Question

Dr Elizabeth Grace is an Academic employed by Imperial College London. She takes five-month leave to undertake research at an Institute in Melbourne. While Elizabeth is in Australia, she continues to be paid her salary by Imperial College London. While she is in Australia, Elizabeth lives in accommodation provided to her by Holmes Institute in Melbourne. Her husband stays in England and only joins her in Australia for a brief holiday. At the conclusion of her leave, Elizabeth returns to England and Imperial College London.

With reference to relevant cases and legislation critically discuss whether Elizabeth is an Australian Resident for tax purposes?

Answer 1

As per Australian Tax laws, how you are taxed depends on whether you are an:
1. Australia Resident for tax purposes
2. Foreign Resident
3. Temporary Resident
and there is another category called Working Holidaymakers

If you satisfy any of the following 3 tests, you will be considered an Australian Resident for tax:

Resides Test
Following factors indicate residency:
1. physical prescence in Australia
2. Intention for staying in Australia (permanent, work or holiday)
3. Family stays in Australia
4. Running a business or employed in Australia
5. Owning or maintaining assets in Australia
6. Social and living arrangements

Lets see in the case of Dr. Elizabeth Grace.
She is physically present in Australia for research purposes (temporary research) and stays in a temporary home provided by the Institute in Melbourne. She doesn't satisfy any of the other conditions.

Domicile Test
If your permanent home is or considered to be in Australia then you are an Australian Resident.

Dr. Elizabeth Grace has a permanent home in England where her family (her husband) stays.

183 days Test
For those arriving in Australia, if they stay for more than half of a year (183 days or more) counted either continuosly or with breaks, they would be considered an Australian Resident for Tax purposes.

Dr. Elizabeth Grace has stayed for 5 months (even calculating in upper hand that would amount to approx. 31days*5 months = 155 days)

There is one more test called the Superannuation test, but this is applicable only to Australian Government employees and hence, has not been discussed here.

Dr. Elizabeth Grace, therefore can be said, is not an Australian Resident for Tax purposes. She has no intention of staying permanently and goes back to England post her reasearch. If she is a temporary resident holding a temporary visa, she has to declare only income earned in Australia. Foreign income (in this case salary paid by Imperial College London) need not be declared.