1 Are you a resident of Australia for tax purposes from Date One to Date 2?
1 No. Question 2 Is the income from your employment exercised outside of Australia (in Country A) exempt income under section 6-20 of the Income Tax Assessment Act 1997 (ITAA 1997)? Answer 2 Yes. This ruling applies for the following periods: Year ended 30 June 20XX Year ended 30 June 20XX Year ended 30 June 20XX Year ending 30 June 20XX The scheme commenced on: Date One
You are an Australian citizen. You were granted a Country A spousal visa which expires in 20XX. You have renewed this visa and the new expiry date is 20XX. Your spouse departed Australia for Country A on Date Three. Your spouse is employed by an international organisation and their employment contract is due for completion around 20XX. You departed Australia for Country A to join your spouse on Date One. You commenced employment, working remotely as workplace relations team lead for an Australian company, Company A, on Date Four. You were initially employed on a part time basis. From Date Five you have worked remotely for Company A full-time in the role of People and Culture Business Partner. That contract expired on Date Six. On Date Seven, you accepted a permanent role as XX XX XX Business Partner for Company A. You support the company's Australian operations remotely. You also manage a team of Country A employees engaged in the X Services Centre located in Country A. You perform some of this work onsite in the municipality of City A in Country A.
Your primary work location is your home office. However, you are expected to work a hybrid working pattern splitting your time between your home office and the office. You may occasionally have short term work trips to Australia as required by your employer within your normal scope of work. The number of days you will spend in Australia for work purposes will be very limited, usually one week to two weeks at the most and no more than one business trip per year. Your salary is paid in Australian dollars to an Australian bank account. Company A is withholding PAYG amounts from your salary. You intend to apply for a refund of PAYG amounts and will use these amounts to meet your Country A tax obligations. You have not submitted tax returns in Country A. You do not own any property in Australia and you do not have accommodation available to you in Australia. You cancelled your lease on the property where you were living before departing Australia. You sold your motor vehicle before departing Australia. You have a bank account and superannuation account in Australia.
You have informed the Australian Electoral Commission (AEC) that you reside overseas and they have removed your name from the Electoral Roll. Your spouse has entered into a long-term residential lease on an apartment in Country A, which you share for the period from Date Eight ending on Date Nine. You have informed Medicare of your relocation to Country A. You did not have any private health insurance in Australia. You do not intend to return to Australia in the foreseeable future, with the exception of short trips to visit family for celebrations and special events and emergencies. You have ceased sporting and social club memberships in Australia. You are a member of the local football team in Country A. You have shipped your personal belongings to Country A.
Income Tax Assessment Act 1936 subsection 6(1) Income Tax Assessment Act 1997 subsection 6-5(2) Income Tax Assessment Act 1997 subsection 6-20(1) Income Tax Assessment Act 1997 section 995-1
Summary You are not a resident of Australia for tax purposes from Date One to Date 2. 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 • 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 not a resident of Australia under the resides test for the period from Date One to Date Tenbased on the following: • from the time you left Australia, you returned only for short periods for work purposes • your intention is to reside in Country A with your spouse indefinitely
• physical presence in Australia is for short periods of work as well as travel for special family events • you have been physically present in Country A for the majority of the ruling period with your spouse and Australian employment performed there • your spouse works with a government organisation in Country A and entered a long residential lease in their name you hold a bank and superannuation account but do not own real property or other assets in Australia • you sold your car before leaving Australia and cancelled your Australian rental lease • you ceased your social and sporting memberships in Australia and have joined a local football team in Country A Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered. 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 Country A. You are entitled to reside in Country A on a temporary basis and while living there, you hold a spousal visa which you have recently extended. The visa does not allow you to live in Country A permanently. Therefore, your domicile is still 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: • the intended and actual length of the taxpayer's stay in the overseas country • 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 • 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 • whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence
• the duration and continuity of the taxpayer's presence in the overseas country • 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 The Commissioner is satisfied that your permanent place of abode is outside Australia because: • you were physically present in Country A for the entirety of the ruling period, with the exception of several short trips to Australia • you work remotely for an Australian company in Country A • you terminated the lease on your rented accommodation in Australia before you departed and have no abode to return to in Australia
• your spouse has rented an apartment in Country A where you both reside and have done so since you arrived in Country A • you have shipped your personal effects to Country A • before departing Australia, you informed Medicare and the Australian Electoral Commission that you were leaving • you have established a home with your spouse in the rented accommodation you have acquired in Country A • you currently have no plans to return to Australia in the foreseeable future • you have established a way of life in Country A, including joining a local sporting club Therefore, you are not a resident of Australia under the domicile test from Date one to Date 2. 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 20XX, 20XX or 20XX years. Therefore, you are not a resident under this test for the above income years. You have been present in Australia for over 183 days in 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 The Commissioner is satisfied that your usual place of abode was outside Australia for the relevant income year ending 30 June 20XX based in the following: • you have shipped your personal belongings to Country A • you have no accommodation available to you in Australia • you have no intention to return to Australia in the foreseeable future • you have recently extended your Country A visa
• you have a leased apartment in Country A where you currently reside with your spouse • you have recently signed a permanent employment contract with your employer Intention to take up residency To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts. 'Intend to take up residency' does not merely mean intend to stay for a long time. It means intending to live here in such a manner that you would reside here. Application to your situation The Commissioner is not satisfied that you did intend to take up residence in Australia for the income year ending 30 June 20XX because: • you left Australia for the Country A with no intention to return in the foreseeable future • you disposed of your car and gave up your rental accommodation in Australia • you advised the relevant Australian authorities that you were leaving the country • you left Australia to join your spouse in rental accommodation leased for several years • both you and your spouse have employment in Country A
• you have obtained a visa for Country A which allows you to stay there for several 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. Question 2 Summary The income from your employment exercised outside of Australia (in Country A) is exempt income under section 6-20 of the ITAA 1997. Detailed reasoning Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident 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. Ordinary income is income according to ordinary concepts and has generally been held to include income from rendering personal services, income from property and income from carrying on a business. Subsection 6-20(1) of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. Where income is not subject to tax in Australia by virtue of the provisions of a double tax agreement Australia has with another country, it is exempt income under subsection 6-20(2) of the ITAA 1936. In determining your liability to pay tax in Australia, it is necessary to consider any applicable double tax agreement. 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. The double taxation agreement between Australia and Country A is contained in the
International Tax Agreements Act 1953, being the Agreement between The Government of Australia and the Government of Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the DTA). Article 15 of the DTA provides the following with regard to payments made in relation to employment: Article 15 Dependent personal services 1) Subject to the provisions of Articles 16, 18, l9 and 20, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that 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 an individual who is a resident of one of the Contracting States 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 that other State for a period or periods not exceeding in the aggregate 183 days in the year of income or taxable year, as the case may be, of that other State; and 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 deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in that other State. 3) Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by a resident of one of the Contracting States may be taxed in that Contracting State. Application to your circumstances Article 15 of the DTA gives Country A the sole taxing rights to your employment income, as income derived by an individual who is a resident of Country A in respect of an employment is taxable only in Country A unless the employment is exercised in Australia.
Your employment income, which is exercised outside Australia, as a resident of the Country A, is not assessable in Australia under the DTA. It also meets the definition of 'exempt income' in section 6-20 of the ITAA 1997. Where your employment income is exercised in Australia it will be assessable as a non-resident.