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Ruling

Subject: Residency

Question 1:

Are you a resident of Australia for tax purposes?

Answer:

Yes

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commences on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Country X.

You are married.

You do not have any children.

You arrived in Australia in the recent year with your spouse under a student visa. This visa allows you to remain in Australia for two years.

The purpose of your visit to Australia is to accompany and support your spouse who is a student.

You have no plans to visit Country X in the near future.

You are employed in Australia.

You have no intention of living permanently in Australia.

Upon your arrival in Australia you temporarily stayed with your relatives.

Few weeks later you moved into a rented house with your spouse where you intend to live for the next two years.

In Country X you lived at your parents' house.

You own two blocks of land in Country X. You do not earn any income from these blocks of land.

You do not pay tax in Country X.

Since arriving in Australia you have been involved in organising a multicultural event in your community.

You have no sporting or social connections in Country X.

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 first two tests are examined in detail in Taxation Ruling 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 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'resides' within the definition of resident in subsection 6(1) of the Income Tax Assessment Act 1936.

When an individual has entered Australia with no intention of migrating or settling permanently, all the facts surrounding their stay must be examined when determining their residency status for taxation purposes. Broadly, the main issues are:

· Period of physical presence in Australia

· Behaviour while present in Australia

· Intention or purpose of presence

· Family and employment ties

· Maintenance and location of assets

· Social and living arrangements

The importance and weighting of each separate issue depends entirely on the facts of each case. There is no set formula for reaching a decision but rather the law is interpreted according to the precedent set in other cases and the statements of the individual in question.

You have come to Australia to accompany and support your spouse who is an international student. You have been working as a technician. You have also been involved in social activities within your community. You rent a place in Australia where you intend to live for the next two years. Although you were present in Australia for less than six months during the 2010-11 financial year, you are still considered to be residing in Australia.

Therefore, you are a resident of Australia under this test.

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.

Your residency status

As you are resident under normal concepts you are a resident of Australia for tax purposes.

As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.