Edited version of private advice

Authorisation Number: 1052280543384

Date of advice: 30 July 2024

Ruling

Subject: Residency

Question 1

Will you be a resident of Australia for taxation purposes from the date you permanently departed Australia?

Answer

No.

Question 2

Will your foreign country A employment income earned while you are visiting Australia be taxable in Australia?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

Year ended 30 June 20YY

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

Background personal facts

You and your spouse applied for and were granted visas with the initial intention of assessing the possibility of relocating to Australia to find employment along with your children undertaking their schooling in Australia. You arranged a remote working variation with your Foreign country A employer with a view that you would remain working with your Foreign country A employer until you found a more suitable, long-term local opportunity in Australia. You applied for employment opportunities in Australia. However, none of the applications was successful. After not securing a local position, you and your spouse subsequently made the decision to return permanently to Foreign country A to continue residing in Foreign country A. By that time you were comfortable that your children had settled well into life in Australia and the children would stay in Australia, rather than return to Foreign country A.

You were born in Foreign country B on XX XXXX 19XX.

You have a domicile of origin in Foreign country B, as the country of your birth. You would likely have a domicile of choice in Foreign country A, when you obtained your Foreign country A permanent ID and Foreign country A passport, in XXXX 20XX.

You are married. You were married in 20XX in Foreign country A.

Your spouse is a Foreign country A citizen and Foreign country A passport holder.

You and your spouse have children.

You recently completed your XXX in Foreign country A.

You and your children arrived in Australia on XX XXXX 20XX on a visa.

Residing in Foreign country A

You and your family resided permanently in Foreign country A. You and your family maintain your principal place of residence at the following address:

•         XXXX,Foreign country A

This property was purchased in 20XX and is held solely in your spouse's name. Since its acquisition, this property has and continues to remain your principal place of residence and available for the family's use. It has not and will not be used to produce rental income.

All of your and your family's personal possessions are located in Foreign country A.

You hold bank accounts in Foreign country A for daily use where you receive your income from employment and investments.

Your employer is based in Foreign country A.

You have maintained your Foreign country A health insurance which covers you, your spouse and children.

Your children attended school locally in Foreign country A.

All your mail was directed to the family home in Foreign country A.

Your mother was born in Foreign country B and continues to live there.

Your in-laws live with you and your spouse in their home in Foreign country A as they require daily care.

You have one sibling, who lives in Foreign country B.

All of your spouse's extended family resides in Foreign country A.

The majority of your groups of friends and social activities are in Foreign country A.

You visit friends and enjoy regular social outings. The majority of your family life, social interactions, daily routine, and everyday life existed solely in Foreign country A prior to your arrival in Australia, in XXXX 20XX.

Temporary stay in Australia

You and your spouse wished for your children to live in Australia to complete their school studies. The main purpose of the temporary relocation to Australia was to allow your children to be educated in the Australian education system.

You and your spouse applied for and were granted visas for yourselves and the children. It would allow the children to attend school in Australia.

On XX XXXX 20XX, you and your children temporarily relocated to the Australia.

You travelled with your children to Australia for the purpose of assessing the possibility of relocating to Australia with your children. Your initial intention was to stay in Australia with the children. However, your spouse had no intention of relocating to Australia and remained living and working in Foreign country A.

After spending 2 months in Australia, you decided that your children had settled well into life and school in Australia and therefore made the decision to return permanently to Foreign country A, at the end of XXXX 20XX.

Your children remained in Australia after you returned to Foreign country A and will continue to live and go to school on the XXXX.

The school the children are enrolled in is XXXX.

You and your spouse are comfortable with your children being responsible for themselves. You have also arranged for neighbours to check-in on them regularly as well as your in-laws spending time visiting Australia to help your children.

You intend to bring your children home to Foreign country A during the school holidays each year. You have already purchased the children's plane tickets back to Foreign country A for the 20XX school holidays.

You have subsequently made the decision to return to Foreign country A to continue residing and working there.

As your spouse did not temporarily relocate from Foreign country A, he has continued to reside in the family home in Foreign country A where he also continued with their Foreign country A employment.

As the children are under the age of 18, and to ensure that the children did not need to reside in short-term rental accommodation, you secured a 12-month lease on a property where the children have stayed and will continue to stay while they complete their school education.

This property is not intended to be your principal place of residence as you were always planning to return to Foreign country A . You intend on extending the lease. However, you may move the lease into one of your children's name once they turn 18.

Upon arrival in Australia, you purchased low-cost temporary furniture (beds, table & chairs, sofas, work desks) for use. This was more cost effective than renting a furnished property. You opted for cheap and minimal furniture that was suitable for the children to stay and for your short-term temporary visits to see the children.

You intend to sell this temporary furniture when the children depart Australia or move out of this rented accommodation. Further, all furniture and personal effects at the family home in Foreign country A have remained there and are used while you and your spouse reside there. No furniture or personal effects, other than clothes, were brought the rented accommodation.

Now that you have returned to Foreign country A, at the end of XXXX 20XX, it is your intention to continue to reside in Foreign country A whilst also infrequently visiting your children in Australia on the occasions they do not spend school holidays in Foreign country A.

You do not hold private health insurance in Australia.

You have maintained your Foreign country A health insurance as you and your spouse intend to continue residing in Foreign country A.

You have opened a bank account in Australia to pay for the living expenses of the children during their temporary stay in Australia. You do not have any Australian credit cards.

You initially applied for a Medicare card with yourself as the primary applicant, however this was done purely as a matter of convenience during your visit and to ensure the children were covered under the Australian Medicare system. This application was rejected as you were overseas at the time the application was processed.

You have filed a new application for a Medicare card for your children only with one child as the primary applicant and your other child as an additional applicant.

You have obtained a State A license for vehicle purchase and registration purposes. You also purchased a vehicle for the ease of getting around whilst temporarily in Australia as well as to facilitate learning to drive for your older child.

You also obtained a mobile phone plan with an Australian telecommunications provider for convenience. visiting your children. You and your spouse both have also maintained Foreign country A mobile phone numbers with your Foreign country A telecommunication company.

The majority of your and your spouse's communications and engagements, outside of the children's school, are with family, friends and business contacts in Foreign country A.

You and your spouse have no professional or personal associations or memberships in Australia.

You and your spouse continue to file your Foreign country A individual tax returns as tax residents of Foreign country A .

Continued employment in Foreign country A

The name and address of your employer in Foreign country A is:

•         XXXX,XXXX, Foreign country A.

Your employment contract was entered into in Foreign country A on XX XXXX 20YY. You have provided a copy of your employment contract. You have been in your current role for X years and X months.

You generally work 37.5 hours per week.

Your current position with is XXXX, with almost the entirety of the team of which you are a part located in Foreign country A with 1 member of the team located in Foreign country B. You have provided a copy of your Role Description from your employer. Your main responsibilities are described as:

•         Leading the team in Foreign country A and Foreign country B.

•         Managing business from Foreign country B and elsewhere.

You will continue your employment and position with your Foreign country A employer. You have continued to perform your employment role for your Foreign country A employer when you are physically present in Foreign country A.

You continue to be paid by your Foreign country A employer into your Foreign country A bank account and in Foreign country A currency.

When you are working in Foreign country A, you attend the office rather than working remotely.

Your employer has provided you with a letter dated XX XXXX 20XX approving your working remotely from Australia from time to time due to your family needs for up to a maximum of X weeks per quarter.

You intend to travel once every X months to Australia, spending between X and X weeks each trip visiting your children. When visiting your children in Australia, you will spend some of this time on annual leave but will also spend some of this time working remotely from Australia for your Foreign country A employer.

The work which you will perform remotely while in Australia will include your duties as described above. You will work via emails and phone calls. You will continue to function as part of the same Foreign country A based team. You will maintain the Foreign country A working hours and days, whereby your hours of sleep and work align with those of your colleagues in Foreign country A. This is a requirement of your employer and includes taking your lunch breaks at the same time as the other members of your Foreign country A team. Your remote work in Australia will be solely Foreign country A focussed and have no connection with Australia. Your employer has approved of you working remotely from Australia.

Your sole employment income is derived from your position with your Foreign country A employer.

Your employer does not have any Australian clients. The majority of your clients are in Foreign country A.

You and your children also intend to spend some of the children's school holidays in Foreign country A or otherwise out of Australia.

You do not intend to seek or take up any employment in Australia.

Continuing to reside in Foreign country A

You returned to Foreign country A from Australia on the XX XXXX 20XX.

You and your spouse will continue to maintain and reside in your principal place of residence in Foreign country A.

Most of your personal belongings, including furniture, remain in your principal place of residence in Foreign country A.

The majority of your friends and extended family remain in Foreign country A and Foreign country B.

You continue to pay all utility and associated costs incurred by your Foreign country A principal place of residence.

Your Foreign country A mail continues to be sent to your Foreign country A home.

You and your spouse maintain your Foreign country A driver's licences.

You will continue to lodge Foreign country A individual tax returns as a tax resident of Foreign country A.

During some of the school holidays, the children will return to Foreign country A or go on holidays with you and your spouse out of Australia.

You will maintain all Foreign country A based accounts, registrations, and insurance policies. This includes serious illness insurance in Foreign country A.

You will also maintain your non-property investments in Foreign country A.

You and your spouse are maintaining your Foreign country A memberships and associations, including supermarket memberships, etc.

You own one investment property in Foreign country A which is solely in your name. It is located at:

•         XXXX,Foreign country A.

Maintenance and location of assets

You own one investment property in Foreign country A.

The principal place of residence is the family home in Foreign country A in which you reside, is owned solely by your spouse.

You own one property in Foreign country B where your parent lives.

You maintain a bank account in Australia to pay the utility cost on your children's rental accommodation as well as for daily expenses when you visit.

You maintain bank accounts and investments in Foreign country A and Foreign country B.

The vast majority of your income is derived from your employment in Foreign country A.

You opened an Australian superannuation fund. You made contributions into it in XXXX 20XX and XXXX 20XX. However, now that you have permanently returned to Foreign country A, you do not intend to make any further contributions to this fund.

In Foreign country A you maintain a Fund where your Foreign country A employer will continue to make contributions into it under Foreign country A regulations.

Neither you nor your spouse has ever been an employee of the Commonwealth Government of Australia. Neither of you has ever been a member of the Commonwealth Superannuation Scheme (CSS) or the Public Sector Superannuation Scheme (PSS).

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Issue

Residency

Question 1

Will you be a resident of Australia for taxation purposes from the date you permanently departed Australia on XX XXXX 20XX?

Answer

No.

Summary

You will not be a resident of Australia for tax purposes for the period of the ruling.

Detailed reasoning

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 period of the ruling, 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 any of the income years of the ruling.

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

Conclusion

As you are not a resident of Australia under any of the four tests of residency, you will not be a resident for the period of the ruling.

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

Question 2

Will your Foreign country A employment income earned during your visits to Australia be taxable in Australia?

Summary

The source of your employment income while working remotely in Australia is Foreign country A. As you are not a resident of Australian for tax purposes, you are not assessable in Australia on the income you earn while working remotely in Australia for your Foreign country A employer.

Detailed reasoning

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

In Nathan v. Federal Commissioner of Taxation 25 CLR 183 at 189-190 it was recognised that the ascertainment of the actual source of a given income is a practical, hard matter of fact.

As stated by Bowen J in Federal Commissioner of Taxation v. Efstathakis (1979) 9 ATR 867; 79 ATC 4256 (the Efstathakis Case) at ATR 870; ATC 4259, to determine source:

... the answer is not to be found in the cases, but the weighing of the relative importance of the various factors which the cases have shown to be relevant.

In the Cam, French and Efstathakis cases it was held that the source of the income was where the taxpayer performed the services:

Commissioner of Taxation v Cam & Sons Ltd (1936) 36 SR (NSW) 544 (the Cam Case) - concerned wages paid to seamen employed to work on trawlers. They were engaged and paid in New South Wales, but most of their services were provided outside state territorial waters. Jordan CJ, with whom Street and Bavin JJ agreed in the Cam Case at 548, held that:

Where income is derived from wages or salary, again the source has several factors. Personal exertion may be involved in negotiating and obtaining the contract of employment, in performing the stipulated services, and obtaining payment for them.... [I]n the ordinary case of the employment of a seaman...where there is nothing special, either in the circumstances of the contract of employment or in the payment, and where the work is both done and paid for in the ordinary course, the all-important factor is the doing of the work; and the contract of employment and the payment are relatively insignificant and formal elements. But this is not necessarily the case with respect to all wages or salary. In the case of an appointment to a sinecure, the engagement and the payment may be the only significant factors. Accordingly, the wages had to be apportioned based on 'working time in and out of New South Wales territorial waters.

In Federal Commissioner of Taxation v French (1957) 98 CLR 398 (the French Case) - the taxpayer was employed as an engineer by the Australian company CSR which carried on business in New South Wales and, relevantly, New Zealand. Each year, the taxpayer spent two or three weeks in New Zealand as inspecting engineer for the company in its New Zealand business. At all other times, the taxpayer performed services for the company in New South Wales. A majority of the High Court held that the wages paid in respect of the period in New Zealand were sourced in New Zealand, because this is where the services were performed, this being the most important factor in Mr French's situation (see French Case at 411, 417 and 422).

However, the Court also made comments to the effect that this decision did not necessarily determine what would be most important in every personal services contract. For example Dixon CJ in the French Case at 405 in relation to a director and at 406 in relation to an accountant procured to achieve a specified result, and Kitto J at 417-418 refers to a situation where remuneration was payable regardless of service, and to a person who worked sometimes overseas who was paid while on sick leave, and to where a period of overseas service might in substance be merely incidental to Australian service., and

In the Efstathakis Case - the taxpayer was a Greek National resident in Australia who was employed by the Greek Government as a secretary/typist in the Greek embassy. She had applied for the job in Greece, and the post had been gazetted there. She performed the services in Australia. Her net pay was compiled in Greece, a cheque was drawn on a bank in Greece and then received in Australia. A condition of her employment was that she could be posted anywhere in the world, but she would probably have resigned, as she had put down roots in Sydney, having child there, buying a unit, and marrying a naturalised Greek Australian.

As per the above cases, cases concerning the provision of personal services are decided by weighing up the outcomes of the consideration of the following three factors (with the weighting given to each determined by their relevance to the case):

•         the place where the contract of employment is entered into,

•         the place where remuneration is payable, and

•         the place where the services are performed.

In your situation, you have an employment contract with a Foreign country A entity and sometimes carry out your employment duties in Australia during your periodic visits to your children; who are being educated here. The contract of employment was entered into in and is governed by the laws that apply in Foreign country A . Your remuneration is paid by your Foreign country A employer into a bank account located in Foreign country A in Foreign country A dollars. These factors significantly lean toward the source of the income being Foreign country A.

As mentioned above, in the Cam, French and Efstathakis cases it was held that the source of the income was where the taxpayer performed the services. However, in those cases the place where the taxpayer was located was the same as where the taxpayer did the work, where it was given effect to and where the outcome of the work occurred. Your case is distinguished from these cases as the place where your work in Australia, is given effect to, and where the outcome of the work occurs is with your employer in Foreign country A.

Therefore, the income you earned from your Foreign country A employment while working remotely in Australia is regarded as being sourced in Foreign country A.

Conclusion

As the source of your employment income while working remotely in Australia is Foreign country A and you are not a resident of Australian for tax purposes, you are not assessable in Australia on this income.