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Edited version of your private ruling
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Subject: Residency and foreign source income
Question 1 and answer:
Are you a resident of Australia for income tax purposes?
No.
Question 2 and answer:
Is your foreign employment income exempt from income tax in Australia?
Yes.
This ruling applies for the following periods:
Year ended 30 June 2013
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
The scheme commenced on:
1 July 2012
Relevant facts and circumstances
You left Australia with your spouse to live in an overseas country.
You have established a home in an overseas country with your spouse and you live within a residential compound.
Your spouse has an employment contract which is automatically renewed on a regular basis and your spouse intends to continue working with the same employer under contract.
You engage in occasional part-time work.
You own a house in Australia jointly with your spouse. This property is leased to tenants on a long term basis through a real estate agent.
You removed your name from the Australian electoral roll.
You have advised all relevant financial institutions to deduct non-resident withholding tax from dividends and investment income which is derived by yourself.
You only visit Australia for short periods to visit your parents and other family.
You and your spouse are not members of a Commonwealth of Australian Government Superannuation fund.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 6(1).
Income Tax Assessment Act 1997 Section 6-5.
Reasons for decision
Residency
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.
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 ones 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 ones settled or usual abode, to live in or at a particular place.
As you have been living with your spouse in an overseas country for some years you are not 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 they have established a permanent place of abode outside of Australia.
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 have been living with your spouse in an overseas country for a considerable period of time. Therefore, the Commissioner is satisfied that you have established a permanent place of abode outside Australia.
The 183-day test
This test does not apply to you as you will not be present in Australia for 183 days or more in any income year.
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.
This test does not apply to you as you and your spouse are not members of a Commonwealth of Australian Government Superannuation fund.
Your residency status
As you are not an Australian resident under any of the tests of residency, you will not be an Australian resident for taxation purposes for the 2012-13, 2013-14, 2014-15 and 2015-16 financial years.
Foreign employment income
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 non-resident of Australia for taxation purposes, your assessable income includes only income derived from an Australian source.
As you are not considered to be an Australian resident, your foreign employment income will be exempt from tax in Australia.