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Ruling

Subject: Residency

Questions

1. Are you a resident of Australia for income tax purposes?

No.

2. Are you assessable in Australia for remuneration received for working in Australia a period during 2007?

Decline to Rule.

3. Are you assessable in Australia for remuneration received for working in Australia from July 2007 to June 2008?

Yes.

4. Are you assessable in Australia for remuneration received for working in country B for a period in 2008?

No.

5. Are you assessable in Australia for remuneration received for working in Australia from July 2008 to June 2009?

Yes.

This ruling applies for the following periods

Year ended 30 June 2009

Year ended 30 June 2008

Year ended 30 June 2007

The scheme commenced on

During 2007

Relevant facts

You are a country A citizen.

You have worked in Australia for the following periods:

A few months until mid 2007 and paid in country A by employer A.

July 2007 and paid in country A by employer A.

Then for a number of months worked and paid in Australia by employer B and your salary was taxed in Australia.

Then for a number of month you worked in country B and were paid outside of Australia.

The next few months you worked and were paid in Australia by employer B and you salary was taxed in Australia.

From late 2008 until late 2009 you worked for another Australian employer in Australia.

You have worked in Australia on a 457 Visa which commenced in August 2007.

For the period before your 457 visa had commenced your country A employer treated you as a country A resident.

You do not have a permanent place to live in Australia.

Your employers provided you with accommodation while in Australia.

You do not have any assets in Australia except a joint account with your wife.

You own a property and have a bank account in country A.

You did not bring any family to Australia, your spouse remained in country A.

You state that you do not know if your some of your employers were Australian residents or non-residents and if non-residents whether you remuneration was deducted in determining the taxable profits of a permanent establishment in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Subsection 6-5(2).

International Tax Agreements Act 1953 schedule 2

Taxation Administration Act 1953  Section Sch 1 357-105

Taxation Administration Act 1953  Sub section Sch 1-357-105(2)

Reasons for decision

Residency and assessability of income

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

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

§ 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.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd 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 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

You advised that:

§ you arrived in Australia in early 2007 and did not have a 457 visa until after June 2007;

§ you were living in Australia as your employment required you to;

§ you lived in temporary accommodation provided by your employer;

§ you own a home in country A and do not have any assets in Australia, and

§ your spouse lives in country A and did not accompany you while you worked in Australia.

Based on this information you are not an Australian resident for taxation purposes for the periods in question as your behaviour in Australia does not reflect a degree of continuity, routine or habit that is consistent with residing here.

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 they have a permanent place of abode outside of Australia.

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 home indefinitely in that country.

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 the 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.

In your case,

§ You do not have a permanent place to live in Australia,

§ Your employer provides you with accommodation while in Australia,

§ You own a residence and have a bank account in country A,

§ Your spouse remained in country A while you worked in Australia.

The Commissioner is not satisfied that you have a permanent place of abode in Australia.

As your domicile is in country A and you have not taken any action to change your domicile you are not a resident for tax purposes under this test.

The 183-day test

This test does not apply to as your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Taxation of income 

Under section 6-5 of the ITAA 1997, residents of Australia can be taxed on their income from all sources both in and out of Australia. However, Australia is also bound by the provisions of the International Tax Agreements Act 1953 (ITAA 1953), which takes precedence over the ITAA 1997 where there are inconsistent provisions.

An agreement between Australia and country A is contained in Schedule x of the ITAA 1953 (the agreement) and covers the taxing rights of certain income. The relevant article of the agreement deals with the taxing rights of income from personal services.

AnArticle of the country A Convention provides that salary and wages derived by a country A resident for employment exercised in Australia may be taxed in Australia.

However the Article provides that the income will only be taxed in country A if:

(a) the taxpayer is present in Australia for a period or periods not exceeding 183 days in the Australian income year;

(b) the remuneration is paid by, or on behalf of, an employer or company who is not a resident of Australia; and

(c) the remuneration is not deductible in determining taxable profits of a permanent establishment, a fixed base or a trade or business which the employer or company has in Australia.

Year ended 30 June 2007

As you could not provide a definite answer as to whether your employer was a non-resident and whether your remuneration was deducted in determining taxable profits of the company the Commissioner cannot rule.

Under section 357-105 of Schedule 1 to the Taxation Administration Act 1953 (TAA), if further information is required in order to make a private ruling, the Commissioner must request that information from the applicant.

Because of the binding nature of a private ruling and the rights of review available to the applicant, the facts in relation to the scheme to be ruled on must be fully disclosed and explained to ensure that the scheme has been clearly identified.

Sub-section 357-105(2) of the TAA provides that the Commissioner may decline to make the ruling if the applicant does not give the information to the Commissioner within a reasonable time.

As a response to our request for further information has not been received, it is considered that insufficient information has been provided to enable a private ruling to be given.

Accordingly, the application for a private ruling (for the year ended 30 June 2007) under Division 359 of Schedule 1 to the TAA has been declined.

Years ended 30 June 2008 and 2009

In 2008 and 2009 you were in Australia for over 183 days, therefore paragraph (2) of the country A Convention cannot apply and all Australian sourced salary and wages are assessable in Australia.

The income you earned in country B is not assessable as it is not Australian income and you are not considered an Australian for tax purposes.