Edited version of your written advice

Authorisation Number: 1012935416270

Date of advice: 12 January 2016

Ruling

Subject: Residency

Question and answer

Are you a resident of Australia for taxation purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2015

The scheme commenced on:

13 January 2015

Relevant facts and circumstances

You are a citizen of Australia.

You departed Australia some time ago for a foreign country.

You currently hold a working holiday visa in a foreign country.

You intend to stay in a foreign country for at least one more year before returning to Australia.

Your only asset in Australia is a bank account.

Your only asset in the foreign country is a bank account.

You left your household and personal effects in Australia.

You have an employment contract in a foreign country.

You have never been employed by the Commonwealth of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 995-1(1).

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• resides test

• domicile and permanent place of abode test

• 183 day test and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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 (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

You are a citizen of Australia.

You departed Australia some time ago on a working holiday visa.

You intend to stay in a foreign country for at least 1 more year before returning to Australia.

You have left your personal and household effects in Australia.

Based on the facts above you are residing in Australia according to ordinary concepts.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied that they have a permanent place of abode outside of Australia.

Generally, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law.

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.

In order to show that a new domicile of choice in a country outside of Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia.

The Commissioner is satisfied that you do not have a permanent place of abode outside of Australia for the following reasons:

• You are a citizen of Australia

• You have maintained your personal and household effects in Australia

• You intend to return to Australia after your visa expires

You are therefore a resident under the domicile test.

Your residency status

Accordingly as you are a resident under the resides and domicile test you are a resident of Australia for taxation purposes under subsection 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.