income tax purposes under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936 for the 2009-10 income year.