Edited version of private advice

Authorisation Number: 1052165261905

Date of advice: 6 September 2023

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Is your consultancy income assessable in Australia?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Country Z.

You departed Country Z to come to Australia to live and work.

You are on a temporary 12 month visa.

You reside with your partner in Australia who is also on a temporary visa.

You will apply as a dependant on your partners visa when your visa expires.

You and your partner intend on residing in State Z for the duration of your stay in Australia.

You intend on returning to Country Z in the future.

If your partner is offered a contract extension you may stay in Australia.

Prior to your departure from Country Z you were working full-time.

Your employment ceased when you departed Country Z.

You are now working full-time with your former employer in Country Z.

You are working remotely in Australia from your home office.

You are not a resident of Country Z for taxation purposes.

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)

International Tax Agreements Act 1953

Reasons for decision

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 TR 2023/1 Income tax: residency tests for individuals.

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 relevant period you are a resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are a resident of Australia according to ordinary concepts as you are living and working in Australia.

You and your partner are living in State Z and intend remaining there for the duration of your stay in Australia.

Your domicile is in Country Z and you are therefore not a resident under this test.

You were not in Australia for more than 183 days in the relevant income year and you are therefore not a resident under this test.

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

You are a resident of Australia for taxation purposes for the duration of your stay in Australia.

Consultancy income

As a resident of Australia for taxation purposes you are required to declare your world-wide income in your Australian tax return.

In determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreement. Sections 4 and 5 of the International Tax Agreements Act 1953 (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 7(1) of the Agreement between Australia and Country Z concerning Business profits states:

The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated in that other State. If the enterprise carries on business in that manner, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment.

Article 3 of the Country Z Agreement states that the term 'enterprise' applies to the carrying on of any business.

In your case, you are a resident of Australia for tax purposes and are also a resident of Australia for the purposes of the Country Z Agreement.

Therefore, your business activities constitute an enterprise of Australia and your consultancy income is assessable in Australia under Article 7 of the Country Z Agreement.

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