Private ruling: Income
Published: January 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013
Date scheme commenced: 01 January 2012

Ruling: Questions and Answers: | 1. Are you a resident of Australia? | No | 2. Will the income you earn from your Australian employer be fully sourced in Australia? | No | 3. Will the income you earn from your Australian employer be partially sourced in Australia? | Yes | 4. Will the income you earn from your Australian employer be partially sourced in country x? | Yes | 5. If part of your income is sourced in the country x will this income be assessable in Australia? | No | 6. Will the commissioner grant a determination to vary the rate of PAYG withholding on your income? | No

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an country x citizen. You maintain a residence in country x, you have lived in this residence for 10 years. You are employed by an Australian company. You carry out most of your work in country x. You work physically in Australia for two weeks every two months. You have no intentions to move to Australia permanently. When in Australia you stay in short term hotel accommodation. You have an Australian TFN and hold an Australian bank account for your employment income to be paid in to. Your employer pays superannuation into an Australian superannuation fund. You are not a Commonwealth government employee and are not eligible to contribute to the CSS or PSS superannuation funds. You are over 16 years of age and do not have a spouse who is eligible to contribute to an Australia government superannuation fund. PAYG is currently being withheld at resident rates on all of your employment income. Apart from the employment connections and associated bank account and superannuation fund you have no further economic or family ties to Australia.

Relevant legislative provisions: Section 6-5 of the Income Tax Assessment Act 1997 | Section 6(1) of the Income Tax Assessment Act 1936 .

Reasons for decision: Summary: While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our 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 . The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the: · resides test; · domicile and permanent place of abode test; · 183 day test; and · Commonwealth superannuation fund test. The primary test for deciding the residency status of each individual is whether they reside in Australia according to the ordinary meaning of the word resides. If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established. | Detailed Reasoning - The resides test: The ordinary meaning of the word 'reside', according to the Macquarie Dictionary is 'to dwell permanently or for a considerable time; having one's abode for a time'. Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here. The following factors are useful in determining whether your behaviour over the time spent in Australia reflects a degree of continuity, routine or habit that is consistent with residing here: (a) intention or purpose of presence; (b) family and business/employment ties; (c) maintenance and location of assets; and (d) social and living arrangements You are a country x citizen, you live in your own home which you have continued to maintain for 10 years. You have an Australian bank account and your employer contributes to an Australian superannuation fund but do not have any family ties or other economic relationships with Australia. You are only physically present in Australia for two weeks every second month during each income year for work purposes. Whilst here you stay in rented short term accommodation, your behaviour and pattern of work does not reflect a degree of continuity, routine or habit which is consistent with residing in Australia. You are no a resident of Australia under the resides test. | Detailed Reasoning - The domicile/permanent place of abode 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 your case you hold a country x domicile, you are a country x citizen and have not made any attempts to become an Australian citizen. 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. Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia provides the Commissioner's view on it is considered that a person has established a permanent place of abode and at paragraph 15 defines permanent place of abode as: the taxpayers fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayers presence, the duration of his presence and the durability of his association with the particular place. You do not hold an Australian domicile and your permanent place of abode is in country x, you are not a resident of Australia under this test. | Detailed Reasoning - The 183-day test: Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia. You will be in Australia for 2 weeks every 2 months; you will therefore not be in Australia for more than 183 during the financial year. . | Detailed Reasoning - The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee. You are not a member of any of the relevant superannuation funds, nor the spouse of a person covered by the funds and you are not under the age of 16, therefore you are not a resident of Australia under this test. | Detailed Reasoning - Conclusion: The Commissioner is satisfied that you do not satisfy any of the tests of residency. Therefore you are a non-resident of Australia for tax purposes. | Detailed Reasoning - Income of foreign residents: If you are a foreign resident, your assessable income includes: (a) the ordinary income you derived directly or indirectly from all Australian sources during the income year; and (b) other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source. As you are a foreign resident you are only required to pay tax only on your Australian sourced income, that is, income which is earned whilst you are physically present in Australia. Income that is earned (even income from an Australian employer) when you physically carry out the work in country x is no Australian sourced, this income falls for consideration under the country x taxation system. | Detailed Reasoning - PAYG Withholding: Employers who employ foreign residents are required to withhold PAYG amounts on any Australian sourced income. As a foreign resident working for an Australian company your income earned whilst working overseas is not taxable in Australia, and as such your employer should not be taking out PAYG withholding from this income. The Commissioner does not provide determinations in relation to varying the amount of PAYG withholding an employer is required to take out of an employee's salary; instead employers are required to withhold the correct amount of tax- that being tax only on the Australian sourced income. As a foreign resident you should only have withholding tax withheld from the income you earned whilst physically working in Australia, and as you have an Australian tax file number this income would have tax withheld at foreign resident rates based on the PAYG tax tables which are available on our website.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.