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Edited version of your written advice
Authorisation Number: 1051298303626
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You cannot rely on this edited version in your tax affairs. You can only rely on the advice that we have given to you or to someone acting on your behalf.
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Date of advice: 24 October 2017
Ruling
Subject: Residency for tax purposes
Question 1
Were you a Resident of Australia for tax purposes for the income year ending 30 June 20XX.
Answer
Yes
This ruling applies for the following periods:
Year ending 30 June 20XX
The scheme commences on:
01 July 20XX
Relevant facts and circumstances
You entered Australia on January 20XX on a Working Holiday Visa (subclass 417) under a Country X passport.
You did not have employment or a permanent dwelling to return to in Country X.
You lived in X for one month before moving to Y where you purchased a vehicle and rented a room in a share house.
During the period you lived in Y you established a number of ties to the community including library and gym membership. You met your current partner who lives in Australia.
In order to start your own business you applied for an ABN and worked for several months in freelance employment before obtaining a contract with XYZ.
In accordance with the requirements of your Working Holiday Visa you spent time working in rural areas so that you could apply for the 2nd year extension of your visa.
After leaving Australia you were unable to obtain the 2nd year Working Holiday Visa due to your Country X passport expiring in August 20XX and you subsequently applied for enrolment in a university program to enter as a student.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1997 Subsection 995-1(1)
Reasons for decision
Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:
● the resides test,
● the domicile test,
● the 183 day test, and
● the superannuation 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.
Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.
The resides (ordinary concepts) test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
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.
In your case:
● You entered Australia with the intention of residing here permanently.
● You lived in Australia for 12 months.
● You exhibited the normal habits and “mode of life” of a person residing in Australia.
● You moved interstate for work in order to facilitate a potentially successful extension of your Working Holiday Visa
Based on these facts, it is evident that you did establish enough of a connection with Australia to establish that you were a resident.
Consequently you were residing in Australia according to the ordinary meaning of the word. Therefore, you meet the ‘resides test’ and are a resident of Australia for tax purposes.
Your residency status
As you will be a resident under the ‘resides test’ there is no need to consider the remaining three tests, and you are a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936.