Private ruling: Residency and Foreign Source Income
Date of advice: 22 May 2018
Published: July 2018
Ruling period: Year ended 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX | Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you a resident of Australia for taxation purposes? | A1: Yes. | Q2: Are you salary and wages received from your Country X employer assessable in Australia? | A2: Yes.

Relevant facts and circumstances: You moved to Country X You took a permanent job. You have been granted a long term visa. You have a long term lease on an apartment. Your overseas accommodation was not provided by your employer. Most of your personal effects are in Country X. You travel back to Australia infrequently and primarily for business purposes. You have been present in Australia for less than 183 days in the 20XX and 20XX financial years. You have a spouse. Your spouse did not accompany you to Country X. You remit money to your family. Your spouse still resides in your family home. You intend to let your family home as an investment property in the future. You have removed yourself from the electoral role. You have not cancelled Medicare. You cancelled your private insurance but then reinstated it. You have a car in Australia which is registered in your name. You have Australian bank accounts. You have a bank account and credit card in Country X. You have investment properties in Australia which are being let. You do not have any overseas investments. You receive a fortnightly pension from Australia. You have filed tax returns in Country X for the 20XX and 2017 financial years as a resident of Country X for taxation purposes. You have maintained a local club membership. You have joined a local club in Country X. You do not have a Country X drivers licence. You do not maintain any professional or occupational membership in Australia. You are not a contributing member to the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PSS). Your spouse is not a contributing member of the CSS or PSS.

Relevant legislative provisions: Section 6(1) of the Income Tax Assessment Act 1936 | Section 995-1 of the Income Tax Assessment Act 1997

Reasons for decision: Detailed Reasoning - Your residency status: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 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’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are: ● the resides test, ● the domicile test, ● the 183 day test, and ● the superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. The resides test is the primary test for determining the residency status of an individual. If residency is established under the resides test, the remaining three tests do not need to be considered. If residency is not established under the resides test, an individual will still be a resident of Australia for taxation 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'. Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are: ● whether the person is physically present in that country at some time during the year of income ● the history of the person's residence and movements ● if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits ● if the person is outside the country for part of the relevant income year, the purpose of the absences ● the family and business ties which the person has with the particular country, and ● whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there. Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia. In the recent case of Iyengar v FCT 2011 ATC 10-222, the Administrative Appeals Tribunal held that the taxpayer was a resident of Australia, even though he was working overseas. The taxpayer's family ties, his intention (to complete his contract) and motive (to pay off his mortgage), and his maintaining an Australian place of abode while working overseas, were all indicative that he was an Australian resident during the relevant period. Whilst you left Australia during the 20XX income year and your employment ties were not Australian you still had significant family ties within the country. The fact that you still maintain a family home in Australia indicates that you are keeping a connection with Australia. This is further confirmed by the fact that you remit monies back to Australia for use by your family. Therefore, you meet the requirements of the resides test. Whilst it is not necessary to meet more than one test to determine residency for tax purposes (we have already established that you are a resident under the ‘resides’ test), we will also include a discussion of the other residency tests for completion. | Detailed Reasoning - The domicile test: If a person’s domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice 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 You have established long term accommodation in Country X showing that you have established a permanent home in Country X. However, you also have a permanent home available in Australia, that being the home in which your spouse resides. Even though you have taken steps to relocate your permanent home in Country X the Commissioner is of the view that your permanent place of abode is still Australia as this is where you live with your family. Therefore, you will be a resident of Australia under the domicile test. | Detailed Reasoning - 183 Days Test: You were not present in Australia for more than 183 days in the 20XX or 20XX financial years. As such you will not meet the requirements of the 183 day test for these periods. If you continue to remain outside of Australia for a period longer than 183 days in the following financial years you will not be a resident of Australia for taxation purposes under the 183 Days test. | Detailed Reasoning - Superannuation Test: You and your spouse are not contributing members of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). As such you will not be a resident of Australia for taxation purposes under this test. | Detailed Reasoning - Taxation of your income: You are currently working in Country X for a Country X based company. Under Australian taxation law a resident of Australia must report their worldwide income in their tax return. You are also a resident of Country X and have reported your income in a Country X tax return. There is a double taxation agreement (DTA) between Country X and Australia. You will be a resident of Australia for the purpose of the DTA. Under the DTA you will be taxable in both Australia and Country X. As you are taxable in both Australia and Country X, you will be entitled to a tax offset in Australia to offset the tax you will have paid in Country X.