Edited version of your written advice

Authorisation Number: 1012868770574

Date of advice: 27 August 2015

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes for part of the year ending 30 June 2015?

Answer

Yes

This ruling applies for the following periods:

30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You are a citizen of Country A.

Your country of origin is Country A.

For the last five years, prior to your arrival in Australia, you lived in Country A.

You first arrived to Australia under a 417 working holiday visa.

The visa allowed you to stay in Australia for one year.

You will apply for the second year visa.

You are employed one employer for six months.

Your employer has offered to sponsor you.

Purpose of your visit to Australia was to find a long term job and eventually become a permanent resident.

You intend to continue to work in Australia through your employer's sponsorship and apply for permanent residency.

Since your arrival in Australia, you left for overseas to visit your parent for approximately three weeks.

You live in shared rental accommodation in Australia.

You do not own a permanent place overseas. Prior to coming to Australia you lived in your parents' house.

You do not own any assets in Australia.

You have a bank account in Australia and overseas.

You do not have a job held for you overseas.

You do not have any dependents overseas.

You do not have any sporting connections in Australia and overseas.

You were not a resident for tax purpose in another country

You are not a Commonwealth of Australia Government employee for superannuation purpose.

You are not enrolled in a course of study in Australia.

Relevant legislative provisions

Income Tax Rates Act 1986 Subsection 12(1)

Income Tax Assessment Act 1936 Section 6(1)

Income Tax Assessment Act 1997 Section 995-1

Reasons for decision

Residency

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 while Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) outlines the guidelines used to determine whether you are a resident.

The definition provides four tests to ascertain if a taxpayer is a resident of Australia for income tax purposes. These tests are:

1. The resides test (residence according to ordinary concepts)

2. The domicile test

3. The 183 day test

4. 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 for tax purposes 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; 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'.

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 individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. Further, paragraph 24 of TR 98/17 provides that individuals may establish that they do not reside here, even if they have been in Australia for longer than six months.

TR 98/17 also states that when assessing whether a person's behaviour is consistent with residing here, the following factors are taken into account:

• intention or purpose of presence;

• family and business/employment ties;

• maintenance and location of assets; and

• social and living arrangements.

2. 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 in their country of origin unless they acquire a different domicile of choice or 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).

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 a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

3. The 183 days 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.

4. The superannuation test

This test is not relevant in your situation as it only applies to persons 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. 

Application to your circumstances

In your case, you arrived in Australia on dd/mm/yyyy under a 417 one year working holiday visa.

You have provided the following information:

• You will apply for the second year visa.

• Purpose of your visit to Australian was to find a long term job and eventually become a permanent resident.

• You are employed by one employer for six months.

• Your employer has offered to sponsor you.

• You intend to continue to work in Australia through your employer's sponsorship and apply for permanent residency.

• Since your arrival in Australia, you left for overseas to visit your parent for approximately three weeks.

• You live in shared rental accommodation in Australia.

• You do not own a permanent place overseas.

• You have a bank account in Australia.

• You do not have a job held for you overseas.

• You do not have any dependents overseas

As you have arrived in Australia on a working holiday visa, have stayed in Australia continuously for more than six months, been employed by the same employer for that time and stayed in the same place, you are considered to be a resident of Australia for taxation purposes under the ordinary concepts test as outlined in the subsection 6(1) of the ITAA 1936.

Note

There is a proposal to change the income tax law in relation to residency for taxpayers on working holiday visas in Australia from 1 July 2016 so that most temporary working holiday makers in Australia will be taxed as non-residents regardless of how long they are in Australia.