Edited version of private advice

Authorisation Number: 1051526580639

Date of advice: 12 June 2019

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for income tax purposes effective from a date?

Answer

No

Question 2

Is the income you derived from Australia post a date assessable in Australia?

Answer

No

This ruling applies for the following period:

Period ended 30 June XXXX

The scheme commences on:

XX December XXXX

Relevant facts and circumstances

You are a Dual Citizen.

You had a country of origin.

You have worked in Australia since XXXX departing Australia on a date to holiday with your family.

You entered a country and have no intention to return to Australia.

You have informed the Australian Electoral Commission that you have departed Australia.

You have informed your health care provider that you have departed Australia and have cancelled your policy.

You have established a residence in a country.

You have purchased a vehicle and hold a driving licence issued from the relevant country.

You have purchased household effects for your residence.

You are utilising your pre-existing bank account.

You have not lodged a foreign income tax return.

You do not own any property in Australia and have not invested in property since leaving Australia.

You work remotely as a sole trader, for Australian clients.

You travelled to Australia for work purposes, your family accompanied you.

You physically conducted your sole trader activities on a construction site.

Your sole trader activity has a postal address located in Australia.

You have maintained Australian bank accounts.

You are not an eligible member of the Commonwealth Superannuation Scheme, or the Public Service Superannuation Scheme.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

International Tax Agreements Act 1953

Reasons for decision

Summary

You departed Australia and established a family residence in a country. You have no intention to return to Australia therefore you are no longer a resident of Australia for taxation purposed.

To meet the requirements of your sole trader activity, a client required you returned to Australia for a limited period of time to meet project expectations. As you did not establish a fixed base in Australia to conduct the work all associated income is not assessable in Australia.

Detailed reasoning

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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', in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

·         the resides test,

·         the domicile (and permanent place of abode) test,

·         the 183 day test, and

·         the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

Based on the facts you have provided, we can conclude that you will not satisfy any of the test of residency and you are not a resident of Australia for taxation purposes.

Double Tax Agreement

The relevant country agreement is located on the Austlii website (http://www.austlii.edu.au/) in the Australian Treaties Series database. The relevant countryagreement operates to avoid the double taxation of income received by residents of Australia and the relevant country.

Article 15 of the relevant country agreement discusses that "Income derived by an individual who is a resident of one of the Contracting States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to activities exercised from that fixed base."

Fixed base

To assist in the interpretation of the Ireland Agreement, reference is made to Taxation Ruling

TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements.

The Commissioner's view in paragraphs 101 to 105 of Taxation Ruling TR 2001/13 is that, when interpreting a tax treaty recourse must be had to the Commentary on the OECD Model Tax Convention on Income and on Capital ('OECD Commentary'), including any subsequent revisions to that OECD Commentary, as a supplementary means of interpretation. The latest edition of the Model was published in 2017.

The glossary lists the term "Fixed base" as follows, this term was used in the OECD and UN model tax treaties in the context of independent personal services, but the former Article 14 has been removed from the OECD Model and these issues are now generally dealt with under Article 7, dealing with business profits attributed to permanent establishments. It denotes a centre of activity of a fixed or permanent character from which such services can be carried out such as a physician's consulting room. The fixed base provision attributes the right to tax income from independent personal services to the "other" country (i.e. the source country) if the taxpayer has a fixed base available to him in that country and income is attributable to that fixed base.

You derived your income as a sole trader; the physical works were conducted on a construction site. As you are not a resident of Australia for tax purposes since entering the relevant country, and did not establish a fixed base in Australia on your return for a period of time. Article 15 of the relevant country Agreement provides that your income will not be assessable in Australia as you did not establish a fixed base in Australia whilst conducting your sole trader activities during a period of time.

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