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Edited version of private ruling
Authorisation Number: 1011673233394
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
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Ruling
Subject: Residency
1. Were you an Australian resident for income tax purposes for the period you were working in Country X?
No.
2. Was your foreign employment income assessable in Australia?
No.
This ruling applies for the following periods:
Year ended 30 June 2010
The scheme commences on:
1 July 2009
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
Your country of origin is Australia and you are an Australian citizen.
You departed Australia in 2008 to move indefinitely in Country X.
You resigned from your permanent employment in Australia to take up a permanent position with the Country X airlines.
You were living in a rented accommodation while in Country X.
You own a residential unit in Australia and it was rented while you were out of the country.
You were subject to the Country X taxation regulations and paid tax in Country X.
You were not a Commonwealth government of Australia employee.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1)
Income Tax Assessment Act 1997 Subsection 6-5(3)
Reasons for decision
While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.
Your residency status for taxation purposes and the source of income determines your liability for Australian taxation.
Residency
The terms resident and resident of Australia are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides a series of tests to ascertain whether a person is a resident of Australia for taxation purposes.
Two of the tests that are relevant to your circumstances depend on whether you could be considered to be residing permanently or for a considerable period of time in Country X, such that it is your settled or usual place of abode.
You were living and working in Country X. You resigned from your permanent employment in Australia to take up a permanent position with Country X airlines. You were renting a property there. You rented out your main residence in Australia for the period you were in Country X.
Although you maintained an association with Australia through your family and assets, your associations with Country X were more significant as you were residing and working full time there.
Therefore, you would be considered to have established a permanent or long-term residence outside of Australia.
The other residency test that is potentially relevant to your circumstances involves membership of superannuation scheme set up for employees of the Commonwealth.
As you were not a member of such a scheme, however, this test will not apply.
In view of the above, it has been concluded that you were not an Australian resident for income tax purposes for the period of your employment in Country X.
Income from Country X
Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a foreign resident of Australia includes all the ordinary income derived directly or indirectly from all Australian sources during the income year.
A foreign resident is a person who is not a resident of Australia.
Salary and wages are regarded as ordinary income.
The source of income derived from employment is generally the place where the duties or services are performed (Federal Commissioner of Taxation v. French (1957) 98 CLR 398; (1957) 11 ATD 288; (1957) 7 AITR 76).
As your employment duties were carried on outside of Australia, they were considered to be sourced out of Australia. Therefore the income derived in relation to such employment is not assessable in Australia under subsection 6-5(3) of the ITAA 1997 as you were a foreign resident.