Private ruling: Residency and source of income
Date of advice: 15 January 2018
Published: May 2018
Ruling period: Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021
Date scheme commenced: 1 July 2015

Ruling: Q1: Are you a non-resident of Australia for taxation purposes? | A1: Yes. | Q2: Are the payments received from an Australian charity and not-for-profit-commission a foreign source income? | A2: Yes.

Relevant facts and circumstances: You were born in Australia and you are an Australian citizen. You have been granted a residency card for country I and your application for citizenship there is to be implemented in the near future. The permanent residency card was issued a few years ago. You departed Australia several years ago and returned to Australia for work and then departed again to work for a specified employer in two different countries. You are still working for that employer in the country P. You were an employee of the United Nations which entitled you to work in country S for a period of time. In country P you have been issued a visa by their government which entitles you to live and work there. This is currently valid for a few years but can be extended. Your family have also been issued visas with the same classification. You applied independently for this visa with support from the local office of your specified employer. Your previous employment was based elsewhere in the world where you lived and worked. You have no definite plans to move back to Australia. Your family lives with you in country P The contract between your employer and you lists country I as your home. You have returned to Australia twice for short visits for a holiday and to visit family. You have informed the Australian Electoral Commission and Medicare that you have departed Australia. You have not lodged Australian income tax returns while being overseas. You have a 12 month rental contract on a property in country P. Your employer pays for this accommodation. You have exclusive use of the property. You live there with your family and the rental contract is in your name. When in Australia you were living in a rented unit. This is no longer available for your use. You have maintained bank accounts in Australia which have minimal use. All your household goods were shipped overseas. You have advised Australian financial institutions that you are a foreign resident so that non-resident withholding tax can be deducted from any payments they make to you. You have bank accounts in three other countries. You have investment accounts for your children in another country. You have a joint investment account with your spouse in another country. You have a joint bank account with your spouse in another country. You have a bank account with your spouse in another different country. You have a bank account in country P. You have not yet been required to lodge income tax returns in any overseas countries. You were not required as a UN staff member in other countries and you are not yet due to lodge in country P. Your spouse and two children have accompanied you overseas. You have not maintained any professional, social or sporting connections with Australia. You have not yet established any professional, social or sporting connections in any other country. You have obtained an international driving permit. Neither you or your spouse have ever been Commonwealth Government employees. You do not have any employment being held for you in Australia.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 6-5(3) | Income Tax Assessment Act 1997 subsection 6-10(5) | Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision: Detailed Reasoning - Residency: 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 residence according to ordinary concepts test; ● the domicile/permanent place of abode test; ● the 183 days/usual place of abode test; and ● the Commonwealth superannuation test. If any one of these tests is met, an individual will be a resident of Australia for taxation purposes. Based on the facts you have provided, we conclude that you do not satisfy any of the tests of residency. Accordingly you are a non-resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936. | Detailed Reasoning - Foreign income as a foreign resident: Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a foreign resident directly or indirectly from Australian sources, as well as ordinary income included by a provision on a basis other than having an Australian source is assessable. Statutory income from all Australian sources is also included in a foreign resident’s assessable income under subsection 6-10(5) of the ITAA 1997. 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). You are a non-resident who derives employment income from country P. Therefore, it will not be assessable income in Australia under subsection 6-5(3) of the ITAA 1997.