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Edited version of private ruling
Authorisation Number: 1011850760305
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Ruling
Subject: Residency for tax purposes
Questions and answers:
1. Are you a resident of Australia for tax purposes from the time you moved to Australia?
Yes.
2. Is your salary from your Country X employer taxable in Australia?
Yes.
This ruling applies for the following period:
Year ended 30 June 2011
The scheme commenced on:
1 July 2010
Relevant facts and circumstances
You are a citizen of Country X.
You moved to Australia in February 2011.
You moved with your spouse and child.
You have no other family in Australia.
You moved to Australia to spend time with your spouse's family and to decide whether you wanted to move to Australia permanently.
When you moved to Australia you intended to live here for at least three years.
For family reasons, you and your family may be returning to Country X at the end of 2011.
Your employer is in Country X. You perform your employment duties in Australia.
You pay tax on your salary in Country X.
You have not returned to Country X since arriving in Australia.
Later this year, you intend to return to Country X for one month for work purposes and also to visit your family and friends.
You and your family rent a house in Australia.
You owned a dwelling in Country X which you sold before moving to Australia.
You have a bank account in Country X.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Income Tax Assessment Act 1936 Subsection 6(1)
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, where you are a foreign resident, your assessable income includes only income derived from an Australian source.
The terms 'resident' and 'resident of Australia', in regard to 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 for income tax purposes. These tests are:
· the resides test,
· the domicile test,
· the 183 day test, and
· 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 Macquarie Dictionary, 2001, rev. 3rd 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'.
Taxation Ruling TR 98/17 Income Tax: residency status of individuals entering Australia emphasises the quality and character of an individual's behaviour while in Australia assists in determining whether the individual resides here.
All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:
· intention or purpose of presence
· family and business/employment ties
· maintenance and location of assets, and
· social and living arrangements.
No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.
In your case, you are residing in Australia for the following reasons:
· You intended to live here for at least 3 years
· Your spouse and child have moved with you to Australia
· You sold your dwelling in Country X when you moved to Australia
As you are residing in Australia according to ordinary concepts, you are a resident of Australia for tax purposes.
The 183 day test
Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in a year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.
In your case, you will be physically present in Australia for a period greater than 183 days. You do not have a permanent place of abode outside of Australia.
Therefore, you are also a resident under this test.
As you meet 'the resides' test and the 183 day test, you are a resident of Australia for tax purposes.
As you are a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income includes income gained from all sources, whether in or out of Australia.
Double tax agreement between Australia and Country X
Australia and Country X currently have an agreement in place to avoid double taxation and to prevent fiscal evasion with respect to taxes on income.
The article of the agreement dealing with income from employment states that salary and wages derived by an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.
Because you perform your employment duties in Australia, your salary and wages income is sourced in Australia. Therefore, as a resident of Australia, your salary and wages income is only taxable in Australia.
Therefore, the income you earn from working for your Country X employer is taxable in Australia and must be included in your Australian income tax return.