Edited version of private advice

Authorisation Number: 1051588403388

Date of advice: 4 October 2019

Ruling

Subject: Assessability of foreign source income

Question

As a foreign citizen, resident and working in another country and supporting your spouse and children who will be resident in Australia - will your foreign income be taxable in Australia?

Answer

No

This ruling applies for the following period:

Year ending 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

·        You were not born in Australia.

·        You reside and work in foreign territory X, which is not the country of your birth.

·        You have overseas assets comprising of bank accounts and a undeveloped block of land.

·        You and your spouse and your children live in rental accommodation in foreign territory X due to foreign ownership restrictions in that territory.

·        You have never lived in Australia.

·        You have never been an Australian resident for tax purposes.

·        You do not have the right to work or live in Australia.

·        You have visited Australia several times over the past decade.

·        On each occasion, you entered Australia on a tourist visa.

·        You have not stayed longer than three weeks per visit.

·        Your spouse is an Australian citizen.

·        You and your spouse own properties in Australia.

·        You lodge Australian tax returns to report rental income from these properties as a non-resident.

·        Your spouse and children intend to repatriate to Australia from foreign territory X in the period this ruling applied to.

·        You are obligated to remain in foreign territory X in order to fulfil the terms of your employment contract.

·        You intend to financially support your family while they are living in Australia including mortgage liabilities.

·        You intend to visit your family in Australia once a year for a period between ten days and three weeks.

·        Your family will visit you in foreign territory X or elsewhere overseas.

·        You and your spouse have not been a Commonwealth Government of Australia employee for superannuation purposes.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1

Reasons for decision

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation 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 (and permanent place of abode) 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.

The resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

In your case, you were not born in Australia and you are not an Australian citizen. You have lived and worked in foreign territory X for the past several years. You have never lived in Australia. You have visited Australia several times in the past decade and have only ever entered on a tourist visa and for a maximum of three weeks per visit.

Although your spouse and children will repatriate to Australia from foreign territory X in the period this ruling applies to, you intend to continue residing and working in foreign territory X and fulfil the terms of your employment contract.

You intend to visit your family in Australia once a year for a period between ten days and three weeks. Your family will visit you in foreign territory X or elsewhere overseas.

You are not a resident of Australia for taxation purposes under this test.

The domicile test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

In your case, you have not established a domicile of choice in Australia.

You are not a resident of Australia for taxation purposes under this test.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You are not a resident of Australia for taxation purposes under this test as you have not been in Australia for 183 days or more while you have been based in foreign territory X.

Superannuation test

Based on the information you have provided, neither you nor your spouse is an employee of the Australian Commonwealth government and you are not eligible to contribute to certain superannuation funds for Australian government officers, their spouses, or their children under the age of 16 years.

You are not a resident of Australia for taxation purposes under this test.

Conclusion

Based on the facts you have provided, you do not satisfy any of the tests of residency outlined in subsection 6(1) of the ITAA 1936. Therefore, you are not a resident for taxation purposes in the relevant financial year.

Any foreign income earned by you in the relevant income year is not taxable in Australia.