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Ruling

Subject: Residence

Questions and answers:

Are you a resident of Australia for tax purposes?

Yes

This ruling applies for the following period:

Year ending 30 June 2012

The scheme commenced on:

1 July 2011

Relevant facts and circumstances

You arrived in Australia in 2011

Your period of stay was covered by a working holiday visa.

You state the purpose of your visit is to work and live in Australia.

You have an employment contract until mid 2012 which will continue if your employer sponsors you.

You will leave Australia in mid 2012 for a month, and then you will return to Australia to pursue permanent residence.

You live at a permanent address in Australia with your partner and their family.

In your country of origin, you live with your parents.

Your assets in Australia include bank accounts.

Your assets in your home country include a bank account, credit card and line of credit.

You pay tax in your home country whilst you are working and living there.

In Australia, you are a member of a gym, your social circle includes your partner and your friends.

In your home country you are in a sporting team and a fitness club.

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 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.

Your period of stay in Australia will be approximately 300 days in the financial year ended 30 June 2012.

You have remained in the same location for the period of your stay, with an intended 1 month return trip to your country of origin.

The purpose of your visit in Australia is to work and live here. You will apply for permanent residence to Australia.

Your partner lives in Australia and you are residing with their family. You are employed in Australia on an employment contract which you will extend if your employer continues to sponsor you.

Your behaviour whilst in Australia exhibits the attributes of a place of residence rather than a transitory travel arrangement.

Accordingly, the Commissioner is satisfied that you reside in Australia under ordinary concepts and you will be treated as a resident under the resides test. There is no need to consider how the other tests apply to your circumstances.

Your residency status

As you meet the resides, 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 and will therefore include the income you receive from your overseas savings accounts.