1 Are you considered a foreign resident for taxation purposes?
1 Yes Question 2 Will your employment income related to services performed/exercised overseas be assessable in Australia? Answer 2 No This ruling applies for the following periods : Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ending 30 June 20XX The scheme commences on: 1 July 20XX
You were born in Australia and are an Australian citizen You moved to XXXX on XXXX together with your family in order to undertake an employment opportunity. You have held a XXXX for the last XXXX years and XXXX employment contract with XXXX. Your XXXX is renewed every XXXX years. Whilst your family moved back to Australia in XXXX, you continue to live and be based in XXXX. You have a long‐term rental lease in XXXX. The lease is for a XXXX apartment to allow your family to visit and stay during school holidays. Your personal belongings are based in XXXX. You maintain ties with the local XXXX community, including medical practitioners and gym memberships. You are not on the Australian electoral roll and do not hold a valid Medicare card. You have also cancelled your Australian private health insurance. You hold an employment contract with, and are paid by, a XXXX entity. Under this XXXX contract, you hold three different roles, including two XXXX roles and an XXXX role covering Australia.
As part of these roles, you are required to travel to Australia for business trips and approximately XXXX% of your employment costs are cross charged to an Australian entity to reflect these duties. You perform your Australian responsibilities under your regional role, as well as performing your employment duties for other, non‐Australian markets on a 'remote working' basis. Your remuneration for your workdays physically performed in XXXX (both for Australian and non‐Australian duties) are reported via an Australian payroll (under a shadow payroll process) and PAYG taxes are remitted to the ATO. In addition, employer superannuation guarantee contributions are made based on your physical Australian workdays. In the XXXX tax year, you were physically present in Australia for XXXX days For the XXXX tax year, you are considering increasing your physical days in Australia (likely to be for a total of XXXX to XXXX days). You have ownership interest in an Australian property and have an Australian superannuation fund and a (joint) bank account. You hold foreign shares and investments and participates in a XXXX Retirement Scheme. You hold a XXXX Drivers License.
You are not a member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS)
Income Tax Assessment Act 1936 Subsection 6(1) Income Tax Assessment Act 1997 Subsection 6-15(1) Income Tax Assessment Act 1997 subsection 995-1(1) Income Tax Assessment Act 1997 Section 6-5 Income Tax Assessment Act 1997 Subsection 6-5(3)
Question 1 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 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 moved to XXXX on XXXX together with your family in order to undertake an employment opportunity • You have a long‐term rental lease in XXXX • Your personal belongings are based in XXXX
• You have held a XXXX Pass for the last XXXX years and XXXX employment contract with XXXX. Your XXXX Pass is renewed every XXXX years. • You maintain ties with the local XXXX community, including medical practitioners and gym memberships • You hold an employment contract with, and are paid by, a XXXX entity. You are not a resident of Australia under the resides test from XXXX. You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test). 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 did not abandon your domicile of origin in Australia and acquire a domicile of choice in another country. You are not entitled to reside in XXXX indefinitely and while living in XXXX, you only held a work permit which was valid and renewable every XXXX years. Therefore, your domicile is 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 moved to XXXX on XXXX together with your family in order to undertake an employment opportunity • You have a long‐term rental lease in XXXX • Your personal belongings are based in XXXX • You have held a XXXX Pass for the last XXXX years and XXXX Employment Contract with XXXX. Your XXXX Pass is renewed every XXXX years. • You maintain ties with the local XXXX community, including medical practitioners and gym memberships • You hold an employment contract with, and are paid by, a XXXX entity. The Commissioner is satisfied that your permanent place of abode is outside Australia. Therefore, you are 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 in Australia.
Application to your situation You have not been present in Australia for 183 days or more during the relevant income years. Therefore, you are not a resident under this test. 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 As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes from XXXX. Question 2
Subsection 6-5(3) of the ITAA 1997 provides that ordinary income derived by a non-resident directly or indirectly from Australian sources, as well as other ordinary income included by a provision on a basis other than having an Australian source, is assessable. The salary and wages received by the taxpayer are ordinary income for the purposes of subsection 6-5(3) of the ITAA 1997. In determining liability to tax on Australian sourced income received by a non-resident, it is necessary to consider not only the income tax laws but also any applicable double tax agreement contained in the International Tax Agreements Act 1953 (the Agreements Act). Section 4 of the Agreements Act incorporates the Agreements Act with the ITAA 1997 so that the two Acts are read as one. The XXXX contains the double tax convention between Australia and XXXX. The XXXX Convention operates to avoid the double taxation of income received by Australian and XXXX residents.
Article XXXX(XXXX) of the XXXX Convention provides that Remuneration or other income derived by an individual who is a resident of one of the Contracting States in respect of personal (including professional) services performed or exercised in the other Contracting State shall be exempt from tax in the other Contracting 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 the year of income or in the basis period for the year of assessment as the case may be of that other Contracting State; (b) the services are performed or exercised for or on behalf of a person who is a resident of the first-mentioned Contracting State; and (c) the remuneration or other income is not deductible in determining the profits for tax purposes in the other Contracting State of a permanent establishment in that other Contracting State of that person. The terms "Contracting State", "one of the Contracting States", and "other Contracting State" mean Australia or XXXX.
You were present in Australia for a period not exceeding 183 days. Your salary and wages were paid by both an Australian and XXXX resident employer and the exemption under Article XXXX of the XXXX Convention will, therefore, not apply. Accordingly, as per Article XXXX, you will be assessable under subsection 6-5(3) of the ITAA 1997 on the salary and wages received from your employer, for services that are exercised within Australia, for the relevant income years. Therefore, any income for services performed or exercised outside of Australia, would not be required to be reported here and would only be reported in the relevant contracting state.