Edited version of private advice

Authorisation Number: 1051811356638

Date of advice: 15 March 2021

Ruling

Subject: Residency and assessable income

Question 1

Are you a resident of Australia for taxation purposes from mid 20XY to mid 20XX?

Answer

No.

Question 2

Are you a resident of Australia for taxation purposes from mid 20XX?

Answer

Yes.

Question 3

Are the payments of salary received by you, along with the end of service payments received, assessable in Australia?

Answer

Yes.

Question 4

Are the salary payments received, along with the reimbursement of expenses received, assessable income in Australia?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia and Country Z.

You and your family have been living in City Z.

You have been working for Company Z in City Z.

You were required to attend a workshop in Australia and returned early 20XX.

Your family remained in City Z.

Covid-19 meant that you were not able to return to City Z as planned.

You lived in short-term accommodation in City Z while working for Company Z in Australia.

You requested assistance from your employer to temporarily relocate your family back to Australia.

Your family returned early 20XX.

Your employer instructed you that you were not able to return to City Z in the short-term and assisted you in finding employment in Australia.

You had a rental property in City Z.

Qatar closed it borders early 20XX.

Instructions were given to removalists remove your property from the rental in City Z.

Early 20XX you had discussions with a potential Australian employer.

Early 20XX your belongings were shipped from City Z.

You got an extension to your lease in City Z.

Mid 20XX your belongings arrive in Australia.

Your resident permit in City Z was cancelled mid 20XX.

You accepted an offer of employment in Australia.

You signed a contract with Company Y mid 20XX.

You relocate with your family for work.

Mid 20XX your employment with Company Z ends.

You commence your new employment in Australia mid 20XX.

Your lease on the property in City Z ended.

You and your family moved into a home you have purchased and your belongings are moved in.

All payments were made to you by Company X on behalf of Company Z.

You were in Australia for XXX days in the 20XX income year.

You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

Reasons for decision

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, if you are a foreign resident, your assessable income includes only income derived from an Australian source (subsection 6-5(3) of the ITAA 1997).

The terms resident and resident of Australia, regarding 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. These tests are:

1.    the resides test

2.    the domicile tests

3.    the 183-day test

4.    the superannuation tests.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

In considering the definition of 'reside', the High Court of Australia, in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at page 99-100, per Latham CJ, noted the term 'reside' should be given a wide meaning for the purposes of section 6(1) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303, Deputy President Forgie said at paragraphs 43 and 44 that the widest meaning should be attributed to the word 'reside'.

The question of whether an individual 'resides' in a country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and considered the following factors as being relevant:

(i)            physical presence in Australia;

(ii)           nationality;

(iii)          history of residence and movements;

(iv)          habits and 'mode of life';

(v)           frequency, regularity and duration of visits to Australia;

(vi)     purpose of visits to or absences from Australia;

(vii)   family and business ties with Australia compared to the foreign country concerned; and

(viii)  maintenance of a place of abode.

The weight given to each factor varies with individual circumstances and no single factor is necessarily decisive. In Shand v Federal Commissioner of Taxation 2003 ATC 2080, the Tribunal stated (at 35):

Questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.

You have been living and working in City Z. You returned to Australia for work early 20XX.

During the period you were in Australia for work Covid-19 meant that you could not return to City Z. Your employer was not able to return you to work in City Z and you worked from Australia. Your family were brought back to Australia and the border to City Z was closed. You along with your employer commenced trying to find you a job in Australia. You accepted a position and commenced working with Company Y mid 20XX. You purchased a house and moved in late 20XX.

Based on the information provided to us you were not a resident of Australia for taxation purposes under the resides test from mid 20XY to mid 20XX.

You came back to Australia on early 20XX for work purposes and you were not able to return to City Z due to the pandemic. For a number of months you were uncertain as to your ability to return to City Z and your employer required you to work in Australia.

It then became clear when the border was closed to City Z and your belongings were removed from your rental property in City Z that your stay in Australia was more permanent. You and your employer then embarked on finding you a new job in Australia. You resumed your status as a resident of Australia for taxation purposes mid 20XX when you accepted the job with Company Y.

It was at this point that you made the decision to reconnect with Australia and resume living and working in Australia.

You are a resident of Australia for taxation purposes from mid 20XX under this test.

The domicile test

If a person's domicile is Australia they will be an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country.

Your domicile of origin is Australia.

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which a person intends to live for the rest of his or her life. An intention to return to Australia in the foreseeable future to live does not prevent the taxpayer in the meantime setting up a permanent place of abode elsewhere.

The Commissioner is satisfied that you had a permanent place of abode in City Z from mid 20XY to mid 20XX.

The Commissioner is not satisfied that you had a permanent place of abode in City Z from mid 20XX due to the following:

•         you accepted a position with an employer in Australia

•         you were not able to resume working in City Z due to the pandemic

•         the border to City Z was closed

•         you had your belongings removed from the rental property in City Z

•         your resident permit was cancelled.

You became an Australian resident and did not have a permanent place of abode in City Z from mid 20XX.

The 183-day test

Under this test, a person who is present in Australia, whether continuously or intermittently, for more than half the income year may be said to have a constructive residence in Australia unless it can be established that:

•         their usual place of abode is outside Australia

•         they have no intention to take up residence in Australia

The term 'usual place of abode' is not the same as 'permanent place of abode'. Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly used be a person when they are physically present in a country.

You have not been in Australia for more than 183 days in the 20XX income year.

The Commissioner is satisfied that you are not a resident under this test.

The superannuation tests

This test covers Commonwealth government employees - members of the Commonwealth superannuation funds (as well as their spouses and children under 16 years of age).

A person is a resident under this test if they are:

•         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

•         the spouse, or a child under 16, of a person covered by either of the above.

You and your spouse are not eligible to contribute to the relevant Commonwealth super funds.

Residency Status

Your residency status

You were a not a resident of Australia from mid 20XX to mid 20XX. You are a resident of Australia from mid 20XX.

Relevant payments

As a resident of Australia for taxation purposes you are assessed on your world-wide income under section 6-5 of the ITAA 1997.

You received payments for salary from your former employer after you resumed your residency status with Australia mid 20XX.

The payments were received by you mid 20XX.

These payments are assessable income in Australia under section 6-5 of the ITAA 1997.

The payments received are not assessable as you were a non-resident when you received these payments which are salary from your former employer and they are from a foreign source.

The payment from your employer which represent reimbursements in mid 20XX are not assessable.

The end of service payments received by you on mid 20XX are not assessable income in Australia under section 83-235 ITAA 1997 as they were received by you as the result of the termination of your employment in a foreign country, the payments are not a superannuation benefit, the payments are not a pension or annuity and the payments relate to a period of time when you were not an Australian resident.

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