Edited version of private advice

Authorisation Number: 1052268005049

Date of advice: 10 July 2024

Ruling

Subject: Residency

Question

Are you a resident of Australia for taxation purposes?

Answer

No.

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 2022, 2023, and 2024 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, and the Commissioner is satisfied that your permanent place of abode is outside Australia.

•         You do not meet the 183 day test because you were not in Australia for 183 days or more during the 2022, 2023, and 2024 income year/s.

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

Question 2

Is the pension income you receive from the Military Super and Benefits Scheme assessable in Australia and in Country Z?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 2022

Year ended 30 June 2023

Year ending 30 June 2024

The scheme commenced on:

1 November 2021

Relevant facts and circumstances

You are an Australian citizen.

You relocated to overseas Country Z in XXXX with your partner.

Prior to your departure you had your name removed from the AEC roll.

You married your spouse on XXXX.

You hold no assets, including housing, cars or personal effects in Australia.

You intend to remain in Country Z for the next five years at least. It is your wish to return to Australia in the future, however you do not have an official date in mind.

You currently hold a family reunification VISA and residence/work permit, which is valid for three years at a time. You do intend to obtain citizenship with Country Z alongside your Australian citizenship when your become eligible in 20XX.

You and your spouse currently rent an apartment in Country Z, but you are in pursuit of purchasing a home.

You return to Australia every two years to visit family and friends for typically 2-3 weeks at a time.

You mostly stay with your parents in State A. Occasionally you will visit and stay with friends who live in a different state.

Before you moved to Country Z, you completed military service in Australia.

You were discharged from the Australian Defence Force on XXXX, due to the injuries you received during your service.

Your invalidity pension commenced on XXXX.

You pay tax on your pension in Australia and then you also declare the income with the Country Z tax authority, where you received a tax offset or credit for what you already pay in Australia due to higher income tax rate with the Country Z tax authority.

Your pension is paid via a federal pension Scheme (the Scheme) which is part of the Commonwealth Superannuation Corporation, the Australian Government's superannuation and pension provider.

The fund type for the Scheme is classified by APRA as APRA Regulated Non-Public Offer Fund.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 995-1

Question 2 - Reasons for decision

The Agreement between the Government of Australia and the Government of Country Z for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Agreement) applies to persons who are residents of one or both of the Contracting States.

Article 18(3) of the Agreement provides:

Pensions paid by one of the Contracting States or a political sub-division or local authority of that State to any individual in respect of services rendered to that State, political sub-division or local authority, as the case may be, and pensions paid under the social security scheme of one of the Contracting States may be taxed in that State. The provisions of this paragraph shall apply only to individuals who are citizens of the Contracting State from which the payments are made.

As such, pension income paid by the Australian government to an Australian citizen who is a resident of Country Z may be taxed both in Australia and Country Z. As this income may be taxed by both Contracting States the provisions of Article 23 of the Agreement will apply to eliminate the double taxation of this income as follows:

1. Subject to the provisions of the law of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle hereof), Danish tax paid under the law of Country Z and in accordance with this Agreement, whether directly or by deduction, in respect of income derived by a person who is a resident of Australia from sources in Country Z (not including in the case of a dividend, tax paid in respect of the profits out of which the dividend is paid) shall be allowed as a credit against Australian tax payable in respect of that income.

2. Double taxation shall be avoided as follows in Country Z:

(a) Subject to the provisions of sub-paragraph (c), where a resident of Country Z derives income which, in accordance with the provisions of this Agreement may be taxed in Australia, Country Z shall allow as a deduction from the tax on the income of that resident, an amount equal to the income tax paid in Australia;

(b) Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, which is attributable to the income which may be taxed in Australia;

(c) Where a resident of Country Z derives income which, in accordance with the provisions of this Agreement, shall be taxable only in Australia, Country Z may include this income in the tax base, but shall allow as a deduction from the income tax that part of the income tax which is attributable to the income derived from Australia.

Application to your circumstances

In your case, the Scheme's pension is offered by the Commonwealth Superannuation Corporation which is the Australian Government's superannuation and pension provider.

As this pension is paid by the Australian Government to you as an Australian citizen, Article 18.3 of the Agreement provides that the pension may be taxed in Australia and in Country Z. In accordance with Article 23.2(a) of the Agreement, Country Z will allow a deduction for tax paid in Australia.