Edited version of private advice

Authorisation Number: 1051785900026

Date of advice: 7 December 2020

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for income tax purposes?

Answer

No. Having considered your circumstances as a whole and the residency tests, it is accepted that you are not a resident of Australia for income tax purposes, including for the period where you were displaced and present in Australia due to COVID-19.

Further information on residency can be found by searching 'QC 33232' and information on the effect of COVID-19 on residency can be found by searching 'QC 63323' on ato.gov.au

Question 2

Is your salary earned whilst present in Australia, Country A or any other country taxable in Australia?

Answer

No. Article 12 of the Agreement between the Government of the Commonwealth of Australia and the Government of the Republic of Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income provides that remuneration or other income derived by an individual who is a resident of Country A in respect of personal (including professional) services performed or exercised in Australia shall be exempt from tax in Australia if the recipient is present in Australia for periods not exceeding 183 days in the year of income, the services are performed on behalf of a person who is a resident of Country A and the remuneration is not deductible in determining the profits for tax purposes in Australia of a permanent establishment in Australia. You were present in Australia for less than 183 days in the year ended 30 June 20XX and the services were performed for a Country A entity.

Your income retained its foreign source as the circumstances of your employment remained unchanged other than being present in Australia during the displacement period and you intended to and did leave Australia as soon as you were able to.

Further information on the effect of COVID-19 on source of income can be found by searching 'QC 63323' on ato.gov.au

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Background

You are a citizen of Australia and do not hold any other citizenship.

You departed Australia during the year ended 30 June 20XX to take up a X-year assignment in Country A with Company Z. Due to business needs this assignment was further extended for another X years and X months.

Your underlying employment contract is with Company Y, an Australian company, however you have been assigned to Company Z since 1 June 20XX.

Your role is based in Country A and involves global travel.

You have not lived in Australia since you departed on during the year ended 30 June 20XX.

You may return to Australia to live permanently in the future but the earliest this is likely to occur is when your current assignment to Country A is due to end during the year ending 30 June 20XX.

You are paid by a split payroll since you moved to Country A. You receive a portion of your remuneration through the Australian payroll into an Australian bank account and portion through the Country A payroll into a Country A bank account.

You participate in the global parent company's employee share scheme plans.

You are considered a Country A tax resident.

Family

You are married and have three adult children.

Your spouse and adult children are citizens of Australia and hold no other citizenships.

Your spouse remained in Australia initially to care for an ill family member. The family member passed away in late June 20XX and your spouse spent the second half of the year ended 30 June 20XX attending to the family member's estate before they relocated to Country A. Your spouse visited Country A during this period, but most of their time was spent in Australia.

Your spouse subsequently relocated to join you in Country A on in the year ended 30 June 20XX.

Your and your spouse's household effects and furnishings were shipped to Country A.

Assets in Australia

You and your spouse own a property in Australia that was occupied as your main residence. Your youngest child continued to live in the home until the year ended 30 June 20XX but has since moved out into their own accommodation.

When you and your spouse visited Australia, you would stay in the property, however, there were limited household effects and furnishing that belonged to you in the property as most of your goods had been shipped to Country A.

You and your spouse have plans to "knock down and rebuild" this property and had submitted a development approval ('DA') application for this work to commence in the first half of 20XX. The building work has been delayed as a result of the DA application lapsing on during the year ended 30 June 20XX due to the impact of COVID-19 on a certification process. You have resubmitted the DA application for approval.

Since your departure from Australia in the year ending 30 June 20XX the house has been empty in anticipation of demolition of the property and the rebuilding plans. You and your spouse will use alternative accommodation when you visit Australia as this property will no longer be available for you to use. You anticipate you will stay in hotels for any approved business travel and your spouse will stay with extended family when they visit Australia.

You hold Australian bank accounts, personally and jointly with your spouse.

You have an Australian superannuation fund. Your employer continues to make employer contributions into your superannuation fund under the terms of your assignment agreement.

Most of your personal and household effects and belongings are in Country A.

You maintain a car in Australia which is used when you travel back to Australia for holidays or to visit Company Z's Australian operations. The car is currently garaged at your Australian property but will be stored at your adult child's home while construction is ongoing.

You have a second car registered in your name however this car was gifted to your adult child. Your child has full responsibility for the running costs of the car, although you continue to pay the insurance.

Associations with Australia

You have deregistered yourself from the Australian Electoral Roll.

You have suspended your Australian Private Health Insurance and are covered by international health insurance by your employer for the duration of your Country A assignment.

You continue to hold an Australian driver's licence.

The electricity and gas bill for your Australian property continues to be held jointly with your spouse.

You continue to hold Australian credit cards.

Your extended family live mainly in Australia.

Current and continuing associations with Country A

Your assignment in Country A was originally for a period of X years and this was extended for a further X years and X months.

You and your spouse live in a fully furnished 4-bedroom apartment in Country A that you have leased since your departure from Australia in the year ended 30 June 20XX.

All the furniture in the apartment is owned by you and your spouse and was shipped to Country A from Australia, the electrical goods were purchased in Country A.

All moveable property such as golf clubs, mountain bike and fishing equipment that you own is kept in Country A.

You are provided with a motor vehicle by your employer in Country A.

You and your spouse hold Country A driver's licences, bank accounts, credit cards, mobile phone numbers and internet and cable TV subscriptions.

You and your spouse have electricity and water accounts in Country A.

You and your spouse are involved in many clubs and societies in Country A.

Repatriation to Australia

At the expected end date to your assignment you and your spouse may return to live in Australia.

Your intention is to continue living in Country A until the end of your assignment and then depending on job availability you may undertake another assignment or return to Australia.

It is likely you will ultimately retire to Australia.

Travel patterns

You have spent most of your time in Country A, but you are required to travel globally for work purposes as part of your role.

In your role the Company Z Australian business unit falls within your area of responsibility. Accordingly, you have had and will continue to have business trips back to Australia for work purposes.

Prior to the COVID-19 pandemic you have spent approximately XX-XX days in Australia each tax year since you relocated to Country A.

You expect a similar travel pattern to continue for the remainder of your assignment to Country A, except for the COVID-19 period of displacement.

COVID-19 impacts

Your spouse travelled to Australia in late 20XX and was unable to return to Country A until mid-20XX due to the outbreak of COVID-19.

You returned to Australia in early 20XX for a planned period of two weeks. Due to the escalating COVID-19 crisis in both Australia and Country A you were advised by your employer to remain in Australia due to health and safety concerns.

In April 20XX the Country A government announced control measures that restricted travel for any non-Country A nationals entering Country A during April 20XX, which were then extended to 1 June 20XX.

In mid-June 20XX the travel restrictions were eased however any travel into Country A required a formal application and approval from the Country A Government.

As a result of the travel restrictions and border control measures you worked remotely in Australia for your Country A employer for XXX days over the year ended 30 June 20XX and the year ending 30 June 20XX ('the displacement period').

During the year ended 30 June 20XX you spent XXX days present in Country A, XXX days present in Australia, which included XXX days of the COVID-19 displacement period, and XX days present in other locations.

You and your spouse stayed in your Australian property for the displacement period as the original DA was not successfully completed. As the property was prepared to be knocked down in preparation for the planned building work all the furnishings and household goods had already been removed from the property with the exception of very basic necessary furnishings to enable you to occupy the property for a temporary period while you waited for the travel restrictions to be lifted to enable your return to Country A.

You and your spouse monitored the COVID-19 Australian Government and Country A controls daily and had open return airline tickets to Country A.

You submitted a formal application to the Country A Government in late June 20XX to return to Country A following the end of the control measures, but your application was rejected. A subsequent application was submitted and approved in August 20XX and you and your spouse were able to return to Country A at the end of August 20XX.

Following your departure to Country A your Australian property is vacant and awaiting demolition and rebuilding work to commence. You have no plans to return to Australia until at least December 20XX for holidays, if possible and subject to COVID-19 restrictions relating to travel and quarantine.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection6-5(2)

Income Tax Assessment Act 1997 subsection 6-5(3)

Income Tax Assessment Act 1997 section 995-1