Edited version of your private ruling

Authorisation Number: 1012455947069

Ruling

Subject: Residence

1. Will you be a resident of Australia for tax purposes as defined by section 6(1) of the Income Tax Assessment Act 1936 for the period of this ruling?

Yes

2. Will you be a resident of Australia for the purposes of the Double tax agreement?

No

3. Will you be assessable on income derived from all sources in Australia and any other income that is included by a specific provision?

Yes

4. Will you be assessable on income derived from sources outside Australia?

No

5. Will you be assessable on non-Australian rental income?

No

6. Will you be assessable on Australian rental income?

Yes

7. Will you be assessable on non-Australian dividend income?

No

8. Will you be assessable on Australian dividend income?

Yes

9. Will you be assessable on non-Australian interest income?

No

10. Will you be assessable on Australian interest income?

Yes

11. Will you be liable for withholding tax on your Australian dividends, royalties and interest?

No

12. Will your Australian dividends, royalties and interest be taxed at rates limited under the Double tax agreement?

Yes

13. As a resident will you be liable for tax at resident rates and be eligible for tax offsets?

Yes

14. As a resident will you be able to disregard any capital gains or losses made on the disposal of assets that are not Australian taxable property?

Not applicable as no assets were advised as being disposed of in the ruling period.

This ruling applies for the following periods:

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

The scheme commences on:

1 July 2012

Relevant facts and circumstances

You advise that you are resident of elsewhere under their income tax laws.

You will spend over months a year in Australia. You are contemplating coming to Australia to live permanently in a later year but have made no decision to do so.

Your spouse will spend slightly less time in Australia.

You will spend the remaining time elsewhere.

Your stated intention of stay in Australia is holiday focussed away from your business elsewhere. During your time in Australia you will live in your home which you describe as a holiday home.

Your adult children are currently elsewhere.

You have a home elsewhere which you expect your family to reside in while you are in Australia.

You have a business elsewhere. It is expected that when in Australia the current day to day running of this business can be done by remote in Australia via the net. You will not be employed in Australia and will carry out charity work.

You have an investment portfolio elsewhere which is professionally managed.

You jointly own property in Australia but do not derive income from these. You have an Australian joint bank account. You will obtain personal and other assets in Australia, and will derive income from Australian sourced interest, dividends and royalties after you arrive in Australia.

You will maintain your foreign drivers licence, insurances, credit cards, bank accounts, health insurance, mobile phones, and internet service provider while in Australia. Your have household effects and motor vehicles that will remain overseas. Your foreign home will continue to be your postal address for service of bills and for the purposes of Health Insurance.

You were born in Australia and have foreign citizenship.

You have purchased a home to live in while you are in Australia.

Your extended family is in Australia. Your only social connections elsewhere are those friends which you have made since moving to elsewhere.

Your activities in Australia include, spending time with your extended family here, attending fitness clubs, sporting activities, attending the theatre as a season ticket holder, attending talks at the Institute, attend family events, regional trips to visit friends and family and regular visits to galleries.

Relevant legislative provisions

Income Tax Assessment Act 1936

Subsection 6(1).

Income tax Assessment Act 1997

Section 6-5

Subsection 995-1(1).

Reasons for decision

Residency

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia (or conversely, a foreign resident) for income tax purposes. These tests are the:

(1)   residence according to ordinary concepts test

(2)   domicile and permanent place of abode test

(3)   183 day test, and

(4)   Commonwealth superannuation fund test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.  However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

Residence according to ordinary concepts

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, is 'to dwell permanently or for a considerable time; having one's abode for a time'.

Taxation Ruling TR 98/17 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individual's behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

In your case, you will reside in Australia as your behaviour does reflect the required degree of continuity, routine or habit that is consistent with residing here.

This is because:

· you will come to Australia for a number of months per year and will be accompanied by your spouse for most of that time.

· while you will not seek employment in Australia you are doing charity work which is not usual for someone on holiday.

· While your children (except for your spouse and one child already living independently in Australia) will remain overseas they are mature children capable of living independently.

· you will maintain your overseas licences, credit cards, bank accounts, insurances and postal address, and

· while you have personal assets elsewhere you will have similar assets in Australia to allow you to live in the home in Australia for the majority of each year.

Domicile and permanent place of abode

Under this test, a person whose domicile is in Australia is deemed to be a resident of Australia for tax purposes, unless the Commissioner is satisfied that their permanent place of abode is outside Australia.

Domicile is a legal concept to be determined according to the Domicile Act 1982 and to the common law rules which the courts have developed in the field of private international law. The primary common law rule is that a person acquires at birth a domicile of origin.

A person retains their domicile of origin unless and until he or she acquires a domicile of choice in another country, or until he or she acquires another domicile by operation of law. The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

As you did actively seek citizenship to elsewhere, you did make elsewhere your domicile of choice.

However as you have chosen to spend the majority of your time living in Australia with your spouse your domicile of choice has reverted to Australia.

In your case, you will maintain your home elsewhere while you are in Australia during the income years in question.

The Commissioner is not satisfied that you have a permanent place of abode outside Australia.

The 183 day test

You will be present in Australia for more than 183 days in the income years in question. As the Commissioner is not satisfied that your usual place of abode is outside Australia you will be a resident for tax purposes under this test.

The Commonwealth superannuation fund test

This test is not relevant in your situation as it only applies to persons eligible to contribute to the superannuation funds for Commonwealth (Australian) government officers or their spouses or their children under the age of 16 years.

As you will meet three of the tests of residency you will be a resident of Australia for tax purposes for income years in question.

Double tax agreement

Schedule 1 to the International Tax Agreements Act 1953 (the Agreements Act) contains a relevant double tax agreement

The relevant Agreement states:

The (residency) status of an individual who, by reason of the preceding provisions of this Article is a resident of both Contracting States, shall be determined as follows:

(a) that individual shall be deemed to be a resident only of the Contracting State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests);

(b) if the Contracting State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national;

(c) if the individual is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

In your case you have a permanent home available in both Australia and elsewhere. Under the Agreement, if you have a permanent home in both Australia and elsewhere, you would still be considered to be a resident of elsewhere under the Agreement because your personal and economic relations are closer to elsewhere than Australia.

Assessability of income

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states:

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

Accordingly in your case, you will be assessable on income derived from all sources inside Australia (and any other income that is included by a specific provision). You will not be assessable in Australia on income derived from sources outside Australia, unless it is included in your assessable income under a specific provision. This means your foreign rental income, foreign dividend income, and foreign interest income will not be assessable in Australia.

As it has been determined that you are an elsewhere resident under the relevant Agreement, you will not be a resident for the purposes of your non-Australian source ordinary income.

Income tax returns

The Commissioner may require certain persons to lodge an annual income tax return. Included are those foreign residents who derive income from Australian sources.

In your case, based on the facts that you have supplied, you will be required to lodge an income tax return where you derive income from Australian sources.

Tax rates

Residents are subject to resident tax rates on their Australian sourced income. Residents are also generally eligible to claim personal tax offsets in their income tax return where the conditions of each tax offset is satisfied.

As you are considered to be a resident for tax purposes on your Australian sourced income for the years in question, any Australian sourced income including income from real property derived by you will be subject to tax at resident tax rates. These tax rates include the tax free threshold for the whole year.

Under the Double tax agreement your Australian sourced dividends whilst being assessable to you, can only be taxed in Australia at a rate no more than xx per cent of the gross amount of the dividends.

Under the Double tax agreement your Australian sourced interest whilst being assessable to you, can only be taxed in Australia at a rate no more than xx per cent of the gross amount of the interest.

Under the Double tax agreement any Australian source royalties whilst being assessable to you, can only be taxed in Australia at a rate no more than xx per cent of the gross amount of royalties.

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