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Tax Residency

Commonwealth Super residency test – not as easy as first meets the eye

There are many tests which determine whether an Australian living overseas is foreign resident for Australian tax purposes.

One of the main tests is called the Commonwealth Superannuation test. Under this rule, to be considered as a foreign resident, you must not be a contributing member of CSS or PSS (not PSSap).

If this test is satisfied then the Australian taxpayer is regarded as a resident of Australia.

However, the test does not just look at members of CSS or PSS who are drawing a pension- you need to be contributing to the fund (working and having superannuation guarantee put in by your employer). The test was designed to ensure that Australian government employees working at Australian posts abroad (eg. DFAT and diplomats), and their spouses and children under 16, are still treated as Australian residents.

Things to be mindful of when considering whether the Superannuation test applies to a client:

1. To be considered an Australian resident under the supperannuation test, the taxpayer must be a member of the CSS and PSS schemes. Employees who started with the APS after 1 July 2005 are not able to satisfy this test.

  • CSS scheme closed 1 July 1990 to new members
  • PSS scheme closed 1 July 2005 to new members

2. The member must still be working and contributing

Example 1.

Judy is a member of CSS. She retired in the 2016 financial year and started drawing a pension.

To be closer to her grandkids, she moved to the UK.

She is no longer a contributing member of CSS, therefore she is not considered a resident.

Example 2.

Troy started a grad position at DFAT in the 2017 financial year. In the 2018 financial year, he was posted to South Africa for 3 years. He is a contributing member of PSSap.

He will not be considered an Australian resident under the superannuation test. He may be eligible under one of the other residency tests (resides, domicile or 183 day test).

Example 3.

John is not an eligible employee in the CSS or PSS schemes. He has been living in Tokyo for ten years. His spouse is a Commonwealth employee and a contributing member of the CSS scheme.

John is an Australian resident under this test.

How can Waterhouse Lawyers help you?

If you require advice on residency issues, Waterhouse Lawyers can help you. Our lawyers and advisors have provided many clients with advice on residency issues and have successfully applied for private binding rulings and objections in favour of the client. Please contact us on 02 9252 8746, tax@waterhouselawyers.com.au or via our inquiry form.

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