Edited version of your written advice

Authorisation Number: 1012777511261

Ruling

Subject: Residency

Questions and answers

1. Are you a resident of Australia for taxation purposes?

Yes.

2. Are you a resident of Country X under the double tax agreement between Australia and Country X?

Yes.

This ruling applies for the following periods:

Year ended 30 June 200X

Year ended 30 June 200X

Year ended 30 June 200X

Year ended 30 June 200X

Year ended 30 June 200X

Year ended 30 June 200X

Year ended 30 June 200X

The scheme commences on:

1 July 200X

Relevant facts and circumstances

You were born in Australia and are a citizen of Australia.

You have a parent, sibling, adult children and grandchildren who live in Australia.

You sold your home in Australia and moved to Country X with your former spouse and some of your children.

You returned to Australia for your children's educational needs and left various assets in Country X in storage with friends with the intention of returning to Country X.

During this period you stayed in the property you own in Australia as you always intended the move back to Australia to be temporary and that you would return to Country X.

You married your current spouse in 20XX. Your spouse was born in Country X and has dual citizenship.

From 20XX to 20XX, you spent a few weeks of each year in Country X.

You returned to Country X to retire and you purchased a home in Country X. It was your intention to live in Country X indefinitely.

You are in the process of adopting a child in Country X. The child has been living with you since 20XX.

In 20XX you were granted a Country X retirement visa.

The visa does not expire, is permanent, unrestricted and entitles you to multiple entries.

You own property in Australia.

In Australia, you maintain assets (in the property) which are not advisable to take to Country X for security reasons.

You consider your home to be in Country X and the Australian property as simply a base which also serves as storage for various belongings.

You have basic hospital cover with a private health insurer in Australia.

You maintain a post office box to collect mail regarding your Australian dealings.

You maintain an Australian mobile phone number.

You are not a director or partner of any Australian companies or partnerships.

You have no memberships with any clubs or associations in Australia.

You own property in Country X. .

You have never derived income from property in Country X.

In Country X you maintain assets.

You maintain a mobile number in Country X.

You are a member of various clubs and associations in Country X.

You have a family doctor and dentist in Country X.

The family of your spouse lives in Country X.

You are considered a 'resident alien' and a resident of Country X under the tax law of Country X.

You have provided documentation from the government of Country X that you are subject to taxation in Country X and you are a resident of Country X within the meaning of Article 4 of the double tax agreement between Australia and Country X.

You lodged Australian income tax returns for the relevant income years as an Australian resident for tax purposes.

You state that any absences from Country X during the above years were very brief and only for very short periods of a few days at a time.

You continued to stay in your property on your return trips to Australia.

You were present in Australia for longer than you would have otherwise been due to personal reasons.

You travelled to Australia for the purpose of visiting your parent, sibling, children and grandchildren and to check on your property. These trips were usually for special occasions such as birthdays, Christmas and family gatherings.

Your spouse generally accompanies you on your trips to Australia. On occasion, your spouse may return to Country X ahead of you and has therefore spent less time in Australia than you during each income year.

Neither you nor your spouse is a member of any Commonwealth government superannuation scheme or eligible to contribute to any such scheme.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

International Tax Agreements Act 1953 Section 4

International Tax Agreements Act 1953 Section 5

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 for income tax purposes. These tests are: 

• the resides test,

• the domicile test,

• the 183 day test, and

• the superannuation 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 to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

The question of whether an individual 'resides' in a particular country is a question of fact and degree and all the circumstances of the taxpayer are taken into account in arriving at a decision.

In your case, it is evident that you had a strong association with Country X during the relevant income years as evidenced by the following:

• You have had a Country X spouse since 20XX.

• You have a child you intend to adopt who has been living with you and your spouse since 20XX.

• You established a family home.

• You were granted a permanent retirement visa for Country X.

• You spent more time in Country X than Australia during the ruling period.

• You maintained another property and assets.

• You established associations with various clubs/groups and health care providers.

However, you also maintained a strong association with Australia as evidenced by the following:

• You have strong family connections to Australia through your parent, sibling, children and grandchildren.

• You had a residence available for you to stay in at all times.

• You had assets in the residence.

• You owned other property.

• You maintained assets.

• You lodged Australian income tax returns as a resident during the relevant years.

• You travelled to Australia frequently and spent anywhere from X days to X days in Australia in each year of the ruling period.

In regard to the amount of time you spent in each country during the ruling period, we note that you spent significant amounts of time in Australia in each year.

In your application, you mentioned the case of Dempsey v Commissioner of Taxation [2014] AATA 335 (Dempsey's case) in which there were some similarities to your situation. In Dempsey's case, the taxpayer was found to be a non-resident even though he maintained a furnished home and two vehicles in Australia during his absence overseas. However, unlike your situation, his return visits to Australia only amounted to a total of 41 days in the period of two years and eight months he was working overseas.

Based on the information provided, we consider that you were splitting your time between Australia and Country X and were virtually residing in both countries.

Consequently, you have not demonstrated that you cut your ties with Australia to a great enough extent to say that you were not still residing here according to the ordinary meaning of the word.

Therefore, we consider that you were still residing in Australia during the relevant income tax years.

As you are a resident under this test, it is not necessary to determine whether you meet the requirements of the other three tests of residency. 

Residency under the double tax agreement

The Agreement between the Government of Australia and the Government of Country X for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Country X Agreement) operates to avoid the double taxation of income received by residents of Australia and Country X.

In your situation, you are a resident of both Australia and Country X under the domestic laws of each country. Therefore, it is necessary to refer to the 'tiebreaker' rules contained in the Country X Agreement to determine whether you will be treated solely as a resident of Australia or of Country X.

Article 4 of the Country X Agreement states that where an individual is a resident of both Australia and Country X, residency will be determined in accordance with the following rules:

(a) he shall be deemed to be a resident solely of the Contracting State in which he has a permanent home available to him;

(b) if he has a permanent home available to him in both Contracting States, or if he does not have a permanent home available to him in either of them, he shall be deemed to be a resident solely of the Contracting State with which his personal and economic relations are the closer.

(4) For the purposes of the last preceding paragraph, an individual's citizenship of a Contracting State shall be a factor in determining the degree of his personal and economic relations with that Contracting State.

In your case, you have a home in Country X and also have a residence available to you in Australia. Therefore, you have a permanent home available to you in both countries and it will be necessary to ascertain with which country your personal and economic relations were closer during the relevant income years.

Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements states that the OECD Model Tax Convention and Commentary (OECD Commentary) provides appropriate guidance when interpreting the terms used in double tax agreements.

In relation to 'personal and economic relations', the OECD Commentary states that:

15. If the individual has a permanent home in both Contracting States, it is necessary to look at the facts in order to ascertain with which of the two States his personal and economic relations are closer. Thus, regard will be had to his family and social relations, his occupations, his political, cultural or other activities, his place of business, the place from which he administers his property, etc. The circumstances must be examined as a whole, but it is nevertheless obvious that considerations based on the personal acts of the individual must receive special attention. If a person who has a home in one State sets up a second in the other State while retaining the first, the fact that he retains the first in the environment where he has always lived, where he has worked, and where he has his family and possessions, can, together with other elements, go to demonstrate that he has retained his centre of vital interests in the first State.

In your case, you are an Australian citizen and during the relevant years you had strong family connections to Australia along with significant economic ties through your Australian property. However, there are various factors that indicate your personal and economic relations were closer to Country X than Australia as follows:

• You established a family home in Country X.

• You maintained the majority of your personal and household effects in Country X.

• You have spent more time in Country X than in Australia.

• You are in the process of adopting a child in Country X who has been living with since 20XX.

• The family of your spouse resides in Country X.

• You have established associations with various clubs/groups and health care providers in Country X and have none in Australia.

Based on the information provided, it is considered that on balance your personal and economic relations were closer to Country X than Australia during the relevant years.

Consequently, you will be treated solely as resident of Country X under Article 4 of the Country X Agreement for those years.

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