Edited version of private advice

Authorisation Number: 1052388510750

Date of advice: 22 May 2025

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes?

Answer 1

No.

Question 2

Is my employment income considered Australian sourced as stated in section 6-5 of the Income Tax Assessment Act 1997?

Answer 2

No.

Question 3

Is my employment income assessable and subject to tax in Australia?

Answer 3

No.

This ruling applies for the following periods

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced in:

20XX

Relevant facts and circumstances

You were born in country A.

You are a dual citizen of country A and Australia.

As a child you moved with your family from country A to Australia.

You acquired Australian citizenship.

You departed Australia alone, with the intention of moving permanently to country B to marry your partner and start a family.

You arrived in country B on a tourist visa, then a working visa, currently a XX visa and you have applied for a XX visa which allows you to stay for over XX years.

You were married in country B.

Your spouse is a citizen of country C and has a XX Visa which allows a XX-year residency in country B.

Your spouse is employed.

Your child was born in country B and has a XX visa.

Your child has dual citizenship in country A and C.

You live in country B in a long-term rental with your spouse and child. The lease is under your spouse's name.

You own a furnished property in Australia, where a parent lives rent free.

You have family connections in Australia.

You have a bank account, an investment fund and own cryptocurrency in Australia.

You have not advised the Australian Electoral Office to have your name removed from the electoral roll but have not voted since departing.

You have not advised Medicare to remove your name from their records to date.

You have not advised any Australian financial institutions with whom you have investments that you are a foreign resident so that non-resident withholding tax could be deducted.

You have not advised any Australian companies with whom you have investments that you are a foreign resident.

You have not lodged tax returns in country B.

There is no double tax agreement between Australia and country B.

You have no intention of returning to Australia permanently.

Employment

You signed a new employment contract which came into effect after your arrival in country B. This contract was requested by you so you could apply for a Country B XX visa. The requested contract specified XX months of employment as required by the Country B authorities.

The contract header specifies a XX-month time period in order get the XX visa in Country B, however clause X states the contract will continue until terminated by this agreement. It does not specify a fixed period or end date.

The open-ended contract has remained in effect for your time in Country B and there has not been any re-negotiations or new contracts signed.

The contract states your work premises for the purposes of the contract is remote.

The contract is based in Australian Dollars and provides for superannuation.

You are employed with an Australian company.

Your employer provides software solutions for your clients.

Your employer has a nominal office in X however, staff work remotely in multiple states of Australia and globally and contracts out work to a company overseas.

Your employer has clients in Australia, country C and country D.

There are no clients in country B.

Your general duties as a XX Manager include:

•                     project planning, team management and client liaison

•                     working with staff in Australia, country C and country D (contractors)

•                     liaising with clients in Australia, country C and country D to achieve business goals and objectives

•                     ensuring client satisfaction, product deployment, training and support

All your work decisions, oversights and communications are executed from country B.

Your role is designed to be remote and can theoretically be performed anywhere with adequate technology.

You carry out your work remotely in country B for your Australian employer and you have not travelled to Australia for work purposes.

Your employment contract does not require you to maintain any professional associations or registrations in Australia as part of your ongoing employment.

Your employer pays superannuation and withholds income tax.

Your salary is paid in Australian dollars, into an Australian bank account.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1936 section 6-5

Income Tax Assessment Act 1936 subsection 995-1(1)

Reasons for decision

Detailed reasoning

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 (also referred to as the ordinary concepts test)

•                     the domicile test

•                     the 183-day test, and

•                     the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides 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 domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

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... 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.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                     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.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the resides test is about whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia. The ordinary meaning of reside does not require an individual to have a principle or usual place of residence in Australia.

Application to your situation

You are not a resident of Australia under the resides test for the period XXXX to XXXXincome yearsbased on the following:

•                     You and your spouse maintain a rental property in country B where you stay together with your child.

•                     You have established an abode in country B where you stay in long-term rental accommodation with your spouse and child.

•                     You have established professional and social connections in country B with various friends and social organisations.

•                     You are considered a non-resident for tax purposes under the resides test because:

­        you maintain strong family ties with your spouse and child in country B

­        you have no intention of returning to Australia to live

­        you have social living arrangements in county B.

In your case, you are still a citizen of Australia and moved to country B, on a tourist visa. Based on the information you have provided; the Commissioner is satisfied that you are not residing in Australia according to ordinary concepts. This may change if you decide to return to Australia and meet the residency test for tax purposes.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund 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 in 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 a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and 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.

In your case, you were born in country A and your domicile of origin is country A. You immigrated to Australia and became an Australian citizen.

It is considered that you abandoned your domicile of origin in 19XX and acquired a domicile of choice in Australia. You were not entitled to reside in country B indefinitely and while living in country B, you only held a work and XX visa which was valid for a limited time. You have now applied for a XX visa which expires after a fixed term of XX years.

Therefore, your domicile is still Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•                     whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•                     whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

•                     the intended and actual length of the taxpayer's stay in the overseas country

•                     whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time

•                     whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia

•                     whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

•                     the duration and continuity of the taxpayer's presence in the overseas country

•                     the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that they are leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

Application to your situation

The Commissioner is satisfied that your permanent place of abode is outside Australia because:

•                     you lease and live in a long-term rental property in country B with your spouse

•                     you have not left country B since you arrived in 20XX, except for short holiday periods

•                     you intend living in country B for a considerable and indeterminable period of time with your spouse.

The duration and continuity of your presence in country B supports the argument that you established a long-term place of abode in country B. While you are a citizen of Australia, this does not outweigh the enduring association and connection you have, and maintain, in country B.

Whilst the question of a usual place of abode is a question of fact, generally the phrase is interpreted as the abode customarily or commonly when you are physically in a country.

Your place of abode does not have to be fixed but must have the attributes of a place of residence or a place to live. Since 20XX, your usual place of abode is country B.

Therefore, while you are a citizen of Australia, the Commissioner considers you have established a permanent place of abode outside Australia for tax purposes in country B since 20XX.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•                     the person's usual place of abode is outside Australia, and

•                     the person does not intend to take up residence in Australia.

Application to your situation

You have not been present in Australia for 183 days or more during the 20XX-to-20XX income years. You have, however, been present in country B for more than 183 days in 20XX until the 20XX income years. Therefore, 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 are not a member on behalf of whom contributions are being made to 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. Therefore, you are not a resident under this test.

Conclusion

On XX 20XX, you moved to country B on a tourist visa and since then have lived and worked there on various visas. You got married to your spouse who lives and works in country B on a XX visa, and you had a child, born in country B. You intend to stay in country B with them and have applied for a XX visa which allows you to stay for up to 10 years.

You have established long term family and social relationships in country B, and you have no intention of returning to Australia.

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for the years ended 30 June 20XX-to-20XX.

Therefore, you became a non-resident of Australia for tax purposes during the 20XX-20XX tax year. However, this may change if you decide to return to Australia and meet the residency test for tax purposes at a future date.

Question 2 and Question 3

Summary

In this case, we have determined that your employment income does not have an Australian source. As the employment income does not have an Australia source as a non-resident for tax purposes, the income will not be taxable under section 6-5 of the ITAA 1997. However, this decision is based on the facts relating to your particular situation and cannot automatically be applied to other taxpayers who work remotely overseas for an Australian employer. Each situation must be considered on a case-by-case basis by weighing up the importance of the various factors.

Detailed Reasoning

The relevant parts of section 6-5 of the ITAA 1997 state:

(1)           Your assessable income includes income according to ordinary concepts, which is called ordinary income.

...

(3)           If you are a foreign resident, your assessable income includes:

(a)           the ordinary income you derived directly or indirectly from all Australian sources during the income year; and

(b)           other ordinary income that a provision includes in your assessable income for the income year on some basis other than having 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, after weighing up the relevant factors, 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' (see the Cam Case at 553).

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 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.

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.

Bowen CJ, with whom Brennan and Deane JJ agreed, held that the wages paid to the taxpayer had an Australian source. His Honour considered the above factors, but gave most weight to 'the residence of the taxpayer in Australia and the facts that the services were performed and payment received [in Australia] ... The payment of remuneration depended upon actual performance of the services (the Efstathakis Case at ATR 871; ATC at 4260).

Notwithstanding the above, the outcome may be different in cases where special skills or creative talents are being rendered (Federal Commissioner of Taxation v. Mitchum (1965) 113 CLR 401; (1965) 13 ATD 497; (1965) 9 AITR 559) (the Mitchum case). In such cases, factors such as the place of negotiation and execution of the contract may be relatively more important. In considering the earlier French case, the High Court stated at 408-409, that:

Taylor J., as I read his reasons, was engaged in deciding a question of fact deriving what assistance he could from the decided cases. He said, speaking, of course, of a case of wages or salary for work done or services performed - "... if, as the statute requires, I am compelled to select as the source of an employee's remuneration either the locus of the contract of service, or, the place where the remuneration is payable thereunder, or, the place where the services are performed which give rise to the right of remuneration I am content to conclude that, in the absence of special circumstances, this third element should be chosen" (1957) 98 CLR, at p 422

In so saying, his Honour was not, in my opinion, laying down a rule of law: he was expressing his reasons for the conclusion of fact to which he had come. I do not feel compelled or persuaded by the decision of the Court in French's Case (1957) 98 CLR 398 to hold that in every case where work forms the consideration for wages or salary paid, the source of the income constituted by the wages or salary is in the place where the work is done.

... It is sufficient for present purposes to say that neither French's Case (1957) 98 CLR 398 nor any other of which I am aware lays it down that for the purposes of the Act the source of wages, salary or remuneration for services performed is necessarily, in default of special circumstances, in the place where the work is done or the services performed.

From the above cases, source 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.

Application to your circumstances

In your case, you are employed by an entity located in Australia. Your employer provides aged care software solutions for your clients. Staff work remotely in multiple states of Australia and globally including country C, country B and contracts out software developers to a consulting company overseas. Your employer has clients in Australia, country C and Country D.

Since the 20XX financial year, you have been employed as a XX Manager. You signed a new employment contract on X XX 20XX which came into effect after you arrived in country B. This was done specifically to enable you to obtain a Country B XX XX visa. Your employment contract recognises the fact your premises for work is effectively your home in Country B. Therefore, this factor does support the source of the income being in the Country B.

However, the fact you are paid in Australian dollars by an Australian employer, into an Australian bank account as well as the existing withholding and superannuation arrangements may give the impression of an Australian source. Although, these arrangements may be due to payroll arrangements that you put in place when you first started with your employer in 20XX and are not conclusive indications of taxable source.

In the Cam, French and Efstathakis cases, it was held that the source of the income of the respective employees 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:

•                     the Cam Case - the fishermen undertook fishing activities putting nets into the water and fished obtaining fish from the sea which all occurred where the boat on which he was working on at the time was located,

•                     the French Case - the professional services the taxpayer provided in undertaking inspections were in relation to things he inspected in the locations that he was in at the time he conducted the inspections and which he subsequently reported on, and

•                     the Efstathakis Case - the taxpayer undertook secretarial duties and typing work. Her work was given effect to and the outcome of the work occurred in the location she worked at.

Your case can be distinguished from these cases, as the place where your work is given effect to and where the outcome of the work occurs is not just with your employer in Australia, but also in country C and country D. Furthermore, your effort and output are also directed towards interacting with software contractors overseas. While the actual physical location of your designated company office is in Australia, it has employees like you, working remotely across Australia, country C and in country B. Your presence at the Australian office has not been a requirement and you have not returned to Australia while working in country B for the past X years.

While it is acknowledged Australia is technically where your employer has an office, the fact the outcome of the work occurs both in Australia and several overseas countries and the fact the work is undertaken by you exclusively in country B supports the position the employment has an overseas source in country B.