Edited version of your written advice

Authorisation Number: 1012788831427

Ruling

Subject: Residence

Question and answer

Were you a resident of Australia for taxation purposes for the relevant financial years?

No.

Are you required to declare your income from your work overseas in your Australian tax return?

No.

This ruling applies for the following periods:

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on:

1 July 2009

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.

You are a citizen of Australia.

Your spouse is a duel citizen.

You went to the Country Y in the 20XX financial year.

You travelled on your spouse's EEA visa and were able to remain permanently in the foreign country on this visa.

You and your spouse went to Country Y so your spouse could undertake study.

You obtained employment in Country Y prior to leaving to live in Country Y.

You were considered to be a resident of Country Y for taxation purposes for the period you were working in Country Y.

You were employed in Country Z.

You were a resident of Country Z for taxation purposes for the period you were in country Z.

You paid tax on your income in Country Z.

You rented apartments at your own expense overseas.

You made two trips back to Australia while overseas.

The trips did not exceed 183 days and were to visit family and to undertake a university course.

You have two bank accounts overseas which do not have any funds in them.

You had a bank account, term deposit and personal belongings in Australia which you initially stored with family and then in a commercial facility.

You were renting a property prior to going overseas which you did not maintain while you were overseas.

You returned to live in Australia in the relevant income year to live.

Neither you nor your spouse, are eligible to contribute to the relevant commonwealth super funds.

Relevant legislative provisions:

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

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.

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 and your spouse went overseas to live in the 20XX income years.

You were working overseas and your spouse was studying.

Based on the facts above you were not residing in Australia according to ordinary concepts.

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 of origin is Australia.

The Commissioner is satisfied that you had a permanent place of abode outside Australia for the following reasons:

• You went overseas in 200X and returned in 20YY

• You rented apartments overseas at your own expense

• You did not maintain your rental property in Australia

• You only returned to Australia for short trips

Therefore you are not 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 any of the financial years you were overseas.

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 and your spouse are not eligible to contribute to the relevant super funds.

You are not a resident under this test.

Your residency status

You were not a resident of Australia for taxation purposes for the period you were overseas in the Country Y and the Country Z.

In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.

Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the Income Tax Assessment Act 1936 (ITAA 1936) and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).

Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. The Country Y agreement is listed in section 5 of the Agreements Act.

The agreement between Australia and Country Y operates to avoid the double taxation of income received by residents of Australia and Country Y.

Article XX considers the assessability of income derived from government service.

Article XX states:

(1) Remuneration (including a pension) paid to any individual in respect of services rendered in the discharge of governmental functions to one of the States or to a political sub-division of one of the States or to a local authority of one of the States may be taxed in that State. However, any such remuneration, not being a pension, shall be taxable only in the other State if the services are rendered in that other State and the recipient is a resident of that other State who:

(a) is a citizen or national of that State; or

(b) did not become a resident of that State solely for the purpose of performing the services.

The income you derived while working in country Y is not assessable in Australia as the duties were performed in Country y and you did not become a resident of Country Y solely for the purpose of the employment.

Therefore you are not required to declare the income derived in Country Y in your Australian tax returns.

ATO view documents

Taxation Ruling TR 98/17

Taxation Ruling IT 2650