Question

During your meeting with Joe, he advises that his employer has offered him a position for 3 years in Thailand. Joe seeks your advice on residence issues for Australian taxations purposes. In particular Joe wants to understand impact on any Non Australian assets he owns (Joe currently has overseas shares valued at $150,000 and a overseas property in Singapore valued at $1.5million). Joe also wants to understand what tests will be applied to determine his residency.

2019-2020

Answer 1

Joe will be considered a foreign resident for tax purposes because he does not satisfy 'the resides' test. This is due to:

• the length of his physical absence from Australia
• the surrounding circumstances not being consistent with residing in Australia

Joe has also not satisfied the domicile test, as:

• his permanent place of abode is outside Australia due to
  • the length of time committed to being overseas

In case Joe is an Australian resident for tax purposes, he needs to report whether he owned or had an interest in assets located outside Australia that had a total value of A$50,000 or more?

So, he will have to report A$ 1,560,000 as foreign assets.

However, considering he accepts the three year employment, he will not be considered as an australian resident for tax purpose and hence need not file the income tax return.

The following tests are required to determine residency for tax purpose:

1. Resides test

The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and you don't need to apply any of the other residency tests.

Some of the factors that can be used to determine residency status include:

• physical presence
• intention and purpose
• family
• business or employment ties
• maintenance and location of assets
• social and living arrangements.

If you don't satisfy the 'resides test', you'll still be considered an Australian resident if you satisfy one of three statutory tests.

2. Domicile test

You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

A domicile is a place that is considered to be your permanent home by law. For example, it may be a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

A permanent place of abode should have a degree of permanence and can be contrasted with a temporary or transitory place of abode.

3. 183-day test

This test only applies to individuals arriving in Australia. You will be a resident under this test if you're actually present in Australia for more than half the income year, whether continuously or with breaks.

You may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here. If you have already taken up residence in Australia, this test will not generally apply regardless of the number of days you spend overseas.

4. The Commonwealth superannuation test

This test applies to Australian Government employees working at Australian posts overseas and who are members of the CSS or PSS schemes. It does not apply to members of the PSSAP scheme. If this is the case, you (and your spouse and children under 16) are considered to be a resident of Australia regardless of any other factors.

It does not apply to members of the PSSAP scheme.