Private ruling: Residency and Comsuper pension
Published: July 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013 | Year ending 30 June 2014
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you an Australian resident for taxation purposes? | A1: Yes | Q2: Is your Comsuper pension assessable in Australia? | A2: Yes

Relevant facts and circumstances: You were born in Country X and are a citizen of that country and Australia. You secured employment with the Department of Foreign Affairs and Trade (DFAT) in Country Y. Your contract is for two years. You intend returning to Australia at the end of your contract. You have rented an apartment in Country Y. You own a property in Australia, which is rented out. You have bank accounts in Australia and Country Y, and a self-managed superannuation fund in Australia. Your family lives in Australia. You intend returning to Australia four times a year. You were formerly an employee of the Commonwealth Government of Australia and receive a Comsuper pension. You contribute to the Australian Government Employees Superannuation Trust (AGEST) but are no longer eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), nor are you the spouse of such a person.

Relevant legislative provisions: Income Tax Assessment Act 1936 Subsection 6(1) | Income Tax Assessment Act 1997 Subsection 6-5(2) | International Tax Agreements Act 1953

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 an Australian resident for taxation purposes. These tests are: · the resides test · the domicile test · the 183 day test · the superannuation test. 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 an Australian resident 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; have 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'. As you have lived and worked in Country Y since the recent year, you are 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 prove an intention to make his or her home indefinitely in that country, for example, through having obtained a migration visa. A working visa, even for a substantial period of time such as two years, would not be sufficient evidence of an intention to acquire a new domicile of choice. Taxation Ruling IT 2650 states that 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. The leading case on whether a permanent place of abode is outside Australia is FC of T v Applegate (79 CTC 4307; (1979)). The Federal Court said that in the context of the definition of resident for taxation purposes, for a place of abode to be permanent it does not have to be everlasting or forever. The following factors, listed at paragraph 23 of IT 2650, have been considered relevant by the Courts, Boards of Review and Administrative Appeals Tribunal and regarding a taxpayer's permanent place of abode. They include: (a) the intended and actual length of the taxpayer's stay in the overseas country; (b) whether the taxpayer intended to stay in the overseas country only temporarily then move on to another country or return to Australia at some definite point of time; (c) whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia; (d) whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; (e) the duration and continuity of the taxpayers presence in the overseas country; and (f) the durability of association that the taxpayer has with a particular place in Australia for example, maintaining bank accounts, informing government departments such as Centrelink that he or she is leaving Australia permanently and that any benefits such as family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. IT 2650 states that the weight to be given to each factor will vary with the individual circumstances of each particular case, and no single factor will be decisive. Applegate's case seems to indicate, however, that greater weight should be given to factors (c), (e) and (f) In your case, although you intend to live and work in Country Y for two years, your associations with Australia are considered to be more significant as you have a home in Australia, your family reside in Australia, you maintain bank accounts and self-managed superannuation in Australia, and you intend returning to Australia at the end of your contract and several times each year during your contract. Based on these facts, it is considered that you have maintained your Australian domicile and have not established a permanent place of abode outside of Australia. Therefore, you are considered to be an Australian resident for taxation purposes under the domicile test. | Detailed Reasoning - Comsuper pension: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. A pension is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. In determining liability to Australian tax on foreign source income it is necessary to consider not only the income tax laws but also any applicable tax treaty (double tax agreement). There is a tax treaty between Australia and Country Y. The tax treaty operates to avoid the double taxation of income received by residents of Australia and Country Y. An article of the tax treaty deals with government service pensions, and provides that any pension paid to an individual in respect of services rendered in the discharge of governmental functions in Australia will be taxable only in Australia. The pension is taxable only in Country Y if the individual is a citizen or national and a resident of Country Y. In your case, you are an Australian citizen and resident for taxation purposes. Your pension is therefore taxable only in Australia under this article of the tax treaty, and is consequently included in your assessable income in Australia under subsection 6-5(2) of the ITAA 1997. | Detailed Reasoning - Note: For a taxpayer who has reached their preservation age, the untaxed element of a Comsuper pension is included in the taxpayer's taxable income and is taxed at the marginal rate (section 301-110 of the ITAA 1997). The preservation age for someone born before 1 July 1960 is 55. If the taxpayer is aged 60 and over, they will be entitled to a tax offset equal to 10% of the element untaxed in the fund (section 301-100 of the ITAA 1997).

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