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Ruling

Subject: Residency

Question and answer:

Are you an Australian resident for tax purposes for the period you are in Australia?

Yes.

Are you a temporary resident for tax purposes for the period you are in Australia?

Yes.

This ruling applies for the following period:

Year ended 30 June 2013

The scheme commenced on:

1 July 2012

Relevant facts and circumstances

You are a citizen of a foreign country and your country of origin is a foreign country.

You are a foreign student who has accepted an employment with a company.

You arrived in Australia on a date A.

You entered Australia on a working holiday visa. This visa allows you to:

· enter Australia within 12 months of grant

· stay up to 12 months

· leave and re-enter Australia any number of times while the visa is valid

· work in Australia for up to six months with each employer

· study for up to four months.

You have been engaged by the company for a specified term to do employee type duties in order to gain work experience. You period of engagement is from a date B to date C.

You plan to leave Australia on date D.

You have not left Australia since first arriving.

You will be working at one address for the entire period and living in the one city and working full time.

Under your engagement you have been granted a few weeks leave. You expect to stay in Australia for the entire period. However, there is a small chance you may leave Australia during this period.

Your employer will either pay you an allowance and withhold tax under the PAYG system or reimburse you for living expenses and tax these benefits under the FBT Act.

At the end of your engagement you will be leaving Australia to return to the foreign country complete your studies.

You have a permanent place to live in Australia in a rental property.

Your only asset in Australia is a bank account.

In the foreign country, you have a permanent place to live in a rented unit. You will be returning to it on your return to the foreign country.

You have a bank account in the foreign country.

You do not have a spouse or dependant children.

Your family has not accompanied you to Australia.

You have no social or sporting connections in Australia.

Your only social or sporting connection in the foreign country is a membership.

You have never been an employee of the Commonwealth of Australia Government.

You are more than 16 years of age.

Relevant legislation provisions:

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

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency for taxation purposes

The Australian Taxation Office (ATO) view on the residency status of individuals entering Australia is contained in Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia which notes that it is not necessary for an individual to be an Australian citizen or hold a permanent residents visa to be a resident of Australia for taxation purposes.

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) and 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

· the superannuation test.

If one of these tests is met, an individual will be a resident of Australia for taxation purposes.

Taxation Ruling TR 98/17 states that the resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'.

The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

TR 98/17 notes that the ordinary meaning of the word 'reside' is wide enough to encompass an individual who migrates permanently to Australia or one who is simply dwelling in Australia for a considerable time.

In most cases, the Commissioner accepts that a visit to Australia of less than six months is not sufficient time to be regarded as residing here. However, when an individual is in Australia for six months or more, the Commissioner takes into consideration the individual's behaviour over the time spent in Australia to determine if there is any degree of continuity, routine or habit in the individual's behaviour that is consistent with residing here.

In assessing an individual's behaviour while in Australia, the Commissioner considers a number of factors, including:

· intention or purpose of presence - TR 98/17 notes that having a settled purpose supports an intention to reside in Australia

· employment - TR 98/17 notes that an individual who is dwelling here for a considerable time while on an employment contract would be residing here, whereas a mere visitor on holiday would not

· maintenance and location of assets - TR 98/17 notes that having assets in Australia, such as bank accounts, adds weight to concluding an individual's behaviour is consistent with residing here

· social and living arrangements - TR 98/17 specifies that social and living arrangements are the way an individual interacts with their surroundings during their stay in Australia. Joining a professional organisation and committing to a residential lease are two examples of social and living arrangements that may indicate an individual is residing here.

In your case, the Commissioner considers that your behaviour in Australia reflects a degree of continuity, routine and habit that is consistent with residing here as you are in Australia with a settled purpose, have a full time job and are living in a rental property. Accordingly, you are considered to be an Australian resident for taxation purposes for the period you are in Australia under the resides test.

As you have satisfied one of the four residency tests, it is not necessary to consider the domicile, 183-day and superannuation tests.

Conclusion - Residency

As you are considered to be a resident of Australia under one of the tests of residency outlined in subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936, you are considered to be an Australian resident for taxation purposes for the period you are in Australia.

Temporary residents

Subsection 995-1(1) of the ITAA 1997 provides that a taxpayer is a temporary resident if:

 (a) they hold a temporary visa granted under the Migration Act 1958

(b) they are not an Australian resident within the meaning of the Social Security Act 1991, and

(c) their spouse is not an Australian resident within the meaning of the Social Security Act 1991.

However, you are not a temporary resident if you have been an Australian resident (within the meaning of the ITAA 1997), and any of paragraphs (a), (b) and (c) are not satisfied.

The definition of an Australian resident for purposes of Social Security Act 1991 is a person who:

(a) resides in Australia; and

(b) is one of the following:

(i) an Australian citizen;

(ii) the holder of a permanent visa;

(iii) a special category visa holder who is a protected SCV holder (this category only applies to some people who were in, or residing in Australia, before or on 26 February 2001)

In your case, you are an Australian resident for tax purposes and paragraphs (a) and (b) are satisfied, and (c) is not applicable as you do not have a spouse.

Consequently, you are an Australian resident for taxation purposes who also qualifies as a temporary resident under subsection 995-1(1) of the ITAA 1997 for the period you are in Australia.