Edited version of private advice

Authorisation Number: 1051948471473

Date of advice: 15 March 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

No.

Question 2

Will your income be taxed at the working holiday rate of 15%?

Answer

Yes.

Question 3

Are you entitled to the low income tax offset and the low and middle income tax offset?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Country Y.

You met your Australian partner while he was on holiday in Country Y.

Your Australian partner had to return to Australia at the end of his holiday and you followed several months later.

The quickest, easiest and cheapest visa for you to obtain was a working holiday visa.

You arrived in Australia with the intention of living here permanently and to continue your relationship with your partner.

You bought clothing and personal items with you to Australia.

You do not own any other property or anything else of value.

You were living with your parents in Country Y.

You did not come to Australia for a holiday.

You took whatever work was available to you in Australia.

You worked as a farm hand when you first came to Australia.

You then went to a different city and worked in a childcare centre along with being a private nanny.

You and your partner have moved to another area and you have worked at an ice cream shop and a pub doing housekeeping.

A few months later the pandemic started to have affect and you did not want to leave Australia.

You have the support of your partners family.

Your working holiday visa expired later in the year.

You applied for another working holiday visa.

The working holiday visa expired.

Prior to the expiry of this visa you applied for a partner visa which has not yet been granted.

You paid for this visa with your stable work in Australia.

You have a group of friends in Australia.

You have not returned to Country Y since arriving in Australia.

Neither you nor your spouse are eligible to contribute to the PSS or the CSS super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

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, 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. 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'. 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 Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia (IT 2650) and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17).

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 not residing in Australia for the relevant period. This is because:

•         You came to Australia on a working holiday visa

•         The visa only allowed you to be in Australia for 12 months

•         The visa did not allow you to remain permanently in Australia.

Although you say your intention when you came to Australia was to live permanently in Australia with your Australian partner the fact is that you applied for and were granted a working holiday visa which did not allow you to remain, or do what you say your intentions were.

You are not a resident under this test.

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.

Domicile

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 were born in Country Z and are a citizen of Country Y.

You have not taken any steps to change your domicile to Australia for this period.

You are not a resident under this 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 were in Australia for more than 183 days in the relevant income year.

The Commissioner is satisfied that your usual place of abode was outside Australia during this period as your visa did not allow you to be in Australia on a permanent basis.

You are not a resident under this test.

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 and your spouse 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.

You are not a resident under this test.

Conclusion

You are not a resident of Australia for taxation purposes.

Your income will be taxed at the 15% working holiday rate.

You will be taxed at 15% because you do not meet the requirements to be taxed at the resident rates.

In order for you to be taxed at resident rates while on a working holiday visa you need to be from a non-discrimination article country and an Australian resident for taxation purposes.

While you meet the first part being from a non-discrimination article country being Country Y you are not a resident of Australia for taxation purposes and therefore your income is taxed at the 15% working holiday rate.

You are not entitled to claim the low income and low and middle income tax offsets as you are not a resident of Australia for tax purposes.