ATO ID 2006/336: Superannuation Guarantee: USA Agreement on social security - certificate of coverage - non-resident for income tax purposes
Date of decision: 12 December 2006
Year of income: Year ended 30 June 2003 Year ended 30 June 2004
Business line: Superannuation

Issue
Can a taxpayer who is not a resident for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936) be covered by Schedule 13 to the Social Security (International Agreements) Act 1999 (SSIAA), such that they are eligible for employer support under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Decision
Yes. A taxpayer who is not a resident for the purposes of the ITAA 1936 can be covered by Schedule 13 to the SSIAA, such that they are eligible for employer support under the SGAA.

Facts
The taxpayer is an Australian citizen who had previously resided in Australia. The taxpayer was sent to the United States of America (USA) by their employer, to work in one of the related entities of the employer on a temporary assignment for a period of less than five years. The employer applied for and was granted a Certificate of coverage (Coc) by the Tax Office, authorising the employer to continue to make payments under the SGAA, while the employee worked for the related entity in the USA. The employer made payments under the SGAA on behalf of the taxpayer, for the period covered by the Coc. The taxpayer subsequently made an application for a private ruling under the former Pt IVAA of the Taxation Administration Act 1953 and was issued with a ruling that they would be liable for taxation as a non-resident as defined in subsection 6(1) of the ITAA 1936, during the period covered by the Coc.

Reasons for decision
Summary: Schedule 13 to the SSIAA, contains the agreement between Australia and the USA (USA Agreement). Article 3 of the USA Agreement covers the personal scope of the agreement and indicates the agreement applies to any person who: (a) is or has been an Australian resident; or (b) is or has been subject to the laws of Australia. The term 'Australian resident' is not defined within the SSIAA itself. Section 3 of the SSIAA contains the provision relating to interpretation and states at subsection 3(1) of the SSIAA: Unless a contrary intention appears, an expression that is used in the Social Security Act 1991 has the same meaning, when used in this Act, as in the Social Security Act 1991. Paragraph 1(e) of Article 1 of the USA Agreement defines 'laws' to mean those applying to social security (specified in subparagraph 1(b)(i) of Article 2), except in relation to Part II of the USA Agreement where it only applies to superannuation guarantee (specified in subparagraph 1(b)(ii) of Article 2). Part I of the USA Agreement outlines the scope of the agreement for both countries, and includes several definitions relating to the USA Agreement. As the definitions are contained in Part I of the USA Agreement, the relevant laws are those applying to social security. As required by subsection 3(1) of the SSIAA, since there is no intention to the contrary, the definition of 'Australian resident' for the purpose of the SSIAA should have the same meaning as expressed in the Social Security Act 1991 . An 'Australian resident' is defined in subsection 7(2) of the Social Security Act as: a person who (a) resides in Australia; and (b) is one of the following: (i) an Australian citizen (ii) the holder of a permanent visa (iii) a special category visa holder who is a protected SCV holder. The term 'resides' has a similar meaning under both the social security provisions and the ITAA 1936. As the taxpayer is a citizen of Australia and has previously resided in Australia they satisfy the personal scope of the USA Agreement under Article 3. The fact that this taxpayer is not currently a resident under the ITAA 1936 is not relevant for the purposes of determining whether they are covered under Part II of the USA Agreement. The calculation of SG shortfall does not arise in this case, as the employer had made the required payments in relation to the employee under the SGAA. | Detailed Reasoning - History:: This ATO ID was amended to reflect the changes to paragraph 27(1)(b) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and the introduction of section 15C of the SGAA. The amendments came into effect on 15 March 2007. The amendments to this ATO ID do not affect the answer to the issue raised in this ATO ID. Date of amendment of ATO ID: 21 January 2011.

Legislative references: Income Tax Assessment Act 1936 subsection 6(1)
Subject references: Non resident individuals Residence of individuals Residents departing Australia Social security agreements Superannuation Superannuation contributions Superannuation guarantee scheme United States