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Edited version of private advice
Authorisation Number: 1051565826976
Date of advice: 15 August 2019
Ruling
Subject: Residency and tax rates while on a bridging visa
Question 1
Are you a resident of Australia for taxation purposes?
Answer
Yes
Question 2
Are you subject to the working holiday maker rates of tax while on a bridging visa?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
Year ending 30 June 20XX
The scheme commences on:
XX October 20XX
Relevant facts and circumstances
You are a citizen of Country A.
You entered Australia on a 417 working holiday visa.
You came to Australia with your Australian partner. Your partner is an Australian citizen who lived with you in Country A.
You intend to stay in Australia to settle permanently.
You applied for a partner visa and received a bridging visa A in relation to this application.
Your bridging visa took affect from when your working holiday visa expired.
You are currently on a bridging visa A waiting for approval of your partner visa.
You don't have any assets in Country A and sold your vehicle and personal belongings to move to Australia.
You are employed in a permanent position in Australia with an Australian company.
You and your partner are renting a property.
You forfeited your Country A residency and your Country A residency for tax purposes to align with the date you arrived in Australia to eliminate tax obligations to Country A.
You have an Australian bank account and you plan to eventually buy a property in Australia.
You have not received your partner visa.
Relevant legislative provisions
Income Tax Assessment Act 1936 subsection 6(1)
Income Tax Assessment Act 1997 subsection 995-1(1)
Income Tax Rates Act 1986 subsection 3A
Summary
You are a resident of Australia for taxation purposes however, while you are on a bridging visa you are subject to the Working Holiday Maker tax rates until you receive your partner visa 820/801.
Detailed reasoning
Residency
The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936.
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).
Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) outlines the guidelines used to determine whether the individual is a resident.
The definition provides four tests to ascertain if an individual 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.
Having considered your circumstances as a whole and the residency tests, it is accepted that you are a resident of Australia for income tax purposes.
Tax rates
The taxation rate is defined and set in the Income Tax Rates Act 1986. Section 3A of the Income Tax Rates Act 1986 defines a working holiday maker (WHM). The rate of tax applying to WHM is defined in Schedule 7 of the Income Tax Rates Act 1986.
Section 3A(1) of the Income Tax Rates Act 1986 states an individual is a WHM at a particular time if the individual holds at that time:
a) a Subclass 417 (Working holiday) visa; or
b) a Subclass 462 (Work and holiday) visa; or
c) a bridging visa permitting the individual to work in Australia if:
(i) the bridging visa was granted under the Migration Act 1958 in relation to an application for a visa of a kind described in paragraph (a) or (b); and
(ii) the Minister administering that Act is still to make a decision in relation to the application; and
(iii) the most recent visa, other than a bridging visa, granted under that Act to the individual was a visa of a kind described in paragraph (a) or (b).
The WHM tax rates take effect for the period you are considered to be a WHM.
Your bridging visa may be considered a WHM visa where it is associated to the 417 or 462 visas. Bridging visas that are considered WHM are:
· a bridging visa issued immediately after a 417 or 462 visa and immediately before a second 417 or 462 visas
· a bridging visa issued immediately after a 417 or 462 visa and no other visa issued after this bridging visa.
In your case, you are on a bridging visa until your 820/801 partner visa is approved and the most recent visa you held other than a bridging visa was a Subclass 417 WHM visa. Therefore, you are subject to the WHM tax rate until your partner visa is approved.
Other Information
When you receive your partner visa the end of the WHM visa marks the date new tax rates are to be applied and you can amend or object to the relevant notice of assessment. Further information on how to amend or object to a notice of assessment can be found by searching QC 33887 and QC 33792 on ato.gov.au