Residency

1 Are you an Australian resident for taxation purposes for the income year ended 30 June 20XX?

Yes. Question 2 Are you an Australian resident for taxation purposes for the income year ended 30 June 20XX? Answer Yes. Question 3 Are you an Australian resident for taxation purposes for the income year ended 30 June 20XX? Answer Yes. Question 4 Are you an Australian resident for taxation purposes for the period X to X? Answer Yes. Question 5 Are you a resident solely of Country A under Article 4 of the Double Tax Agreement between Australia and Country A (Country A Agreement) for the period 20XX to 20XX? Answer Yes. Question 6 If you are found to be a resident of Australia for the Australian income year ending 30 June 20XX, is your foreign employment income for the period XX to XX, assessable income in Australia? Answer Yes. Question 7 If you are found to be a resident of Australia for the Australian income year ending 30 June 20XX, is your foreign employment income for the period XX to 30 June 20XX, assessable income in Australia? Answer No. Question 8 Are you entitled to a foreign income tax offset for the foreign tax paid on your foreign employment income for the period from 20XX to 20XX? Answer No. This ruling applies for the following periods : Year ended 30 June 20XX

Year ending 30 June 20XX Year ending 30 June 20XX Year ending 30 June 20XX The scheme commences on: 1 July 20XX

You were born in Australia and are a citizen of Australia. You commenced employment with Association A in Country A during the 20XX income year. Your employment contract is for a period of XX months, but you are hopeful the contract will be extended. You were required to move to Country A to undertake your employment. You left Australia during the 20XX income year. You undertook and performed employment duties for your Country A employer and derived employment income while physically in Australia for approximately one month before moving to Country A. Country A tax has been withheld by your Country A employer from your income since you commenced employment duties with them. When you arrived in Country A, you were required to complete XX days of hotel quarantine before moving into an apartment. You continued to perform employment duties for your Country A employer and derived employment income while in hotel quarantine. When you arrived in Country A you held a visitor visa. You were granted a work visa on approximately 2 months after arriving in Country A which allows you to reside in Country A until the completion of your current employment contract.

Your work visa was supplied by your employer. You intend on applying for permanent residency in Country A, however before you can do so, you need to have resided in Country A for a number of years. You intend on returning to Australia at the end of your overseas employment. You will reside in rent-free accommodation sponsored by your employer either in a suite or leased apartment in Country A. You are required to pay all water, electricity, gas, television, heating and property management expenses during your stay in Country A. Your postal address is in Country A. You are married to an Australian citizen and have two dependant Australian citizen children. One of your children, Child A, has a medical condition and is supported by medical and allied health professionals. Your spouse and children have not relocated to Country A with you due to Child A's medical condition. You and your spouse are the registered proprietors of a residential property in Australia with a mortgage. You and your spouse hold a joint Mortgage offset account. You own a motor vehicle registered in your name which is being used solely by your spouse. The vehicle is under finance.

You financially support your family together with your spouse. Your spouse works part-time, and their income is transferred into your joint Mortgage Offset Bank Account. You opened a bank account in Country A. You and your spouse have a joint bank account in Australia, and you also have a personal bank account which has not been used for daily expenses since approximately two months before your departure to Country A. Your Australian financial intuitions have not been notified that you are a foreign resident as you understand you will not be earning any income where non-resident withholding tax is required to be withheld. You are offered, as an employment benefit, 4 annual round-trip flight tickets between Australia and Country A, or another destination, so that you can see your family during your annual leave. The maximum period you would leave Country A for would be 20 days per year if you elected to use your annual leave to travel outside Country A. This will be subject to COVID-19 restrictions and political issues.

Your family has not yet visited you in Country A because of the severe lockdowns imposed in Country A and the negative impact this could have on Child A if they tested positive to COVID-19 and had to be separated from the family to quarantine. Instead, your family joined you in Country B for 3 weeks as hotel quarantine and COVID-19 pre-entry testing was not imposed on tourists in Country B. You are required to purchase Country A insurance policies which must remain in place for the duration of your employment in Country A. You have not advised your private health insurance provider to have your policy suspended or cancelled as your spouse and children are on the same policy. You may cancel or suspend your policy once you can confirm that it will not impact on your spouse and children. You have purchased a current Country A private health medical insurance policy since the start of your employment. You did not advise Medicare of your departure. You will notify Medicare once you confirm that doing so will not affect the medical entitlements of your spouse and children.

Your spouse informed the Australian Electoral Commission that you had relocated to Country A, and they removed your name from the electoral role. You have not maintained any professional or sporting connections in Australia. You are unable to maintain any connections that could give rise to or be perceived to conflict with your obligations to your employer. You have developed professional connections in Country A. You join in on activities organised at local sporting facilities and are often invited to dine with dignitaries of a sporting federation in Country A. The strict covid lockdowns have limited your ability to develop other connections in Country A. You became a resident of Country A for taxation purposes on X 20XX. You are a resident of Country A for taxation purposes for the Country A 20XX, 20XX, and 20XX income years. You and your spouse are not members of the Public Sector Superannuation Scheme or an eligible employee under the Commonwealth Superannuation Scheme.

Income Tax Assessment Act 1936 section 6-1 Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 995-1 International Tax Agreements Act 1953 section 4 International Tax Agreements Act 1953 section 5

Questions 1 to 4 Are you an Australian resident for taxation purposes? Summary You are a resident of Australia for taxation purposes as you meet the resides and the domicile tests of residency. Detailed reasoning 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 Draft Taxation Ruling TR 2022/D2 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... [W]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 ordinary concepts test is 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: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity. Application to your situation We have taken the following into consideration when determining whether you meet the resides test:

•      You have moved to Country A to undertake employment •      You intend on returning to Australia at the end of your overseas employment •      Your spouse and children will stay in Australia while you work in Country A •      You and your spouse own a residential property in Australia which is the family home •      Your spouse and children will continue to live in the family home while you work in Country A •      You continue to financially support your spouse and children by transferring money into your Australian Mortgage Offset Bank Account •      You are maintaining your bank accounts, property and motor vehicle in Australia You will continue to have a strong continuity of association with Australia and are a resident of Australia under the resides test for the relevant period. 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 Australia and your domicile of origin is Australia. It is considered that you will not abandon your domicile of origin in Australia and acquire a domicile of choice in Country A. You are not entitled to reside in Country A indefinitely and while living in Country A, you only hold a work permit which is valid until 20XX. You have not yet obtained permanent residency in Country A, and you do not intend to live there indefinitely. Therefore, your domicile remains in Australia. Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case. 'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory. The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world. The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are: •         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia •         whether the taxpayer is living in a town, city, region or country in a permanent way. The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

(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 and then to move on to another country or to return to Australia at some definite point in 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 taxpayer's presence in the overseas country; and (f)    the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on. As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

Application to your situation We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia: •      You are employed in Country A on a fixed-term contract •      You intend on returning to Australia at the end of your overseas employment •      Your family will remain in Australia in the family home •      You have an established home in Australia which your family will continue to live in while you work in Country A •      You continue to financially support your spouse and children by transferring money into your Australian Mortgage Offset Bank Account •      You are maintaining your bank accounts, property and motor vehicle in Australia The Commissioner is not satisfied that your permanent place of abode is outside Australia. You have not definitely abandoned, in a permanent way, living in Australia. Therefore, you are 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 in Australia. Application to your situation 20XX Income Year You were present in Australia for 183 days or more during the 20XX income year. Therefore, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia, and you do not have an intention to take up residence in Australia. Usual place of abode In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836. Application to your situation We have taken the following into consideration when deciding whether your usual place of abode is outside of Australia: •      You moved to Country A to undertake employment on a fixed-term contract •      You intend on returning to Australia at the end of your overseas employment •      Your family will remain in Australia in the family home •      You have an established home in Australia which your family will continue to live in while you work in Country A

•      You stay in accommodation in Country A supplied by your employer •      You are maintaining your bank accounts, property and motor vehicle in Australia •      You will continue to have a strong continuity of association with Australia Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the 20XX income year. Therefore, you are a resident under this test for the 20XX income year. 20XX and 20XX Income Year You will not be present in Australia for 183 days or more during the 20XX or 20XX income years. Therefore you are not a resident under this test for those income years. 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. Questions 1 to 4 Conclusion You satisfy one or more of the residency tests and so are a resident of Australia for income tax purposes for the relevant periods. Question 5 Are you a resident solely of Country A under Article 4 of the Double Tax Agreement between Australia and Country A (Country A Agreement) for the relevant period? Summary We have concluded that the tiebreaker tests in Article 4 of the Country A Agreement apply so that you are deemed to be a resident only of Country A for treaty purposes. Detailed reasoning It is possible to be a resident for tax purposes of more than one country at the same time in respect of an income year or part of an income year. If this is the case, in determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreements. Sections 4 and 5 of the International Tax Agreements Act 1953

(Agreements Act) incorporate that Act with the ITAA 1936 and the ITAA 1997 and provide that the provisions of a double tax agreement have the force of law. You have stated that you are a resident of Country A for taxation purposes for the Country A 20XX, 20XX, and 20XX income years. Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. [1] Article 4 of the Country A Agreement sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the double tax agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. The tiebreaker rules in Article 4 of the Country A Agreement are as follows:

Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the status of the person shall be determined in accordance with the following rules: (a) the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; (b) if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's economic and personal relations are the closer. Permanent home Permanent home is not defined in the Double Tax Agreement. Therefore recourse can be made to supplementary materials in order to aid construction. The OECD commentary to the Model Tax Convention provides that in relation to a 'permanent home':

a. for a home to be permanent, an individual must have arranged and retained it for his or her permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration. The dwelling has to be available at all times continuously and not occasionally for the purposes of a stay, which owing to the reasons for it is necessarily of short duration (e.g. travel for pleasure, business travel, attending a course etc) For instance, a house owned by an individual cannot be considered to be available to that individual during a period when the house has been rented out and effectively handed over to an unrelated party so that the individual no longer has possession of the house and the possibility to stay there. b. any form of home may be taken into account, including a house or apartment belonging to or rented by the individual and a rented furnished room. We have concluded that you have a permanent home available in Australia and Country A based on the following considerations:

•         You stay in accommodation in Country A sponsored by your employer which will be available to you for the duration of your employment contract in Country A •         You have an established home in Australia which your family will continue to live in while you are working in Country A. Economic and personal ties (centre of vital interests) The OECD commentary states that regard should be had to the taxpayer's family and social relations, their political, cultural or other activities, their place of business, the place from which they administer their property etc. As noted in Pike v Commissioner of Taxation [2020] FCAFC 158 at [39], the clause does not place greater weight on personal factors over economic factors. In each case it will be a matter of fact and degree as to whether a taxpayer's personal and economic relations, viewed as a whole, support ties closer to one contracting state over the other contracting state. In Pike v Federal Commissioner of Taxation

[2019] FCA 2185 it was found that a taxpayer who had a spouse and children in Australia and owned a non-income producing block of land and motor vehicles in Australia, had closer personal and economic ties as a whole to the foreign country. The court noted that the taxpayer had a range of personal relations in the foreign country and derived an income stream from the employment he carried out in the foreign country where he spent most of the relevant period. It was this foreign sourced income which not only supported his life and lifestyle in the foreign country but also supported his family in Australia. In your case, in Australia: •      You have a spouse and children who live here •      Your assets include the family home, bank accounts and a car •      You do not receive any income from Australian sources In Country A: •      You do not have any family •      You have developed professional connections and engage in social activities •      Your have a bank account •      You are employed in Country A •      You derive employment income that supports the lifestyle of you and your family

We have concluded that your personal and economic ties as a whole will be closer to Country A for the relevant period. This takes into account your personal circumstances which include the significant income stream you derive from your employment in Country A that supports the lifestyle of you and your family. Question 5 Conclusion The tiebreaker tests in Article 4 of the Country A Agreement apply so you are deemed to be a resident only of Country A for treaty purposes. The provisions of the Country A Agreement will therefore apply on the basis that you are a resident of Country A. Question 6 If you are found to be a resident of Australia for the Australian income year ending 30 June 20XX, is your foreign employment income for the period X 20XX to X 20XX, assessable income in Australia? Summary Your foreign employment income for the specified period is assessable in Australia. Detailed reasoning Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income you derive directly or indirectly from all sources whether in or out of Australia during the income year.

Employment income is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997. Therefore, any employment income will be assessable income as you are considered to be an Australia resident for domestic taxation purposes, unless an article of the Country A Agreement applies to prevent this. Article X - Dependent personal services In your case, you entered into an employment contract and the income derived from your employment is therefore, subject to Article X of the Country A Agreement which deals with dependent personal services. 1. Subject to the provisions of Articles X to X, salaries, wages and other similar remuneration derived by an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State.

2. Notwithstanding the provisions of paragraph (1), remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 183 days in any consecutive period of 12 months; (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of that other State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in that other State. Paragraph 2 of Article X does not apply to you for the relevant period as you were present in Australia for a period exceeding 183 days in a consecutive period of 12 months. In your case, paragraph 1 of Article X reads that the employment income derived by you as a resident of Country A for the purposes of the Country A Agreement is taxable only in Country A unless the employment is exercised in Australia. Where the employment is exercised in Australia, the income derived from that employment may be taxed in Australia. Question 6 Conclusion

Your foreign employment income will be assessable in Australia. Australia will have dual taxing rights on the remuneration attributable to the portion of employment that was carried out in Australia for the relevant period. Question 7 If you are found to be a resident of Australia for the Australian income year ending 30 June 20XX, is your foreign employment income for the period X 20XX to 30 June 20XX, assessable income in Australia? Summary Your foreign employment income for the specified period is not assessable in Australia. Detailed reasoning In your case, Article X reads that the employment income derived by you as a resident of Country A for the purposes of the Country A Agreement is taxable only in Country A unless the employment is exercised in Australia. Where the employment is exercised in Australia, the income derived from that employment may be taxed in Australia. Question 7 Conclusion Your foreign employment income is not assessable in Australia from X 20XX. Country A has sole taxing rights on the remuneration attributable to the portion of employment that was carried out in Country A from X 20XX to 30 June 20XX. Question 8

Are you entitled to a foreign income tax offset for the foreign tax paid on your foreign sourced income for the period from X 20XX to XX 20XX? Summary You are not entitled to a foreign income tax offset for the specified period. Detailed reasoning Where foreign tax is paid in relation to income derived by an Australian resident from foreign sources, a credit (called a foreign income tax offset (FITO)) may be allowed against the Australian income tax payable on that foreign income. Article XX of the Country A Agreement deals with methods of elimination of double taxation and paragraph 1(a) states: Where a resident of Country A derives income from Australia, the amount of tax on that income payable in Australia in accordance with the provisions of this Agreement may be credited against the Country A tax imposed on that resident. The amount of credit, however, shall not exceed the amount of the Country A tax on that income computed in accordance with the taxation laws and regulations of Country A.

Article XX provides that subject to the provisions of the law of Australia, Country A tax paid under the law of Country A and in accordance with this Agreement, in respect of income derived by a resident of Australia from sources in Country A shall be allowed as a credit against Australian tax payable in respect of that income. Article XX states that for the purposes of this Article, profits, income or gains derived by a resident of a Contracting State which are taxed in the other Contracting State in accordance with this Agreement shall be deemed to be income arising from sources in that other State. Your income from the period X 20XX to X 20XX is sourced in Australia under Article XX of the Country A agreement. As your income is not sourced in Country A, Country A tax paid will not be allowed as a credit against Australian tax payable in respect of income and you will not be entitled to a FITO. The provisions in Article XX will apply so that tax payable in Australia may be credited against the Country A tax imposed. You will need to seek a refund from the Country A tax authorities. Question 8 Conclusion

You are not entitled to a foreign income tax offset in Australia. You will need to seek a refund of the tax paid in Australia from the Country A tax authorities. > [1] See also ATO ID 2003/1195.