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Edited version of your written advice
Authorisation Number: 1051202574920
Date of advice: 15 March 2017
Ruling
Subject: in relation to your residency status for tax purposes
Question
Are you a resident of Australia for taxation purposes?
Answer
Yes.
This ruling applies for the following periods:
Year ended 30 June 2016
Year ending 30 June 2017
Year ending 30 June 2018
The scheme commenced on:
1 July 2015
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You were born in Australia.
You are a citizen of Australia.
You went overseas to travel and to work in Country Y in the 2016 income year.
You have a youth visa to enter Country Y.
The visa allows you to remain in Country Y for 2 years, it does not allow you to stay permanently.
You intend on returning to Australia in the 2017 income year.
You commenced work in Country Y in the 2017 income year.
You pay tax on this income in Country Y.
You live in a share house in Country Y.
You lived with relatives prior to going overseas.
You have shares and a bank account in Australia.
You left some of your personal items with your family in Australia.
You have personal and business bank accounts in Country Y.
You are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.
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.
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 went overseas in the 2016 income year to travel and work.
You have a youth visa to be in Country Y. The visa allows you to be in Country Y for 2 years.
You intend on returning to Australia the 2017 income year.
You live in shared accommodation in Country Y.
Based on the facts above you are residing in Australia according to ordinary concepts as you will maintain continuity of association with Australia for the period you are traveling and working overseas.
You are a resident under this test.
Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the resides test), we will also include a discussion of the 'domicile and permanent place of abode' test as an alternative argument.
The domicile test
If a person's domicile is Australia they will be 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 to prove an intention to make his or her home indefinitely in that country.
Your domicile is Australia.
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.
The Commissioner is not satisfied that you set up a permanent place of abode outside Australia for the following reasons:
● Your visa only allows you to be in Country Y for 2 years
● You live in shared accommodation in Country Y
● You intend on returning to Australia to live
You are a resident under this test.
Your residency status
You are a resident of Australia for taxation purposes for the period you are travelling and working in Country Y.
A foreign Income Tax offset (FITO) is available for tax that you pay on your income in Country Y.