Private ruling: Foreign Income - Foreign Resident
Published: July 2012
Date scheme commenced: 1 July 2010.

Ruling: Q1: Were you an Australian resident for income tax purposes for a specific period in the 2010-11 income year? | A1: No. | Q2: Is the employment income you derived from working in Country A whilst being a foreign resident for income tax purposes in Australia, assessable income in Australia? | A2: No. Income period: Year ended 30 June 2011. The scheme commenced on: 1 July 2010.


Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1), | Income Tax Assessment Act 1997 Subsection 6-5(3) and | Income Tax Assessment Act 1936 Subsection 6(1). Facts: | Some time in the 2009-10 income year you arrived in Country A on a specific visa. | You worked in Country A for a specific Australian Government agency for a period in the 2009-10 income year. | You were seconded to work in Country A for another Australian Government agency from some time in the 2009-10 income year to some time in the 2010-11 income year. | Again in Country A, you were then employed directly by this other specific Australian Government agency from some time in the 2010-11 to some time in the 2011-12 income year on an employment contract. | You were still residing in Country A on a specific visa until the current date (which at the time was some time in the 2011-12 income year). | You don't intend to reside overseas permanently. You are residing in Country A for the duration of your contract and it is unclear at this stage what will happen after that. | You are not certain when you will return to Australia. Your current employment contract expires 2014, and it is likely you will return to Australia then. | Since your move to Country A some time in the 2009-10 income year, you have only returned to Australia for long weekends and periods of less than one month for holiday purposes. | You are renting an apartment in Country A. | In Australia, the only assets you have are an Australian bank account. | When visiting or residing in Australia - you stay with your parent at their home. You do not have any social or sporting connections. | You do not have any dependants, nor did you have any family accompany you overseas. | In Country A, you participate in a specific sporting competition. | You were a Commonwealth Government of Australia employee with a specific Australian Government agency from some time in the 2009-10 income year to some time in the 2011-12 income year - working in Country A for the entire duration of that employment. You no longer hold a position with the Commonwealth Government of Australia. You have a Superannuation fund with X.

Reasons for decision: Detailed Reasoning - Residency: The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are: · the resides test. · the domicile test. · the 183 day test. · the superannuation test. The first two tests are examined in detail in Taxation Ruling IT 2650. 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. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - 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'. You were residing in Country A since some time in the 2009-10 income year as evidence by renting an apartment and working there. Therefore, you were not considered to be residing in Australia. | Detailed Reasoning - The domicile test: If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country. The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives. A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere. In your case, · in Country A, you work and pay rent and, · you only maintained an association with Australia through some family and a bank account, · you still are, and have been residing and working in Country A since some time in the 2009-10 income year, · you had created social and sporting ties in Country A by participating in a particular sporting competition. Therefore, you are not considered to have maintained your Australian domicile. Based on these facts, the Commissioner is satisfied that you have established a permanent place of abode in Country A. | Detailed Reasoning - The 183-day test: This test does not apply to you as it has been identified that your permanent place of abode is in Country A. | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person. | Detailed Reasoning - Your residency status: As you are not considered to be a resident of Australia under any of the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are not considered to be an Australian resident under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) for a specific period in the 2010-11 income year. | Detailed Reasoning - Note:: During the period you were a foreign resident, any interest income and/or dividend income derived by you from sources in Australia will be subject to foreign resident withholding tax. | Detailed Reasoning - Employment income derived from Country A: Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident of Australia includes all the ordinary income derived directly or indirectly from all Australian sources during the income year. A foreign resident is a person who is not a resident of Australia. Salary and wages are regarded as ordinary income. The source of income derived from employment is generally the place where the duties or services are performed ( Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76). Your employment duties carried on outside of Australia are considered to be sourced out of Australia. Therefore the income derived in relation to such employment is not assessable in Australia under subsection 6-5(3) of the ITAA 1997 as you are a foreign resident.

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