Edited version of your written advice

Authorisation Number: 1012770555987

Ruling

Subject: Residency and assessability of employment income

Questions and answers

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

No.

2. Is your employment income assessable in Australia?

No.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ending 30 June 2014

Year ending 30 June 2015

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in country X and are a citizen of country X.

You moved to Australia to live with your spouse and children.

You are a citizen of Australia.

You have worked for subsidiaries of company Y for many years.

You started working for company Y in Australia and are still working with this employer.

You worked in Australia for several years and then in overseas countries.

You separated from your spouse.

You were renting accommodation with your family before separating from your spouse.

You returned to country X to live in 20XX.

Your parents and siblings live in country X.

You live with your parents at their home in country X.

You have a partner in country X.

Since 20XX, you have returned to Australia on ten occasions to see your children for periods of one to four weeks.

Apart from the time you spent working, you have spent more time in Australia than country X during the period of this ruling.

You do not own any property in Australia.

Your Australian motor vehicle and household effects remain with your family in Australia.

You have an Australian superannuation fund.

Your salary is paid into an Australian bank account.

Your financial commitments in Australia include the rent on your family's accommodation, children's maintenance payments, children's education, personal loan and credit card payments.

You have maintained your Australian private health insurance and Medicare cover for the benefit of your children.

Your only asset in country X is a bank account.

You have a loan debt in country X.

You state that you are a tax resident of country X.

You haven't lodged an income tax return in any country apart from Australia in recent years.

You have had your name removed from the Australian electoral roll.

You have never been employed by the Australian Commonwealth government.

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, 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. 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'.

In your case, there are various factors that indicate that you are no longer residing in Australia. Specifically, you:

• relocated to country X in early 20XX;

• commenced living with your parents in country X;

• have been working overseas;

• do not have a place to live in Australia;

• separated from your spouse in Australia.

Although you have been working for an Australian company and have made return visits to Australia to visit your children, it is considered that you have not been residing in Australia according to the ordinary meaning of the word from the time you relocated to country X.

Therefore, you are not a resident of Australia under this test.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country.

The intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case, your country of origin is country X and you are a citizen of country X. You subsequently changed your domicile to Australia when you relocated here and became a citizen. However, you returned to country X to live in early 20XX which meant that your domicile reverted back to country X.

Therefore, you are not a resident under this test as your domicile is no longer in Australia.

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 an income year, unless the Commissioner is satisfied that their usual place of abode is outside of Australia and they have no intention of taking up residence here.

You are not a resident under this test as you have not spent more than 183 days in Australia in an income year since you returned to country X to live in early 20XX.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees.

You are not a resident under this test as you are not employed by the Australian Commonwealth government.

Summary

You do not meet any of the tests of residency and ceased to be a resident of Australia from when you relocated to country X in early 20XX.

As a resident for only part of the income tax year ended 30 June 20XX, your income for the year will be taxed entirely at resident rates and the tax-free threshold should be apportioned based on the number of months in the income year that you were a resident.

Assessability of 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 foreign resident, your assessable income includes only income gained from an Australian source. 

The courts have established that the source of employment income is where the work is performed (FC of T v French (1957) 98 CLR 398).

In your case, you have been employed by an Australian company but have been performing your employment duties in foreign countries. Therefore, your employment income does not have an Australian source.

Consequently, your employment income is only assessable in Australia up until the time you ceased to be a resident in early 20XX. None of your employment income is assessable in Australia after you ceased to be a resident.