Edited version of your written advice

Authorisation Number: 1051481334777

Date of advice: 8 February 2019

Ruling

Subject: Residency of Australia for taxation purposes and assessable income.

Question 1

Did your residency of Australia for tax purposes cease on the date of your departure?

Answer

Yes

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms ‘resident’ and ‘resident of Australia’, in regard to an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

● the resides test,

● the domicile test,

● the 183 day test, and

● the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

Based on the facts you have provided, we can conclude that you will not satisfy any of the tests of residency.

Accordingly you are not a resident of Australia for income tax purposes under section 995-1(1) of the ITAA 1997 and subsection 6(1) of the ITAA 1936.

Question 2

Should only the income earned for services carried out for the Australian employer whilst in Australia be included as assessable income?

Answer

Yes

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 Tax Treaty between the foreign country and Australia clarifies the taxation of income where the employee is a resident of another country.

Under Article 15 of the Double Tax Agreement (DTA) an individual who is a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.

In your case, you are a resident of the foreign country and as such the income is assessable there as the employment is not exercised in Australia. You should not include the income received after you ceased being a resident of Australia for taxation purposes.

This ruling applies for the following period:

Year ended 30 June 2018

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You were born in the foreign country and are a citizen there.

You do not hold citizenship or permanent residency in any other country.

You own property in the foreign country.

You arrived in Australia in mid 2015.

Your visa allowed you to live in Australia with your family for four years with an expiry date of mid-2019.

You had an employment contract for twelve months which was subsequently extended to late 2017.

During your time in Australia you rented an apartment and purchased basic furniture and other household items.

You and your family departed Australia in mid 2017 and do not intend to return.

You continued to receive wages from your Australian employer after leaving Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

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