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Ruling

Subject: Residency status

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts

You were born in country K and are a citizen of both country K and Australia.

You are single with no dependants.

You left Australia to take up a short term volunteer position in country T.

You arrived in country T on a temporary/tourist visa.

While in country T lived in hostel style accommodation.

After being admitted to a masters program, you moved from country T to country S to commence your studies.

You arrived in country S on a country S student visa.

During this period you were a fulltime student and lived in a shared rented apartment.

After a short period, you returned to Australia where you took up a short term employment position.

While in Australia you lived in rented accommodation.

After a short period you moved to country Y on a student exchange program.

You arrived in country Y on a country Y student visa.

While in country Y, you were a fulltime student and lived in rented accommodation.

After a short period you returned to the country S to resume your studies as a fulltime student.

You arrived in country S on a country S student visa and lived with a friend.

After a short period you left country S to take up an unpaid position for a social enterprise in country D.

You arrived in country D on a temporary/tourist visa and lived at a shared house.

After the completion of your assignment you returned to country S to live permanently.

The assets that you hold in Australia consist of the following;

· bank accounts;

· credit cards;

· a managed fund which you receive dividends from;

· a small share portfolio; and

· some furniture.

The assets that you hold overseas consist of a bank account in both country Y and country S.

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 for tax purposes 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 first two tests are examined in detail in Taxation Ruling It 2650: Residency - Permanent Place Of Abode Outside Australia.

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 satisfy the conditions of one of the other three tests.

The resides test

The first question to be asked in considering the residency status of a person is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to apply any of the other tests. The person is a resident of Australia for income tax purposes.

The ordinary meaning of the word 'reside', according to the Shorter Oxford English Dictionary, 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 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 quality and character of an individual's behaviour while in Australia assist 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:

· 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.

Although Tax Ruling 98/17 deals with individuals arriving in Australia the same principals can be applied when determining whether individuals leaving Australia are in fact residing overseas.

In your case, you left Australia to take up a short term volunteer position overseas. During the income year in question you spent time in a number of countries for the purpose of earning assessable income, providing volunteer work or being a fulltime student. While overseas you did not engage in any income earning activities. You have a network of friends in Australia and your primary assets that include bank accounts, credit cards, managed funds, shares etc. are located in Australia. During the income year in question you lived in a number accommodations ranging from hostels, shared rental apartments and living with friends.

Based on the above, your behaviour overseas does not reflect a degree of continuity, routine or habit that is consistent with residing overseas, particularly given that travelled to a number of countries for only short periods of time.

Accordingly, it is considered that you continued to reside in Australia and so continued to be an Australian resident for income tax purposes under the 'resides test'.

Although you are considered a resident of Australia for income tax purposes under the 'resides test', due to the nature of the facts that you have provided it is also worthwhile considering your residency status under the 'domicile test'.

The domicile test

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country.  From the information that you have provided, you have did not demonstrate an intention to become a citizen of any of the countries that you travelled to and were still a citizen of Australia. Therefore it is considered your Australian domicile remained unchanged.

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.

For the period in question your overseas movements consisted of the following;

· you left Australia to take up a volunteer position in country T;

· during the period in question you travelled to country T, country S, Australia, country Y, and country D before returning to country S;

· you only spent a short period of time in any one country;

· you lived a number of short term accommodations during this period.

As mentioned, the expression 'place of abode' refers to where a person lives and sleeps at night. Based on the above, it is not considered that you established a permanent place of abode outside of Australia for the period in question and therefore remained a resident of Australia under the 'domicile test'.

Accordingly, you are considered to a resident of Australia for income tax purposes in the 2010-11 income year under subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.

As you are a resident of Australia under both the 'resides test' and 'domicile test' there is no need to consider the remaining 2 tests.