Edited version of private advice

Authorisation Number: 1052093203346

Date of advice: 2 March 2023

Ruling

Subject: Residency and foreign income

Question 1

Were you a resident of Australia for taxation purposes prior to XXXX 20XX?

Answer

No.

Question 2

Are you a resident of Australia for taxation purposes from XXXXX 20XX?

Answer

Yes.

Question 3

Are you a resident solely of Australia under the tie break test between Australia and Country Y?

Answer

Yes.

Question 4

Is your employment income derived from a Country Y employer assessable in Australia?

Answer

Yes.

Question 5

Are your grants received from Country Y assessable in Australia?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Y.

You are a citizen of Country Y.

You are a permanent resident of Australia.

You are a student at a university overseas.

You came to Australia for a few visits between 20XX and 20XX to visit your partner and their family, you were on a visitor's visa for these trips.

You then returned to Australia on XXXX 20XX and your plan was to visit your partner and then go on to Country Z to visit your sibling.

Covid 19 closed the borders in 20XX.

You and your partner applied for another visitor visa that would allow you to stay in Australia longer than 3 months at a time.

The visitor visa was granted XXX 20XX and it was valid until XXX 20XX without any work rights.

On XXXX 20XX you decided to apply for a Partner visa.

You were on a bridging visa from XXXX 20XX to XXXX 20XX, when you received the Partner visa.

You obtained your permanent residency visa on XXXXX 20XX.

During your time in Australia you have been studying remotely and working as a researcher remotely.

You received grants in relation to your study.

The grants are for living expenses.

You started to work in Australia for the first time in XXX 20XX.

You have commenced employment with the Country Y University which you carry out in Australia.

You go back to Country Y for work purposes for 2-3 months.

You will also accompany your partner on a work trip to Country F in 20XX.

You are a resident of Country Y for taxation purposes.

You have a joint bank account in Australia with your partner.

When you go back to Country Y you stay in properties owned by your family.

You intend on applying for citizenship of Australia when you are able to.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

International Tax Agreements Act 1953

Reasons for decision

For tax purposes, whether you are a resident of Australia is defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The definition has four tests to determine your residency for income tax purposes. These tests are:

•         the resides test

•         the domicile test

•         the 183 day test, and

•         the Commonwealth superannuation fund test.

It is sufficient for you to be a resident under one of these tests to be a resident for tax purposes.

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2022/D2 Income tax: residency tests for individuals.

The resides test

The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

Some of the factors that can be used to determine whether you reside in Australia include:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

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 domicile test

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

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

For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case.

Key considerations in determining whether you have your permanent place of abode outside Australia are:

•         whether you have definitely abandoned, in a permanent way, living in Australia

•         length of overseas stay

•         nature of accommodation, and

•         durability of association

The 183-day test

Under the 183- day test, if you are present in Australia for 183 days or more during the income year, you will be a resident, unless the Commissioner is satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

The question of usual place of abode is a question of fact and generally means the abode customarily or commonly used by you when are physically in a country.

The Commonwealth 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.

Application to your circumstances

We have considered each of the statutory tests listed above in relation to your particular facts and circumstances. We conclude that from XXX 20XX you are resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are resident of Australia according to ordinary concepts.

We considered the following factors in forming our conclusion:

•         You previously came to Australia on a working holiday visa

•         You are now a permanent resident of Australia.

•         You have been in Australia since XXXX 20XX.

•         You live with your partner in Australia.

•         You intend on remaining in Australia on a permanent basis.

•         You intend on applying for citizenship of Australia.

•         You only intend on returning to Country Y for holidays and to complete your study.

•         You have been working in Australia.

We also consider that your domicile is not in Australia. Although you have obtained a permanent resident visa, you are not a citizen of Australia, and it is too early to determine whether you have acquired a domicile of choice in Australia. Therefore, you are not a resident under the domicile test.

You are also a resident under the 183-day test as you have been, and will be, in Australia for more than 183 days in the relevant income years and the Commissioner is not satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

You do not fulfil the requirements of the Commonwealth Superannuation test and are therefore not a resident under this test.

You were not a resident of Australia for taxation purposes prior to you taking more concrete steps to stay in Australia by obtaining the Partner visa on XXXX 20XX.

You are a resident of Australia for taxation purposes from XXXXX 20XX.

You are a resident of both Australia and Country Y for taxation purposes.

In determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreements. Sections 4 and 5 of the International Tax Agreements Act 1953 (Agreements Act) incorporate that Act with the ITAA 1936 and the ITAA 1997 and provide that the provisions of a double tax agreement have the force of law.

Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements.

Article 4 of the Country Y agreement sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the double tax agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes.

Where a taxpayer is a resident of both countries for taxation purposes the following is taken into consideration to determine their status.

a)    the individual shall be deemed to be a resident only of the State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests);

b)    if the State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national;

c)    if the individual is a national of both States, or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

You have had a permanent home available to you in Australia and not Country Y during the relevant years.

Further, your personal and economic relations are closer with Australia as you have minimal assets in Country Y, live with your partner in Australia, you intend on being in Australia on a permanent basis and you are working in Australia.

You are a resident of Australia under the tie break test.

Employment and grant income

Article 14 of the Country Y agreement deals with income from employment.

1. Subject to the provisions of Articles 15, 17 and 18, salaries, wages and other similar remuneration derived by 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. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

2. Notwithstanding the provisions of paragraph 1, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a)    the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any 12- month period commencing or ending in the year of income of that other State, and

b)    the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State, and

c)    the remuneration is not borne by a permanent establishment which the employer has in the other State.

The income you derive from your employment with the Country Y employer which you carry out remotely in Australia is assessable in Australia.

Article 20 of the Country Y agreement deals with income not dealt with in any other article of the agreement and provides that items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing articles of the Agreement shall be taxable only in that State. However, income from sources in the other Contracting State may also be taxed in the other Contracting State.

Consequently, the grants you receive in relation to your PHD are assessable in Australia.