Edited version of your private ruling

Authorisation Number: 1012563844048

Ruling

Subject: Residency

Question 1

As a member of the Public Sector Superannuation Scheme do you remain a resident of Australia for income tax purposes as defined in section 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936)?

Answer

Yes.

Question 2

Are you a resident of Country X under the tie-breaker rules of the Double Tax Agreement between Australia and Country X?

Answer
No.

Question 3

Will your income be assessable in Australia while you are living and working in Country X?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2014

The scheme commenced on:

1 July 2013

Relevant facts and circumstances

Your parent is a foreign citizen residing in Country X who has developed a serious illness and is living alone without any family support.

You have returned as a family unit (together with your spouse and two children under 16) to assist with transitioning your parent to a sustainable living environment.

You own a home in Australia. You have friends living it and paying utilities and a contribution to the mortgage for some of the time. After that a family member will live there rent free so that it is not vacant for security reasons. You have left all your personal effects and furniture there.

You don't own a home in Country X. You are currently renting furnished accommodation near your parent.

Country X's revenue commissioner's website states you may be considered a resident of Country X.

Due to the specialist nature of your work and ongoing international commitments with your work programme your employer (Commonwealth Government) has facilitated an arrangement for you to work remotely for the Commonwealth whilst in Country X.

You departed Australia in the 2012-13 financial year and commenced remote work in the 2013-14 financial year.

Your spouse is also working for his Australian-based company (non-Commonwealth). The company does not have a permanent establishment in Country X from which they run a business.

Your spouse's employer will only support his remote work as long as he remains a resident of Australia for taxation purposes.

You plan to return to Australia at the start of the 2014-15 financial year. However, you have recently learned that your spouse's parent in Australia has been diagnosed with a serious illness so it is possible that he will have to travel back to Australia before July. It is difficult to say when or for how long.

It is possible that you may have to go back to Australia for work but this would be for two weeks maximum.

You are not on an official diplomatic posting but you are a permanent Commonwealth government employee and you have been an active contributing member of the PSS for over ten years and did not change over to the PSSap.

You hold dual citizenship of Country X and Australia.

Australian citizenship is a requirement of your job and you have became an Australian several years ago.

Your spouse is an Australian citizen only.

You are seeking to determine which country has taxing rights over your income.

You are currently paying tax in Australia.

Relevant legislative provisions
Income Tax Assessment Act 1936 Section 6(1)

Income Tax Assessment Act 1997 Section 6-5

International Tax Agreements Act 1953 Sch20 Art4

International Tax Agreements Act 1953 Sch20 Art20

Reasons for decision

Summary

You remain a resident of Australia for taxation purposes.

Your government service income is taxable solely in Australia.

Residency
The existing definition of 'resident' or 'resident of Australia' contained in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936), so far as it applies to individuals, provides four tests of residency:

(i)   residence according to ordinary concepts;

(ii)  the domicile test;

(iii)   the 183 days test; and

(iv)   the Commonwealth superannuation test.

In determining whether or not a natural person is a resident of Australia, the starting point is always whether the individual in question resides in Australia within the ordinary meaning of that expression. However, the satisfaction of any one test is sufficient to render an individual a resident of Australia for Australian income tax purposes.

The Commonwealth superannuation test (subparagraph 6(1)(a)(iii) of the ITAA 1936) was inserted into the Act in 1939 to include all Commonwealth public servants as residents. This was done by treating as a resident a person who contributes to the Commonwealth Superannuation Scheme (CSS). The spouse or child under 16 of a person who contributes to the CSS is also treated as a resident.

The PSS was introduced on 1 July 1990 as a consequence of the passage of the Superannuation Act 1990 (SA 1990). The amendment treats Commonwealth public servants who are members of the PSS in the same way as they would have been treated had they been members of the CSS. A spouse or a child under 16 years of age of a member of the PSS scheme will also be treated as a resident.

To determine whether you are a resident under the Commonwealth superannuation test, for the period you are residing in Country X, it is necessary to determine whether you are a member of the PSS for the purposes of the SA 1990 for that period.

Rule 1.1.1 of The Schedule to the SA 1990 defines a 'member' to mean a person who is a member of the PSS. Generally this would include a permanent or temporary employee of the Australian Public Service (APS). Active members of these Commonwealth government superannuation funds and their spouses are always residents of Australia for tax purposes.  

You are a permanent Commonwealth government employee and an active contributing member of the PSS. You will remain a resident of Australia for taxation purposes under the Superannuation test.

Assessability of income

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) advises that where you are a resident of Australia for taxation purposes, your assessable income will include ordinary income derived from all sources, whether inside or outside of Australia.

Salary and wages are ordinary income for the purpose of subsection 6-5(2) of the ITAA 1997. Subsections 6-20(1) and (2) explain that such income will not be taxable in Australia if another provision of the ITAA 1997 or the Income Tax Assessment Act 1936 (ITAA 1936) makes it exempt from tax.

The double taxation agreement between Country X and Australia
In determining the assessability of your income it is necessary to consider not only the Australian income tax laws, but also any applicable double tax agreement (DTA) that exists between Australia and Country X.

The DTA between Australia and Country X (the Agreement) is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. This Agreement operates to avoid the double taxation of income received by residents of Australia and Country X.

The areas of the Agreement are broken down into separate Articles covering different types of income.

One Article of the Agreement explains that remuneration (other than a pension or annuity) paid by the Australian government to any individual in respect of services rendered in the discharge of governmental functions shall be taxable only in Australia. However, such remuneration shall be taxable only in Country X if the services are rendered in Country X and the recipient is a resident of Country X who:

· is a citizen of Country X; or

· did not become a resident of Country X solely for the purpose of rendering the services.

You advised that the country X revenue commissioner's website may consider you to be a resident of Country X.

You departed Australia in the 2012-13 financial year. In line with the country X revenue commissioner's directives, you would be a resident of Country X for the 2013 and 2014 country X tax years.

Because you are a resident for income tax purposes of both Country X and Australia we therefore need to look at the rules contained within the Agreement to make the determination of which country you are a resident of, for the purpose of the Agreement.

Article 4 of the Agreement examines residence and explains that:

(1) For the purposes of the Agreement you will be a resident of either Country X or Australia:

(a) in the case of Australia, subject to the provisions of paragraph (2) of this Article, if you are a resident of Australia for the purposes of Australian tax; and

(b) in the case of Country X, if you are liable to tax therein by reason of your domicile, residence, place of management of any other criterion of a similar nature but not if you are liable to tax in Country X in respect only of income from sources from within Country X.

(3) Where by reason of the preceding provisions of this Article you are a resident of both Country X and Australia, then your status shall be determined in accordance with the following rules:

· You will be a resident solely of the country in which you have a permanent home available to you.

· If you have a permanent home available to you in both Australia and Country X, you will be a resident solely of the country in which you have an habitual abode.

· If you have an habitual abode in both countries you will be a resident solely of the country with which your personal and economic relations are the closer.

You have a permanent abode in Australia and you are currently renting a home in Country X. However, your home in Country X is temporary and your home in Australia is your habitual abode. In addition, your personal and economic relations are closest in Australia as your employment is based in Australia and your personal effects remain there.

Accordingly, you are a resident of Australia for the purposes of the Agreement and your income from Government employment is assessable only in Australia.

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