Edited version of private advice

Authorisation Number: 1051964782237

Date of advice: 29 March 2022

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

No

Question 2

Is your income taxable in Australia under Article 15 of the Double Tax Agreement between Australia and Country Y?

Answer

No

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Y.

You are a citizen of Country Y.

You were a temporary resident of Australia for the period you were in Australia.

You were on a temporary resident visa.

This visa did not allow you to remain permanently in Australia.

You commenced employment in Australia on XX September XXXX.

This contract was for initially for a period with the possibility of extension.

You returned to Country Y for the birth of your child on XXXX.

You were unable to return to Australia to continue your employment due to border restrictions.

You have continued to work remotely from Country Y.

You were on the payroll for your employer in Australia for a specified period.

You continued to pay for your rental property in Australia until the lease ended.

You paid tax on your income in both Australia and Country Y.

Your employment ceased with the Australian entity and you were transferred back to the Country Y entity to continue your work.

Your temporary visa to enter Australia was cancelled on 30 June XXXX.

The only asset you had in Australia was a bank account.

You own an apartment in Country Y which your spouse lived in while you were in Australia and you have a bank account in Country Y.

Your spouse came to Australia in for approximately a month and then returned with you to Country Y.

The plan was for your spouse to give birth in Country Y and then join you in Australia approximately six months later.

The border restrictions did not allow this plan to go ahead.

You have no social or sporting connections with Australia.

Neither you nor your spouse are eligible to contribute to the PSS or the CSS super funds.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

International Tax Agreements Act 1953

Reasons for decision

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, as applied to an individual, are defined in subsection 6(1) of the ITAA 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,
• the domicile test,
• the 183 day test, and
• the superannuation test.

The primary test for deciding the residency status of an individual is whether they reside in Australia according to the ordinary meaning of the word resides.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3rd 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'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains " home ": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as " home ", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

• Physical presence
• Intention or purpose of presence
• Family and business/employment ties
• Maintenance and location of assets, and
• Social and living arrangements

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Income tax: residency - permanent place of abode outside Australia 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 each individual's circumstances.

We consider that your circumstances are consistent with you not residing in Australia according to ordinary concepts.

This is evident from the following:

• You left Australia on XXXX for the birth of your child
• You did not return to Australia due to border restrictions
• You worked remotely for your Australian employer in Country Y

Although you planned to return to Australia after the birth of your child you were not able to due to border restrictions, this meant that you did not return to Australia at all.

For the period XXXXX you were not residing in Australia.

You were not a resident under this test.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must hold the positive intention to make that country your home indefinitely.

Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

You were born in Country Y and you are a citizen of Country Y.

You have not taken any steps to change your domicile.

You are not a resident under this test.

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 for the relevant years.

You are not a resident under this test.

Superannuation Test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

You and your spouse are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person.

You are not a resident under this test.

Conclusion

You are not a resident of Australia for taxation purposes for the relevant periods.

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 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.

Article 15 considers dependant personal services.

Subject to the provisions of Article 15 of the Double Tax Agreement, salaries, wages and other similar remuneration derived by an individual who is a resident of one of the Contracting States in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State.

You were a resident of Country Y for the period XXXX. The work you did for the Australian entity was carried out in Country Y.

Country Y has the taxing rights on the income you derived for the relevant periods you were not in Australia.