1 Are you a resident of Australia for taxation purposes?
Yes. Question 2 Is your income paid from overseas assessable in Australia? Answer Yes. This ruling applies for the following period : Year ended 30 June 20XX The scheme commences on: 1 July 20XX
You are an Australian citizen. You lived in Country X for a period early 20XX to work. You rented accommodation while in Country X. While working in Country X you paid tax as a resident of Country X. Your remuneration was paid into a Country X account. Your family remained in Australia in your home and did not join you to live in Country X. You sent money to your family in Australia while you were in Country X. You returned to Australia in early 20XX. You continued your Country X employment remotely after returning to Australia. Your work had no connection to the Australian office of your employer. You paid tax in Country X as a resident of Country X on your income. You remained in Australia. Your employment contract expired in early 20XX and was not renewed.
Income Tax Assessment Act 1936 Subsection 6(1) Income Tax Assessment Act 1997 Subsection 995-1(1) Income Tax Assessment Act 1997 S ection 6-5 Agreement between the Government of Australia and the Government of Country X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income 1990
Question 1 Summary Your circumstances satisfy three of the four tests for Australian tax residency for the relevant period, therefore you are an Australian resident for taxation purposes. 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, • the domicile test, • the 183 day test, and • the superannuation test. The primary test for deciding the residency status of an individual is whether they reside 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 resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary , 2001, rev. 3 rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679). 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. Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: • Physical presence • Intention or purpose of presence • Family and business/employment ties • Maintenance and location of assets, and • Social and living arrangements.
These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/ 17 Income tax: residency status of individuals entering Australia. It is important to note that not one single factor is decisive, and the weight given to each factor depends on each individual's circumstances. Application to your circumstances In your case, you were a resident of Australia under the resides test for the following reasons: • You have a permanent dwelling in Australia in which you resided for the entire period. • You retained ownership of this dwelling while you worked in Country X. • Your family lived with you in this dwelling and remained there while you worked in Country X. • You resided in this dwelling for more than 183 days for each of the financial years you worked in Country X. 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 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 acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must 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. 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 courts have held that the phrase 'permanent place of abode' calls for a consideration of the town or country where a person is located. 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 his or her permanent place of abode outside Australia are: (a) whether the taxpayer has definitely abandoned, in a permanent way, living in Australia; and (b) whether the taxpayer is living permanently in a specific country. Paragraph 23 of Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode: (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 circumstances You were a resident of Australia under the domicile test for the following reasons: • You are an Australian citizen. • The Commissioner is not satisfied that you have a permanent place of abode outside Australia as Your primary dwelling remains in Australia. You family continued to live in Australia in your primary dwelling for the duration of your employment in Country X. Further from early 20XX you lived in your Australian home. 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. In the context of the 183- day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. 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 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, it is necessary to 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 circumstances You were a resident of Australia under the 183-day test for the following reasons: • You were present in Australia for the entire period. • The Commissioner is not satisfied that your usual place of abode was outside Australia and is not satisfied that you did not intend to take up residence in Australia, as Your primary dwelling remains in Australia Your family continued to live in your primary dwelling for the duration of your employment..
You have lived in your Australian residence from early 20XX. 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 circumstances In your case, you were not resident of Australia under the superannuation test for the following reasons: • You are not a contributing member of 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. Conclusion You were a resident of Australia under the resides test, and both the domicile and 183-day test confirm that you were an Australian resident for taxation purposes for the relevant period. Question 2 Summary As you were an Australian resident for taxation purposes over the relevant period, all foreign sources of income are assessable in Australia under section 6-5 of the ITAA 1997.
The double tax agreement with Country X provides that Australian residents shall be taxable only in Australia for work performed in Australia even if the work is performed for a foreign employer. Detailed reasoning Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. An article of the Australia-Country X DTA states that for taxation purposes, an individual who resides in both Contracting States will be deemed to be a resident solely of the Contracting State in which the person has a permanent home available, or in the case where the individual has a permanent home both or neither Contracting State, they will be deemed to be a resident of the Contracting State with which the person has closer personal and economic ties. Another Article 15 of the Australia-Country X DTA provides that income from a Country X-based employer shall be taxed only in Australia when the employment is exercised in Australia by an Australian resident.
Also the Australia-Country X DTA states that credits for tax paid in Country X are only allowed against Australian tax when the tax has been paid correctly under the law of Country X as well as the provisions of the Australia-Country X DTA. Application to your circumstances You are a resident of Australia for taxation purposes; therefore all foreign and local sources of income are assessable in Australia under Section 6-5 of the ITAA 1997. You are also deemed to be solely a resident of Australia for taxation purposes under the tiebreaker tests in Article 4, Paragraph 3 of the Australia-Country X DTA 1990 as your permanent home remained in Australia and your family remained in this home. As you physically resided in Australia for the entire period, any income earned from your Country X employer will be taxable only in Australia according to Article 15 of the Australia-Country X DTA 1990.