Edited version of private advice

Authorisation Number: 1052028430062

Date of advice: 7 September 2022

Ruling

Subject: Residency

Question 1

Are you a foreign resident of Australia for taxation purposes immediately following your relocation to Country A?

Answer

Yes.

Question 2

Is your employment income paid by Company A attributable to employment exercised in Country A taxable in Australia?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Country B which is your country of origin.

You became an Australian citizen in 19XX.

You moved from Australia to Country A in early 20XX.

Prior to moving you were living in Australia and were an Australian tax resident.

Prior to moving you had been in a relationship with a person residing in Country A for a period of X years.

You moved to Country A to live with your de facto partner, and you have continued this relationship.

One of your children is a minor and relocated with you. They are currently attending school in Country A.

Your immediate family consists of your de facto partner and your dependent child who both reside with you in Country A.

You also have adult children who are not dependents, some of whom reside in Australia, with others residing in other countries.

Your intention at the time of relocating to Country A in early 20XX was:

•         to move to Country A and reside with your de factor partner for an indefinite period

•         to continue your employment with Company B and provide services remotely whilst living in Country A

•         for your dependent child to attend school in Country A

Currently, you have no intention of returning to reside in Australia.

Both your child and your de facto partner are financially dependent on you.

You currently have a renewable temporary residency permit in Country A which has a X year validity and is renewable X times.

You will become eligible for a permanent residency permit in 20XX, and you will apply for one once eligible.

Following your relocation, you have continued your employment as the Managing Director of Company B rendering services remotely whilst living in Country A.

You have employment ties and are a director of a number of companies in a number of countries.

You are a director of a Country A company from which you receive a quarterly salary payment from.

You are a director of a number of Australian domiciled companies. These relate to your role as a Managing Director of the Group A.

You do not receive any director's fees from any Australian company.

Under your employment agreement you:

•         are required to work fulltime being 37.5 hours each week with reasonable additional hours

•         report to the Chairman of the Board and the Board; and

•         receive an annual salary

The salaried wage is solely connected to the day to day managerial functions of Group A. Your salary is paid by Company A.

The remuneration derived by you in respect of your employment is deposited into your personal Australian bank account.

You receive passive rental income from a property in Country C.

You secured leased accommodation in Country A in early 20XX. The lease is a long term lease with approximately XX years remaining.

The property was rented from 20XX until 20XX.

The building on the property was demolished and you built a new residential premise on the property in 20XX.

You have lived at that property as your principal place of residence since late 20XX.

All your personal belongings are located with you in Country A.

You have visited Australia X times since relocating to Country A, on each occasion for a period of no more than 10 days.

You have not cancelled your voting registration but cast your Australian vote in Country A at the Australian Consulate.

You have international private health insurance as it is a requirement of your residency permit in Country A.

You do not have private health insurance in Australia.

You attend parents' meetings of the school your child attends, and you attend events of a sports organisation that your child trains at.

You are a supporter of a Country A not for profit foundation.

You have been a member of an Australian football club for the past 25 or so years which entitles you to attend 11 home games per annum. As you have spent very little time in Australia you have not attended a game since 20XX.

You purchased motor vehicles in Country A which you maintain. You own them outright and they are not leased.

You own a vehicle in Australia which is used by one of your children exclusively.

You have X properties in Australia - X are rented to third parties and one, the former family home, is currently being lived in by one of your children.

You have a home loan account and two investment loan accounts.

Your Australian accounts are held with a bank who class you as a Country A resident.

You do not have any other investments in Australia.

You have two Country A bank accounts.

You are a member of an Australian industry superannuation fund.

You are not a member or the spouse of a member of the Public Sector Superannuation Scheme or the Commonwealth Superannuation Scheme.

Assumptions

You are a resident of Country A for tax purposes under Country A law for the periods ruled on.

You will be present in Australia for less than 183 days during the 20XX-XX, 20XX-XX and 20XX-XX income years.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 6-5(3)

International Tax Agreements Act 1953

Reasons for decision

Question 1

Are you a foreign resident of Australia for taxation purposes immediately following your relocation to Country A?

Summary

Yes, having considered your circumstances as a whole and the residency tests, it is accepted that you are not a resident of Australia for income tax purposes.

Detailed reasoning

Overview of the law

For tax purposes, whether you are a resident of Australia is defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The definition has four tests to determine your residency for income tax purposes. These tests are:

•         the resides test

•         the domicile test

•         the 183 day test, and

•         the Commonwealth superannuation fund test.

It is sufficient for you to be a resident under one of these tests to be a resident for tax purposes.

Our interpretation of the law in respect of residency is set out in:

•         Taxation Ruling IT 2650 Income tax: residency - permanent place of abode

•         Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

The resides test

The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

Some of the factors that can be used to determine whether you reside in Australia include:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

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 domicile test

Under the domicile test, if your domicile is in Australia, you are a resident of Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile. For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case. Key considerations in determining whether you have your permanent place of abode outside Australia are:

•         whether you have definitely abandoned, in a permanent way, living in Australia

•         length of overseas stay

•         nature of accommodation, and

•         durability of association

The 183-day test

Under the 183 day test, if you are present in Australia for 183 days or more during the income year, you will be a resident, unless the Commissioner is satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

The question of usual place of abode is a question of fact and generally means the abode customarily or commonly used by you when are physically in a country.

The Commonwealth 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

We have considered each of the statutory tests listed above in relation to your particular facts and circumstances. We conclude that, for the period 1 July 20XX to 30 June 20XX, you are not a resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are not a resident of Australia according to ordinary concepts.

Although we consider that your domicile is in Australia, the Commissioner is satisfied that your permanent place of abode is outside Australia. We considered the following factors in forming our conclusion:

•         You relocated to Country A with no intention of returning to Australia to live

•         Your de facto partner and dependent child accompanied you to Country A

•         You will apply for permanent residency in Country A

•         You live in a property with a long term lease with XX years remaining

•         You continued your employment rendering services remotely from Country A

•         Your movements and habits are consistent with having a settled routine in Country A

You were not in Australia for 183 days or more during the 20XX, 20XX income years and you won't be in the 20XX, 20XX and 20XX income years. In any case, your usual place of abode is outside Australia, and you do not intend to take up residence in Australia.

You do not fulfil the requirements of the Commonwealth Superannuation test and are therefore not a resident under this test.

Question 2

Is your employment income paid by Company A attributable to employment exercised in Country A taxable in Australia?

Summary

No, Country A has sole taxing rights over your employment income attributable to the portion of your employment that was carried out in Country A.

Detailed reasoning

Overview of the law

Subsection 6-5(3) of the ITAA 1997 provides that the assessable income of a foreign resident taxpayer includes ordinary income derived directly or indirectly from all Australian sources during the income year.

In determining liability to Australian tax in respect of Australian sourced income received by a foreign resident, it is necessary to consider not only the income tax laws but also any applicable tax treaty contained in the International Tax Agreements Act 1953 (the Agreements Act). Sections 4 and 5 of the Agreements Act incorporate that Act with the ITAA 1936 and the ITAA 1997 and provide that the provisions of a double tax agreement have the force of law.

Article 15 of the Australia/Country A Double Tax Agreement (Country A Agreement) deals with dependent personal services and states:

1. Subject to the provisions of Articles 16, 18, 19 and 20, 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.

We note that Articles 16, 18, 19 and 20 of the Country A Agreement are not relevant to you.

Application to your circumstances

In your case, Article 15 reads that the employment income derived by you as a resident of Country A for the purposes of the Country A Agreement is taxable only in Country A unless the employment is exercised in Australia. Where the employment is exercised in Australia, the income derived from that employment may be taxed in Australia.

Country A will have the sole taxing rights on the remuneration you receive for employment that was carried out in Country A.

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