Compare documents

1 Are you a resident of Australia for tax purposes from Date one until Date 2?

1 Yes Question 2 Are you a temporary resident of Australia for the purposes of section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997)? Answer 2 Yes Question 3 Are Occupational Maternity Pay (OMP) amounts received included in your assessable income? Answer 3 Yes Question 4 Are Statutory Maternity Pay (SMP) amounts received included in your assessable income? Answer 4 Yes This ruling applies for the following periods : Year ended 30 June 20XX Year ending 30 June 20XX The scheme commenced on: Date one

You were born in Country A. You are a citizen of Country A and Country B. For several years prior to arriving in Australia, you lived in Country B. Your spouse is a citizen of Country C and Country B. They will be eligible for Australian citizenship after a specified number of years of living in Australia. Your spouse is originally from Country C and you have moved to Australia to be closer to their family. You are in Australia on a temporary family relationship visa which expires on Date 3. You plan to leave Australia when your visa expires but you are also considering other visa extensions. You arrived in Australia on Date one. You previously travelled to Australia for several weeks on a tourist visa several years ago. You left Australia for a family funeral in Country C between Date 4 and Date 5. You and your spouse are renting a property in Australia. You began renting the property on Date 6. Prior to renting the property, you resided with friends. Your current lease agreement expires on Date 7. In Australia, you have: •                personal and joint bank accounts •                an investment account which you have not deposited any money into •                a car.

Prior to leaving Country B, you resided at a property there which you owned for several years. You sold the property prior to Country B. In Country B, you have: •                an investment account •                personal and joint bank accounts •                credit card. You are employed in Country B and are currently on maternity leave. Your maternity leave commenced several months ago. You receive monthly maternity income. This income consists of Occupational Maternity Pay(OMP) from your employer and Statutory Maternity Pay (SMP) from your employer. Tax is being withheld for both the OMP and the SMP. Your position is being held for you. You have a X month notice period. You will submit your notice at the end of your maternity leave. You will use you annual leave to cover the X months after you give notice, so will be employed during that time. Your employment with the employer is likely to cease in several months' time. Your spouse and infant child accompanied you to Australia. You have close friends in Australia but no extended family. You are part of a local mothers' group and a sporting club.

You have close friends in Country B and close friends and family in Country A. You have no sporting connections in Country B or Country A. You maintain your professional connections in Country B via emails, virtual meetings and LinkedIn. You do not have any official professional connections in Australia; however you have been networking with industry experts and attending virtual webinars. You are part of a professional organisation in Australia that works to improve X X in Australian workplaces. Neither you nor your spouse are a Commonwealth of Australia government employee for superannuation purposes. You have a driver's licence in Australia.

Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1997 section 770-10 Income Tax Assessment Act 1997 section 770-15 Income Tax Assessment Act 1997 subdivision 768-R Income Tax Assessment Act 1997 section 768-910 Income Tax Assessment Act 1997 subsection 995-1(1)

Question 1 Summary You are a resident of Australia for tax purposes from Date one to 30 June 20XX. Overview of the law 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', as applied to an individual, are defined in subsection 6(1) of the ITAA 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 (also referred to as the ordinary concepts test) •                the domicile test •                the 183-day test, and •                the Commonwealth superannuation fund test. The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test). Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals . We have considered the statutory tests listed above in relation to your situation as follows: The resides test The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'. The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235 ... here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained. The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                period of physical presence in Australia •                intention or purpose of presence •                behaviour while in Australia •                family and business/employment ties •                maintenance and location of assets •                social and living arrangements. It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances. Because the resides test is about whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia. Application to your situation You are a resident of Australia under the resides test for the period from Date one to Date 2 based on the following: •                period of physical presence in Australia - you have been physically present in Australia since Date one, leaving only to attend a family event in Country C.

•                intention or purpose of presence - you have moved to Australia with your spouse and young child and intend to stay in Australia until at least Date 3 when your visa expires. •                behaviour while in Australia - while in Australia, you have developed a group of close friends. You have also joined a local parents' group and a sporting club. •                family and business/employment ties - you have moved to Australia with your immediate family. Your spouse has several close family members in Country C so you have also moved here to enable you to be closer to them. While in Australia, you have been networking with industry experts and attending virtual webinars. You are part of a professional organisation that works to ensure gender equality in the workplace. •                maintenance and location of assets - prior to leaving Country B, you resided at a property which you have since sold. In Australia, you have bank accounts with your spouse and in your own name. You also have an investment account and a car.

•                social and living arrangements - when you first arrived in Australia, you stayed with friends for several weeks. Since Date 6, you have stayed in an apartment which you have been leasing since Date 6. Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered. Domicile test Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia. Domicile Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile. Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation In your case, you were born in Country A and your domicile of origin is Country A. It is considered that you did not abandon your domicile of origin in Country A and acquire a domicile of choice in Australia. You are not entitled to reside in Australia indefinitely and while living in Australia, you only hold a temporary visa which is valid until Date 3. Therefore, your domicile is Country A and you are a not a resident of Australia under the domicile test. Therefore, your domicile is Country A, and you are a not a resident of Australia under the domicile test. 183-day test Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both: •                the person's usual place of abode is outside Australia, and •                the person does not intend to take up residence Application to your situation For the income year ending 30 June 20XX, you were not present in Australia for more than 183 days. Therefore, you are not a resident of Australia under this test for the income year ending 30 June 20XX.

As at the date of the ruling, you have not been in Australia for 183 days for the income year ending 30 June 20XX. Therefore you are not a resident of Australia under this test for the income year ending 30 June 20XX at the time of completion of the ruling. Superannuation test An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person. Application to your situation You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person. Therefore, you are not a resident under this test. Conclusion You satisfy the resides test of residency and so will be considered a resident of Australia for income tax purposes for the period from XX XX 20XX until 30 June 20XX . Question 2 Summary You are a temporary resident of Australia for the purposes of subsection 995-1(1) of the ITAA 1997. Detailed reasoning

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that you are a temporary resident if: •                you hold a temporary visa granted under the Migration Act 1958 ; and •                you are not an Australian resident within the meaning of the Social Security Act 1991 ; and •                your spouse is not an Australian resident within the meaning of the Social Security Act 1991. The Social Security Act 1991 defines an Australian resident as a person who resides in Australia and is an Australian citizen, the holder of a permanent visa, or a protected special category visa holder who was in Australia on or before 26 February 2001. If you are a temporary resident, you will be a temporary resident as well as a foreign resident or Australian resident for tax purposes. Application to your circumstances In your case, from the date of your arrival in Australia, you were not an Australian resident within the meaning of the Social Security Act 1991 as you were not an Australian citizen, the holder of a permanent visa or a protected special category visa holder. Your spouse is also not an Australian resident within the meaning of the

Social Security Act 1991. As such, you are a temporary resident as defined in section 995-1 of the ITAA 1997 from the date of your arrival in Australia. Question 3 Summary Occupational Maternity Pay (OMP) amounts are included in your assessable income. Detailed reasoning Subdivision 768-R of the ITAA 1997 provides a tax exemption to temporary residents for all ordinary and statutory income from a foreign source and net capital gains from assets that do not have the necessary connection to Australia. It also relieves temporary residents from interest withholding tax obligations associated with amounts owing to foreign lenders. The exemption does not , however, apply to remuneration received for or associated with employment or for services performed while a temporary resident. Subsection 768-910(1) of the ITAA 1997provides the following are non-assessable non-exempt income: (a)            the ordinary income you derive directly or indirectly from a source other than an Australian source if you are a temporary resident when you derive it; (b)            your * statutory income (other than a *

net capital gain) from a source other than an Australian source if you are a temporary resident when you derive it. This subsection has effect subject to subsections (3) and (5). Subsection 768-910(3) of the Income Tax Assessment Act 1997 provides that the following are not non-assessable non-exempt income under subsection(1): (a)            the ordinary income you derive directly or indirectly from a source other than an Australian source to the extent that it is remuneration, for employment undertaken, or services provided, while you are a temporary resident; (b)            your statutory income (other than a net capital gain) from a source other than an Australian source to the extent that it relates to employment undertaken, or services provided, while you are a temporary resident; (c)            an amount included in your assessable income under Division 86 Foreign income tax offset Section 770-10 of the ITAA 1997 is the primary provision under which a foreign income tax offset (FITO) arises. A FITO can be claimed for foreign income tax paid by a taxpayer in respect of an amount that is included in their assessable income.

To qualify for a foreign income tax offset (FITO) you must meet all of the following criteria: •                you must have paid the foreign tax on the foreign income, •                the foreign tax must be a tax which you were personally liable for, and •                the income or gain that the foreign tax was paid must be included in your assessable income for •                Australian income tax purposes Foreign income tax is a tax imposed by a law other than an Australian law, on income profits or gains (subsection 770-15(1) of the ITAA 1997). The concept of 'foreign income tax' is intended to cover foreign taxes imposed on a basis that is substantially equivalent to income tax imposed under Australian law. The FITO is a non-refundable tax offset and is included as a gross up value of the income that is assessed. In determining the availability of a foreign income tax offset, it is necessary to consider not only the income tax laws but also any applicable tax treaties contained in the International Tax Agreements Act 1953 (Agreements Act).

Section 4 of the Agreements Act incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations). Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Convention between the Government of Australia and the Government of Country B for the avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains (The DTA) is listed in section 5 of the Agreements Act. Article 2 of the DTA between Australia and the Country B states that the Country B taxes to which the DTA applies are income tax, corporations tax and capital gains tax. The Australian taxes to which the DTA applies are income tax, resource rent tax and fringe benefits tax imposed under the federal law of Australia. Application to your circumstances

You are receiving ordinary income from your employer (foreign source) in the form of maternity leave which would be remuneration for employment undertaken so it will not be non-assessable non-exempt income under 768-910(3) of the ITAA 1997. Therefore, you will need to include these amounts in your assessable income. As tax has been withheld from the payments in Country B, you are eligible for a FITO in Australia. Question 4 Summary Statutory maternity pay (SMP) amounts are included in your assessable income. Detailed reasoning As outlined in Question 3, the ordinary income you derive directly or indirectly from a source other than an Australian source, to the extent that it is remuneration, for employment undertaken, or services provided, while you are a temporary resident is not non-assessable non-exempt income. Application to your circumstances

You receive statutory maternity payments from your employer which are calculated on a percentage of your average weekly earnings. The payments are paid in the same way as your wages (for example monthly or weekly). Tax is withheld from the payments. These payments are calculated with reference to the amount of employment income you received prior to taking maternity leave. As a result, these payments will be ordinary income. You will need to include the amounts in your assessable income. You will be eligible for a FITO as government of Country B has withheld tax from the payments.