Edited version of your written advice

Authorisation Number: 1012766429332

Ruling

Subject: Residence

Questions and answers

Were you a resident of Australia for taxation purposes for the period you were working overseas?

Yes.

Is your income derived while working for an overseas organisation assessable in Australia?

Yes.

Are you entitled to eligible deductions in relation to your property which was rented out for the period you were working overseas?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2014

Year ending 30 June 2015

The scheme commenced on:

1 July 2013

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.

You were born in Australia and you are a citizen of Australia.

You are not a citizen or permanent resident of any other country.

You worked overseas for a number of months.

You were working for an overseas organisation on a temporary basis as an individual contractor consulting.

You returned to Australia for two trips while overseas to visit family and friends.

You were responsible for your own accommodation while overseas.

You rented out your house in Australia for the period you were overseas.

The property was not rented out for the period of time you returned to Australia to visit family and friends.

You are not currently or have ever been a Commonwealth Government employee.

You will claim interest on mortgage, mortgage fees and council rates as a deduction for the period your property was rented.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(1).

International Organisations (Privileges and Immunities) Act 1963

subsection 3(1)

subsection 5(1)

Part 1 of Fourth Schedule

paragraphs 1,2,3,4,5 and 6 of Part 1 of the Fifth Schedule

Specialised Agencies (Privileges and Immunities) Regulations 1986

regulation 3

subregulation 8(1)

subregulation 9

Reasons for decision

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.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• resides test

• domicile and permanent place of abode test

• 183 day test and

• Commonwealth superannuation fund test.

The primary test for deciding the residency status of each individual is whether they reside 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 resides (ordinary concepts) test

The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word 'resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

You went overseas for work purposes on a temporary basis.

You came back to Australia twice while working overseas to visit family and friends.

You rented your home out in Australia for the period you were working overseas and the home was available for your use when you returned on your visits to Australia.

Based on the facts above you were residing in Australia according to ordinary concepts for the period you were overseas.

The domicile test

If a person's domicile is 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 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.

Your domicile is Australia.

The commissioner is not satisfied that you established a permanent place of abode overseas due to the following facts:

• Your employment overseas was temporary

• You had a home in Australia to return too

• You did not take up permanent residency of any other country

You were a resident under this test.

The 183-day test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You were not in Australia for more than 183 days in the relevant period.

You are not a resident under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the PSS or the CSS, or that person is the spouse or child under 16 of such a person. To be eligible to contribute to those schemes, you must be or have been a Commonwealth Government employee.

You have never been a Commonwealth Government employee.

You are not a resident under this test.

Your residency status

You were a resident of Australia for taxation purposes for the period you were working overseas.

Foreign income

Subsection 6-5(2) of the ITAA 1997 provides that the assessable income of an Australian resident includes ordinary income derived from all sources, whether in or out of Australia, during the income year.

Income from professional services is ordinary income for the purposes of subsection 6-5(2) of the ITAA 1997.

However, subsection 6-15(2) of the ITAA 1997 says that if an amount is exempt income then it is not assessable income.

Section 6-20 of the ITAA 1997 provides that an amount of ordinary income is exempt income if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law.

The International Organisations (Privileges and Immunities) Act 1963 (IO(P&I)A) is a Commonwealth law under which an international organisation, and persons engaged by it, may be accorded certain privileges and immunities including an exemption from tax.

Subsection 5(1) of the IO(P&I)A provides that the Specialised Agencies (Privileges & Immunities) Regulations 1986 (SA(P&I) Regs) may declare an organisation to be an organisation to which the IO(P&I)A applies.

Subsection 3(1) of the IO(P&I)A defines the term 'international organisation to which this Act applies' to mean an organisation that is declared by the regulations to be an international organisation to which the IO(P&I)A applies, and includes a body established by such an organisation.

Regulation 3 of the SA(P&I) Regs says that each Specialized Agency is an international organisation to which the IO(P&I)A applies, therefore the overseas organisation Development Program is an international organisation to which the IO(P&I)A applies.

Entitlement to exemption under the IO(P&I)A depends on whether you were engaged as an employee or as a person who held an office in the An overseas organisation Development Program.

You were engaged as an individual contractor

Under subregulation 8(1) of the SA(P&I) Regs a person who holds an office, other than a high office, in a Specialized Agency such as the overseas organisation Development Program , has the privileges and immunities specified in Part I of the Fourth Schedule to the IO(P&I)A, including income tax exemption on salaries and emoluments received from the organisation. You are not entitled to the privileges and immunities specified in Part 1 of the Fourth Schedule to the IO(P&I)A as you do not hold an office in the An overseas organisation development Program.

Regulation 9 of the SA(P&I) Regs applies to the taxpayer's engagement as a consultant and they are entitled to the privileges and immunities specified in paragraphs 1, 2, 3, 4, 5 and 6 of Part 1 of the Fifth Schedule to the IO(P&I)A, however, income tax exemption is not available for persons serving on a committee or performing a mission (such as individual contractors) for the UNODC.

Accordingly, the income derived by an Australian resident taxpayer as an individual contractor to the overseas organisation is not exempt from tax in Australia under subsection 6-5(2) of the ITAA 1997.

Rental property

Section 8-1 of the Income Tax Assessment Act 1997 allows a deduction for a loss or outgoing to the extent that it is incurred in gaining or producing assessable income but not for a loss or outgoing to the extent that it is of a capital, private or domestic nature.

Rental income is assessable income and is required to be declared in your tax return. You are entitled to claim a deduction for a eligible loss or outgoing that is related to the rental property.

Mortgage interest, mortgage fees and council rates are eligible deductions.

ATO view documents

Taxation Ruling TR 98/17

Taxation Ruling IT 2650

ATOID 2005/116