Private ruling: Residency – visiting research officer and foreign income
Date of advice: 9 February 2018
Published: April 2018
Ruling period: Period ending 30 June 2018
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes | Q2: Is your employment income sourced in Australia? | A2: Yes | Q3: Is your income exempt under the Australia / Country A Double Tax Agreement if you are an Australian resident for tax purposes? | A3: No

Relevant facts and circumstances: You are a Country A citizen. You are a tax resident of Country A. You are an employee of Company A. The company does not conduct business in Australia. The company has subsidiary companies in Australia. You are not employed by any of the subsidiary companies. Your main role in the company is developing new types of cleaning products. You were selected by the company to undertake a research project in Australia for a short period. The company selected this project in order to enhance your research skills and develop relevant networks outside Country A. You are travelling on a Temporary Activity Visa. The visa allows you to undertake research activities but not to otherwise work in Australia. After the research project is complete you are expected to return to Country A and take up your regular position with the company. Your employer will sponsor your time in Australia by paying your salary and expenses as they relate to your research activities. Your spouse and children will stay in Australia with you for the duration of your stay. Your personal assets and furniture are in Country A. Your permanent abode and extended family are in Country A.

Relevant legislative provisions: Income Tax Assessment Act 1936 (ITAA 1936) Subsection 6(1) | Income Tax Assessment Act 1997 (ITAA 1997) Division 6, Section 995-1

Reasons for decision: Summary: 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. | Detailed Reasoning - The resides test: As per Taxation Ruling TR 98/17 (Income tax: residency status of individuals entering Australia) your behaviour whilst you are staying within Australia is used as an indicator as to your status of resident for the given period. The reason for your stay is to conduct research activities. You travelled to Australia with your spouse and children, entered a long-term rental agreement for a residence while you are here. Given these circumstances as a whole you meet the resides test. | Detailed Reasoning - Question 2: Your income (although paid by your company in Country A) is sourced where you are conducting the relevant activities for which you are paid. In this case your income is sourced in Australia as this is where you perform your duties by carrying out the research. | Detailed Reasoning - Question 3: 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. A number of double taxation agreements to which Australia is a party recognise the possibility of a person being a resident of two countries, in other words, a person may have dual residency. Those agreements provide rules for determining the country of which the person is deemed to be a sole resident. Therefore, if a person is considered to be a resident of Australia as well as a resident of another country, regard must be had to the terms of the particular double taxation agreement in determining the person's residency status. The Convention between Australia and Country A at Article 4 discusses the grounds for determining residency and at subparagraph 1(a) in the case of Country A, any person who, under the laws of Country A, is liable to tax therein by reason of the persons’ domicile, residence, place of head or main office or any other criterion of a similar nature; and subparagraph 1(b) in the case of Australia, a person who is a resident of Australia for the purposes of Australian tax. For the purpose of the DTA Article 4(2) you are considered to be resident of Country A in which you have a permanent home available to you and it is the centre of your vital interests. A dual resident, who is treated as solely resident of another country for the purposes of the relevant double taxation agreement, remains a resident of Australia for the purposes of the ITAA 1997. Based on article 14(1) of the DTA, if remuneration is derived by a resident of a contracting state in respect of employment, they shall be taxable only in that contracting state unless the employment is exercised in the other contracting state. As your employment is exercised in Australia the second part of Article 14 must be considered. You are in Australia for more than 183 days in the relevant period, therefore your payment may be taxed in Australia and Country A even though it is paid by a Country A resident. Your income does not fall under Article 19 of the DTA as you are not a student or business apprentice; your income is derived from employment which falls under Article 14 of the DTA.

The advice in the Register has been edited and may not contain all the factual details relevant to each decision. Do not use the Register to predict ATO policy or decisions.