Edited version of private advice

Authorisation Number: 1051903455304

Date of advice: 29 September 2021

Ruling

Subject: Residency status for income tax

Question 1

Were you a resident of Australia for income tax purposes for the years ended 30 June 20XX and 20YY?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20YY

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

General

You are a citizen of Country X who entered Australia on 3 March 20XX on the provision of the Working Holiday visa (subclass 417).

You were granted the Bridging A visa (subclass 010) on 3 March 20YY while your Partner visa (subclass 820) was being processed.

You were granted the Partner visa (subclass 820) on 4 June 20YY.

You have not lodged a foreign income tax return while you were living in Australia.

You were employed on a full-time basis in Australia with an Australian Company.

You intend to reside permanently in Australia and intend to apply for the Partner (Permanent) visa in 20ZZ when you become eligible.

Family and social connections

You do not have any dependents

You did not have any family accompany you to Australia

Accommodation and assets

You were renting a property ("the Property") in Australia with your Australian partner.

The lease agreement in respect of the Property and for which you are a party, has been extended to 22 February 20XX.

You do not have any overseas accommodation.

You have a Commonwealth Bank Joint account in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995(1)

Income Tax Rates Act 1986 Subsection 3A

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, as applied 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 resides test,

•         the domicile test,

•         the 183 day test, and

•         the superannuation test.

The primary test for deciding the residency status of an individual is whether they reside in Australia according to the ordinary meaning of the word resides. Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests.

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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains " home ": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as " home ", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

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

•         Physical presence

•         Intention or purpose of presence

•         Family and business/employment ties

•         Maintenance and location of assets, and

•         Social and living arrangements.

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 each individual's circumstances.

We consider that your circumstances were consistent with you residing in Australia and therefore you were a resident of Australia under the resides test for the years ended 30 June 2020 and 2021 ("Relevant Years").

This is because:

•         you did not have any overseas accommodation;

•         you held a Partner visa (subclass 820);

•         you were renting an apartment in Australia with your Australian partner;

•         you were employed on a full-time basis in Australia with Australian company; and

•         you intend to reside permanently in Australia and apply for the Partner (Permanent) visa in 2023 when you become eligible.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

In your case, you are a British citizen. You came to Australia on a working holiday visa. You were subsequently granted the Partner visa and intend to reside in Australia permanently by applying for the Partner (Permanent) visa in 2023. Therefore, you were a resident of Australia for income tax purposes under the domicile test.

183-day 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.

You have been in Australia for 183 days or more in the Relevant Years. We now need to consider whether we are satisfied that, during the Relevant Years, your usual place of abode was outside Australia and your intention was to take up residence in Australia.

In the context of the 183- day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183- day test. However, it is also possible that a person does not have a usual place of abode. This is the person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode (Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836).

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts.

Based on your circumstances, you are a resident under this test as the Commissioner is not satisfied that your usual place of abode was outside Australia for the Relevant Years and that you did not intend to reside in Australia.

Superannuation Test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test.

Conclusion

As you satisfied at least one of tests of residency, you were a resident of Australia for income tax purposes for the Relevant Years.

Other matters - Tax rate while on Working Holiday Visa

During the period for which you were working in Australia while on a 417 visa, your taxation rate is defined and set as outlined in the Income Tax Rates Act 1986. Section 3A of this act defines a working holiday maker. The rate of tax applying to working holiday makers is defined in Schedule 7 of this act.

Schedule 7 refers to Part III of the act which defines the tax rate as being 15% for income which does not exceed $37,000. Accordingly, any income you derived from your employment in Australia while you remained on a working holiday visa (including the period for which you were on the Bridging A visa) will be subject to a tax rate of 15% under $37,000.

As a resident for part of the 20XX/20XX financial year you are obliged to lodge your income tax return as a resident and report your income as outlined in Individual Tax Return Instructions. You will be obliged to report your income and employment deductions in the "Income" section as well as to complete the section "Adjustments" which will require you to include your income while working on a working holiday visa up to 4 June 20XX. This income must be included at item A4 of the return. This working holiday income will be taxed at 15%.