Issue
Is the taxpayer's income assessable under subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) as a resident of Australia?
Decision
Yes. The taxpayer is a resident of Australia for income tax purposes and ordinary income derived by the taxpayer is assessable under subsection 6-5(2) of the ITAA 1997.
Facts
The taxpayer received salary and wages during the year of income.
The taxpayer is a citizen of another country with a temporary Australian residence visa.
The taxpayer is contracted to work for an Australian employer for 12 months. The visa expires soon and the taxpayer is negotiating to extend the contract for a further two years. Their employer will supply the necessary sponsorship. The taxpayer has initiated the process with the Department of Immigration to extend their visa.
The taxpayer has taken out a loan for 5 years to purchase a car and has a twelve month lease on the rental property in which they live.
The taxpayer lived with their parents in the foreign country and has no other property or business interests there.
The taxpayer confirmed that the taxation authority in the other country regards them as a non resident for taxation purposes.
Reasons for Decision
Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.
Salary and wages are ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.
The term 'Australian resident' is defined in section 995-1 of the ITAA 1997 and means a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).
Subsection 6(1) of the ITAA 1936 contains the definition of 'resident' which states that a person may be a resident of Australia where: • they reside in Australia; or • have their domicile in Australia; or • have been in Australia continuously or intermittently during more than half of the income year, unless the Commissioner is satisfied that their usual place of abode is outside Australia and they do not intend to take up residency.
If a taxpayer is considered to reside in Australia under the first test the other tests do not need to be considered.
The term 'reside' is not defined in either the ITAA 1936 or ITAA 1997. Taxation Ruling TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'reside'. TR 98/17 provides that individuals who enter Australia and extend their stay beyond 6 months are regarded as residents from the time of their arrival, as long as their intention and presence has an habitual and routine character during the entire period.
The taxpayer has initiated the process with the Department of Immigration to extend their visa and is negotiating to extend their employment contract for a further two years. The taxpayer has regular employment and is negotiating to extend their contract. The taxpayer has opened a bank account in Australia and has entered into a 5 year loan for the purchase of a car. The taxpayer holds a lease for a residence in Australia for one year and has no other property or business interests in their country of citizenship.
The length of time the taxpayer has been in Australia and their behaviour during this period indicate that the taxpayer is a resident of Australia for income tax purposes.
The taxpayer is considered to reside in Australia and is therefore considered a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936. Accordingly, the taxpayer's salary and wages will be included in the taxpayer's assessable income under subsection 6-5(2) of the ITAA 1997.