Edited version of private advice

Authorisation Number: 1052255977158

Date of advice: 28 May 2024

Ruling

Subject: Residency and assessable income

Question 1

Are you a resident of Australia for taxation purposes?

Answer

No.

Question 2

Will the employment income you derive from your foreign employer when you exercise your employment in Australia be subject to tax in Australia under Article 14 of the Double Tax Agreement between Australia and Country A (the Country A agreement)?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

You were born in Country A.

You are a resident of Country A for taxation purposes.

You live in Country A with your family.

You own a property in Country A and this property is not rented out.

You have signed an employment contract with Company A who are based in Country B, and this overseas company will be paying your salary. However, you have been performing work for this overseas company for many years, and you will continue to be employed with them for the foreseeable future.

Company A are applying for a visa on your behalf which will permit you to reside in Australia whilst you will be working for your overseas employer. This Visa will expire in late 20XX, as this type of visa is only valid for 6 months.

You will be working on a foreign vessel, which is owned by Company B, a Country A company.

You will be performing the work on this vessel in Australia.

The vessel is operated and managed by Company C, another Country A company.

You will be working at sea in Australian waters on board the vessel on a few weeks on / few weeks off rotation, until your visa expires. During your time off you will return to Country A.

Company A (a Country B Company) supply crew to the vessel owners / operators.

The vessel will come to Australia to work for Company D for a commercial client.

Company D and Company A are subsidiaries of Company E (a global group of many companies), as are Company B and Company C.

Your employer, Company A has no presence in Australia.

Company D has a presence in Australia.

Company A and Company D are not subsidiaries of each other. Both are direct or indirect subsidiaries of Company E.

The vessel will arrive in Australia in mid 20XX and you will be in Australian waters for a few weeks in the 20XX-XX income year, as your current rotation ends in mid 20XX.

If you return to work on the vessel in Australia in the 20XX-XX income year (the next income year) it will only be for a few weeks in total.

If another visa is applied for, you cannot and will not exceed 183 days in Australia for the 20XX-XX income year (the next income year), due to the vessel's upcoming itinerary involving visits to other overseas countries.

During all of the time you will be spending in Australia you will be working on the vessel. As such you will not be renting in or living in any properties in Australia at any time. At no point will you or your family be living in Australia.

You will not develop any professional, social, or sporting connections in Australia.

You do not hold any assets in Australia.

All your assets are held in Country A.

Neither you nor your spouse are a Commonwealth of Australia Government employee for superannuation purposes.

You are not a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

International Tax Agreements Act 1953

Reasons for decision

Question 1

For tax purposes, you are a resident of Australia if you meet at least one of the following tests. You are not a resident of Australia if you do not meet any of the tests.

The resides test (otherwise known as the ordinary concepts test)

•         The domicile test

•         The 183-day test

•         The Commonwealth superannuation fund test

We have considered your circumstances, and conclude that you are not a resident of Australia for the 20YY-YY or 20YY-YY income years as follows:

•         You are not a resident of Australia according to the resides test.

•         You do not meet the domicile test because your domicile is not in Australia.

•         You do not meet the 183-day test because you will not be in Australia for 183 days or more during the 20YY-YY or 20YY-YY income years.

•         You do not fulfill the requirements of the Commonwealth Superannuation test.

More information

For more information about residency, see Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

Question 2

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are a foreign resident, your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year. Ordinary income includes remuneration derived from employment.

In determining your liability to pay tax in Australia, it is necessary to consider any applicable double tax agreement. 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.

Article 14 of the Country A Agreement deals with employment income and sets out the rules where remuneration is derived by a resident of a Contracting State when exercising their employment in the other Contracting State.

1)            Subject to the provisions of Articles 17 and 18 of this Convention, 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 from that exercise may be taxed in that other State.

2)            Notwithstanding the provisions of paragraph 1 of this Article, 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 twelve-month period commencing or ending in the fiscal year or 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 deductible in determining taxable profits of a permanent establishment which the employer has in the other State.

From the above, Australia has a right to tax the employment income of a Country A resident that is exercised in Australia, unless the person is in Australia for less than 183 days in a specified period and other conditions are met.

In your case, you are a Country A tax resident and will not be present in Australia for more than 183 days in any twelve-month period commencing or ending in an Australian income year. Further, your remuneration will be paid by your Country B employer which does not have a permanent establishment in Australia.

Therefore, the remuneration you derive when you exercise your employment in Australia will not be subject to tax in Australia.