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Edited version of your private ruling
Authorisation Number: 1012339002950
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Ruling
Subject: Residence and assessability of foreign sourced employment income.
Questions and answers:
Are you a resident of Australia for tax purposes?
Yes
Is employment income paid from a contracted foreign source assessed in Australia when the services are performed in Australia?
Yes
This ruling applies for the following period:
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You are a citizen of an overseas country
You country of origin is an overseas country
You arrive in Australia during the relevant year.
Your period of stay in Australia is currently covered by a temporary resident visa.
You came to Australia to accompany your spouse who has a working contract in Australia.
You have returned to the overseas country numerous times since arriving in Australia. Each time you return you remain for a number of weeks. You return to the overseas country to attend your workplace and to visit your family.
Your spouse is in the process of seeking Australian equivalency for their qualifications, once that is complete, you will apply for Australian permanent residence.
You work remotely as a consultant here in Australia. Your employment does not require that you perform your duties in a specific location. Your employment contract is set in the overseas country.
You pay income tax in the overseas country on your employment income.
You have no immediate plans to leave Australia.
Currently in Australia, you are renting accommodation. Your lease is current until subsequent year.
You own a home in the overseas country. The home is not being rented in your absence. When you return to the overseas country you occupy the home.
You assets in Australia include a transaction account
Your assets in the overseas country include savings and your home.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
Reasons for decision
Residence
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. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.
The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a 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 resides test
The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'.
Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:
· whether the person is physically present in that country at some time during the year of income
· the history of the person's residence and movements
· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits
· if the person is outside the country for part of the relevant income year, the purpose of the absences
· the family and business ties which the person has with the particular country, and
· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.
You were physically present in Australia during the relevant years and you intend to remain in Australia for periods thereafter.
You have made regular return visits to the overseas country since first arriving in Australia.
When you returned to the overseas country it was/is to spend time with family and attend to your office. You are in the overseas country for about X months of the year.
You live in Australia with your spouse.
You maintain a home in your country of origin; you currently occupy a leased residence in Australia with your spouse.
On the weight of your circumstances, you are an Australian resident under the resides test. As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency.
Your residency status
As you meet the resides test, you are a resident of Australia for tax purposes.
As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia and will therefore include the income you receive from employment.
Tax treaty between Australia and Elsewhere
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.
Therefore in accordance with this agreement, whilst your services are performed in Australia, they are taxable in Australia.
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