Commonwealth super test

 The forgotten residency test – Commonwealth super test

When you think of Australian tax residency tests, most people will remember the ‘183 day’ test, some ‘the resides’ test and others ‘the domicile’ test. But often forgotten, and usually not considered, is the ‘Commonwealth super’ test. This test is relevant to contributing members of the Commonwealth Superannuation Scheme (‘CSS’)  or Public Service Superannuation (‘PSS’). If the Commonwealth super test is satisfied, the taxpayer will be regarded as a tax resident of Australia. This situation is most common for Australian Public Service (‘APS’) employees who have been posted overseas, where they continue to contribute to such a scheme.

What are the CSS and PSS?

The CSS is a hybrid superannuation scheme made of accumulation and defined benefit funds. Benefits are derived from a member and an employer component. The accumulation part consists of member and productivity contributions and fund earnings. The employer component is the defined benefit part. The CSS ceased accepting members on 1 July 1990.

The PSS is a defined benefit superannuation scheme. Benefits are derived from customer and employer components. The customer components consist of customer contributions and fund earnings. The employer component consists of employer productivity contributions (plus fund earnings), and the unfunded ‘benefits balance’, which is determined when the member leaves eligible employment. The PSS ceased accepting members on 1 July 2005.

What are the conditions of the Commonwealth super test?

1. To be considered an Australian resident under the Commonwelath superannuation test, the taxpayer (or spouse) must be a member of the CSS or PSS schemes. Employees who started with the APS after 1 July 2005 are not able to satisfy the test.

2. The member must still be working and contributing to either the CSS or PSS schemes. 

Common errors when applying the Commonwealth super test?

We have seen clients who have been provided with incorrect advice, resulting in grave tax implications in both Australia and other jurisdictions. Common examples include other practitioners incorrectly advising:

• non-residents who receive a pension from either the CSS or PSS, who are no longer contributing members of the fund, with advice that they are characterised as Australian tax residents under the Commonwealth super test.
• a contributing member of either the CSS or PSS (or their spouse) that they are not an Australian tax resident, due to them not satisfying any of the other residency tests.

How can Tax Controversy Partners help you?

Navigating residency law in Australia in and another jurisdiction can be complicated, and understanding a double taxation agreement that sits above both laws can add another layer to the potential confusion.

Beyond the resides test and the ‘183-day’ test, determining residency comes down to your personal circumstances and the weight applied to each relevant factor. Not properly considering the Commonwealth super test can lead to you being given the wrong answers.

At Tax Controversy Partners, our experienced lawyers can assist you in understanding your particular circumstances and providing you with reasonably arguable position regarding your tax residency status.  Please contact us using our online contact form, via email at admin@taxcontroverypartners.com.au or by phone at 02 8513 3813.