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Edited version of private ruling
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Ruling
Subject: Assessable income - postdoctoral fellowship
Is your overseas postdoctoral fellowship assessable income?
Yes.
This ruling applies for the following periods:
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are currently working as a postdoctoral research assistant.
You will be departing overseas to undertake a postdoctoral fellowship.
You will be living overseas for the length of time of your fellowship. You will travel on a professional working visa.
You will receive a settling and maintenance allowance along with paid travel and insurance.
The fellowship you have been awarded requires you to conduct your research overseas under the leadership of a host researcher.
You are married and own your own home.
You will be travelling alone and your family will remain in Australia. You will be returning to Australia maybe once a year during your stay overseas to visit your family. Your family will visit you.
You will be supporting your family from your salary while overseas.
You will be renting a room and purchasing your personal effects.
You intend to return to Australia at the end of the fellowship.
You have a property for investment purposes in Australia.
You are not a member of the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).
Reasons for decision
Summary
The fellowship financial support you will receive whilst living overseas is assessable income in Australia as you are deemed to be a resident of Australia.
Detailed reasoning
Whether or not income is assessable in Australia firstly depends on whether or not you are considered to be an Australian resident for taxation purposes.
The concept of whether an individual is an Australian resident for tax purposes is important under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Subsection 6-5(2) of the ITAA 1997 states that, if you are a resident, your assessable income will include all ordinary income derived from all sources in or out of Australia. Subsection 6-5(3) of the ITAA 1997 states that, if you are not a resident, your assessable income will include only income derived from Australian sources.
An Australian resident is defined in subsection 995-1(1) of the ITAA 1997 to be 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. These tests are:
1. the resides test
2. the domicile test
3. the 183 day test
4. the Superannuation test.
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 considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.
The resides test
The ordinary meaning of the word 'reside' according to the Shorter Oxford English Dictionary, 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.
As you will be maintaining a home overseas where you will be residing, and you have obtained a full time postdoctoral fellowship, you would not be considered to be residing in Australia.
The domicile test
If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied that they have a permanent place of abode outside of Australia.
Domicile
Generally speaking, persons leaving Australia temporarily would be considered to have maintained their Australian domicile unless it is established that they have acquired a different domicile of choice or by operation of law.
In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her indefinitely in that country.
In your case, you intend to return to Australia after the postdoctoral fellowship ends. Therefore, you are considered to maintain your Australian domicile.
Permanent place of abode
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 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.
Taxation Ruling IT 2650 outlines some relevant factors used in determining an individuals permanent place of abode outside Australia. They include:
· intended and actual length of stay overseas
· continuity of presence overseas
· existence of an established home overseas
· existence of a residence in Australia, and
· family and financial ties.
Your intended length of stay overseas is for the period of the fellowship. You will continue to maintain an association with Australia through your family who will remain in Australia, your home and investment property. These factors indicate that you will not have established a permanent place of abode outside Australia.
Accordingly, it is considered that you will be a resident of Australia for tax purposes under the domicile test.
The 183 day test
This test does not apply to you as it has been identified that your permanent place of abode will be in Australia.
The Superannuation test
You are not a member of the PSS or CSS.
Your residency status
As you would be deemed to be a resident of Australia under the tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a resident of Australia for tax purposes.
Therefore, the fellowship financial support you receive while living overseas will be assessable in Australia.