Edited version of your written advice

Authorisation Number: 1051207640727

Date of Advice: 28 March 2017

Ruling

Subject: Residency

Question 1

Are you are resident of Australia for income tax purposes?

Answer

Yes

Question 2

Are you are resident of Australia the purposes of the tie breaker in the Country X Agreement?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 2016

Year ended 30 June 2015

Year ended 30 June 2014

Year ended 30 June 2013

Year ended 30 June 2012

Year ended 30 June 2011

Year ended 30 June 2010

Year ended 30 June 2009

The scheme commences on:

1 July 2008

Relevant facts and circumstances

Family and personal

You are a Country B citizen. You are not on the Australian electoral role as you are a Country B citizen. You moved to Australia in the late 1980s. Your parents are deceased. You have a sibling living in the capital city of Country B.

As a Country B citizen and holder of a valid Country B passport you can stay and work in Australia as long as you remain a Country B citizen and meet the health and character requirements.

Your spouse and children are Australian citizens. You married in the early 1990s. You have 3 children who were born in the 1990s.

You purchased a dwelling in Western Australia in the late1980s. You purchased another dwelling in Western Australia in 2000.

In mid 2008, you and your family moved to Country X with the intention of settling there long term as you had business interests and employment in Country X. You and your family were allowed to stay in Country X on one year visas, this visa has multiple entry/ re-entry permits.

When you left Australia you changed the address for your Australian investments to a post office box in Western Australia. The mail was collected by a relative.

Your children attended an international school in Country X. Your spouse did not work while they were in Country X as visa restrictions did not allow it. Whilst in Country X, your spouse was a member of ANZAR auxiliary, an expat social and charity group that does charity work and meets regularly to organize charitable work/projects.

During the 2008-9 income year you returned to Australia for approximately three short stays, totalling 25 days, in addition to the mandatory family exit and re-entry visit required to activate the visa.

In mid 2009, after a year in Country X, your spouse and children decided they wanted to move back to Australia because of problems with the quality of schooling for all 3 children, and the overall environment associated with delays in closing finance on the project as well as growing security concerns.

Your spouse and children took their clothes and personal effects when they moved back to Australia.

You committed to remain in Country X and run the project, supporting the family remotely, and visiting Australia when possible.

Your spouse is currently employed part-time in Australia. They also receive a share of rental income from an investment property. Their income is supplemented by you by the transfer of funds periodically from Country X, and also from the sale of equities and dividends from your investment portfolio.

From 2009 to 2016 you spent about 115 days in Australia each year to keep family commitments. You visit your family in Australia about every 2 weeks for about 2 days. Your visits are made for key school dates such as assemblies, graduations, presentations and sports events. You also visit for birthdays and anniversaries and some school holiday periods.

From 2009 to 2013 the family members have visited Country X to stay with you 4-6 times a year for periods ranging from a long weekend visit to 10 days. Outside of this, as children have left school and commenced study or work, individual family members or 2 ‐3 members have visited for long weekends. One family member stayed for 3 weeks. You pay for all family visits to Country X.

You leave some clothing and personal items in Australia for ease of travel.

Your spouse is traveling and currently in Country X visiting for 8 days.

Your visa was converted to a 5 year permanent stay visa in 2014. The permanent stay visa requires you to be employed or a director of a company. You believe you could obtain other employment to keep your visa valid, however, as you are a shareholder of the company, you believe it is unlikely that your employment will cease anytime soon. You do not intend to become a Country X citizen.

You are not on the electoral role in Country X.

Prior to going to Country X, in 2008, you and your family did not have private health insurance. You have had private health cover in Australia for you and your family with effect from the 2014 financial year.

In Country X, the company provided basic health insurance cover which reimbursed expenses for reasonable medical costs incurred for you and your family while in Country X. The company continues to provide basic health insurance cover for you in Country X.

You were diagnosed with a disease in Country X in conjunction with a scan in a hospital in Country X. You have also consulted a doctor and surgeon but are uncertain when or where you will have an operation - it may not be required for 10 years.

You have a bank account and credit card in Country X.

You are not a member of the Commonwealth Government Superannuation Scheme. Your spouse is not a member of the Commonwealth Government Superannuation Scheme.

You are considered to be a tax resident of Country X and hold a Country X tax file number. You commenced paying tax in Country X in 2011. Prior to 2011 you had no income in Country X as the project was in the development phase.

In your most recent Australian tax return for the year ended 30 June 2008 you stated that you were a resident of Australia.

You own a 2001 car in Australia, which one of your children uses most of the time. Your family has not purchased a car since 2009. You maintain your Australian driver's licence. You do not own a car in Country X. You have a company car with a driver allocated to you at all times. You do not drive in Country X. Your company restricts you from driving in Country X for insurance purposes.

You are not considering retirement at present. As founding shareholder of XYZ, you have a 2-3 year timeline for exit or to reduce your shareholding in the business once it is fully developed in 2019-20. There are many factors that you will take into consideration in deciding when to retire that you cannot determine at this time.

Sporting and other social connections

You are not a member of any sporting clubs or associations in Australia.

In Country X, you are a member of a golf cub and charitable organisations. You are a supporter and member of the YH charity group which raises funds for Country X children.

As CEO the company you are involved in has sponsored and supported a number of charity organisations and events. XYZ has been a sponsor of their annual golf tournament for the past 3 years, as well as the annual KH Charity golf day, SD Charity Golf day, and the C Club Golf day. Outside of those sponsorships, you and your company provide support and logistics to their other fund raising activities.

You are a social member of an eclectic club which plays as touring members to various golf courses. This occurred weekly up until 2014, but your health has prevented you playing to the same extent of recently.

Accommodation

Prior to 2008 when you travelled overseas you stayed in hotels.

During the 2008-09 income year, while you and your family were living in Country X, your family home in Australia was leased for 12 months (with 30 days notice to vacate the dwelling). There was a verbal agreement to negotiate a further 12 month extension if desired. The property was rented partially furnished (including beds (without linen), minimal crockery and cutlery and key furniture such as couches and chairs) but the family's personal effects were put away in storage.

In mid 2008, you rented an apartment for your family in Country X. You and the family took clothes, key personal items including DVDs, media devices and computers, a printer, kids sports equipment, golf clubs, and kitchen equipment (including appliances, coffee maker, kettle, mixer, plates and cutlery).

Your family was able to move straight back into the family home when they returned from Country X.

You have a spare key to the family home in Australia.

After your family returned to Australia you rented a smaller apartment in Country X.

Up until 2011 you paid for your own accommodation in Country X. Since 2011 the company has paid the cost of your accommodation. You live alone in Country X, and have done so since your family returned to Australia. All rental agreements have been a minimum 1 year term, and as rental is paid in advance in Country X, the rent for the family rental apartment was paid annually in advance, while 2 subsequent properties were paid quarterly in advance. The current apartment provided by the company is on a 1 year term and paid annually in advance for the first 2 years, and subsequently quarterly in advance.

All the apartments are self-contained and do not provide centralised or serviced facilities such as room service, or bar/ restaurant.

You employ and personally pay for a maid. You have a driver who is part of the company pool.

A summary of your apartment details is included in the table below.

Business

In 2002 you commenced business development and exploring business opportunities overseas.

From 2002 to 2007, you were a director of A Company and had to travel extensively for business purposes including conferences and client meetings. As at 30 June 2008 you held shares and options in A Company. In 2008 and 2009 you disposed of most of your shares in A Company. All of these shares were disposed of by 2015. In the 2011 income year you disposed of all the shares (that were acquired from the previous exercise of your options).

You are the founding director of B Pty Ltd which was registered in Australia in 2005. You were the sole shareholder in B Pty Ltd at that time. You have been director of B Pty Ltd since 2005. Two other people were also made directors of B Pty Ltd in 2016.

When you began to explore opportunities in Country X you appointed one of the other directors as full time General Manager to run the business. His role is overseeing the day to day operations of the business, sales, customer interface, supervising the management and technical operations of the business. He manages all of the finances of the business and has full signing authority for payments and transfers of funds. You continue to provide support and strategic guidance to the business in your role as Director, including corporate governance. You are paid a director's fee for this role.

In 2012 new shares in B Pty Ltd were issued to entities related to the directors.

ATO records show you received salary and wage income from B Pty Ltd from the 2011 to 2016 income years and tax instalments were deducted.

You began visiting Country X in 2007 via invitation from your current business partners during which time they developed a business plan and incorporated XYZ.

In 2008 it was your intention to stay in Country X long term to build the XYZ business. Currently, the founding shareholders have a 2-3 year timeline for exit or reduce shareholding in the business once it is fully developed in 2019-20.

You reached agreement with your partners to commit 100% to the project to drive it forward, and at this time you were awarded residency via a visa along with Multiple entry/ re-entry permits.

You were one of three founding equity partners in XYZ. You were awarded shares in the company when it was established. This was obtained with a combination of “sweat equity” and financial contributions to cover, consultants, as well as engineering, legal and financial costs of developing the project.

During the period from 2008 to 2011 you received no remuneration from XYZ.

The business plan involved the raising finance to fund the construction which was to be funded with a combination of equity, vendor finance and advance Customer revenues.

During the period of 2008 to 2010 you oversaw the engineering design and tendering portion of the project, along with the finalisation of construction and customer contracts, as well as coordinating the fundraising component of the network.

The “sweat equity” involved your efforts in developing the business designing planning of the network, dealing with contractors, customers and financiers/investors. You contributed $US and further cash contributed at the financial close of the project in 2011.

You are entitled to dividends but XYZ is still in its early stage and has yet produced a profit so no dividends have been distributed.

You were appointed as CEO of XYZ in 2009 and continue in this position. Under your employment contract you are entitled to an annual salary in $US. Additionally, your employment contract agrees to “pay for and provide to Employee during the period of employment some listed benefits which will be provide later as agreed and under Company regulation”.

You remain in Country X post construction to oversee commercialisation of the asset. You have had residency in Country X throughout via an annual visa, which converted to a 5 year permanent stay visa in 2014.

On 8 November 2013 were appointed in the full time role of CEO.

As founding shareholder you have a 2-3 year timeline for exit or to reduce your shareholding in the business once it is fully developed in 2019-20.

Bank accounts in Australia

2 x Bank1 savings accounts

1 x Bank1 cheque account

3 x Bank2 loan accounts

1 x Bank2 savings account

Bank3 Managed fund (cash management account - less than $1000 balance).

Bank accounts in Country X

1 x Bank4 savings account (in Country X currency)

1 x Bank4 $US account

Shares

You have about $50,000 invested in various Australian equities

Your only investment in overseas equities in XYZ, which are held via a Company in another third overseas Country in which you are the sole shareholder.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Subsection 6(1).

Reasons for decision

Residency in Australia

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.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The first two tests are examined in detail in Taxation Ruling IT 2650, entitled: Income tax: residency - permanent place of abode outside.

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 satisfy the conditions of one of the other three tests.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes its ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

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'.

Whether a person "resides" in Australia is a question of fact and degree and there is no one rule which will determine the issue in every case: Federal Commissioner of Taxation v Miller 73 CLR 93 at 101 per Rich J and at 103 and 104 per Dixon J.

In deciding this question, the courts have referred to and taken into account the following factors as being relevant:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of Place of abode.

To determine whether or not you are residing in Australia for taxation purposes, it is necessary for us to examine the whole relevant evidence in the context of your individual circumstances. Dempsey v Commissioner of Taxation [2014] AATA 335 at [97] per Logan J, DP Hack SC and SM Kenny.

(i) Physical presence in Australia

It is important to note that a person does not necessarily cease to be a resident because he or she is physically absent from Australia. In Joachim v Federal Commissioner of Taxation 2002 ATC 2088, the Tribunal stated (at 2090):

Physical presence and intention will coincide for most of the time but few people are always at home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident there because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home.

In Iyengar's case [2011] AATA 856 the taxpayer who was found to be an Australian resident for tax purposes during the period he was working overseas. The taxpayer worked in a Middle Eastern country for two years and seven months and made two brief return visits to Australia during that time. His family remained living in the family home in Australia while he lived in employer provided accommodation overseas. He remitted funds from his salary to Australia to support his family and pay off his mortgage. Despite his absence from Australia, the Tribunal found that the taxpayer had retained a continuity of association with Australia and was residing here under the 'resides' test.

The longer a person stays in one particular place the more permanent in nature and the quality of use and stay in that abode. An individual's intention, purpose or reason for being in Australia assists in determining whether an individual resides here. (Gregory v. DFC of T (1937) 57 CLR 774; (1937) 4 ATD 397)

In the 2008 income year government records show you were regularly travelling outside Australia for 10 to 15 days and returning to Australia for 3-5 days.

During the 2009 income year you were in Australia for about 25 days.

After the 2009 income you state you have been in Australia for approximately 115 days per year each year (about 2 days every 2 weeks). When you visit Australia you live with your family in the family home.

Although you were not physically present in Australia for the majority of each of the years you were working in Country X, this does not preclude you from being an Australian resident.

You have retained a continuity of association with Australia, as your family reside in Australia and you regularly return to Australia to visit your family. You also have shares in and are a director of a Private Company in Australia. You have other investments in Australia.

(ii) Nationality

You are a Country B citizen. As a Country B citizen and holder of a valid Country B passport you can stay and work in Australia as long as you remain a Country B citizen and meet the health and character requirements.

Your spouse and children are Australian citizens.

You have no intention to become a Country X citizen.

(iii) History of residence and movements

In Levene v IR Commrs (1928) 13 TC 486, the taxpayer had retired from business in England and had lived for several years in London, having been for the whole of his life resident in the United Kingdom. For a period after his retirement he had no fixed place of abode in the United Kingdom and lived at hotels either there or abroad. He spent four or five months of each year in the United Kingdom for the purpose of obtaining medical advice, visiting relatives and the graves of his parents, and taking part in certain religious observances.

It was held by the House of Lords that the Commissioners were correct in taking into account, with regard to the years of assessment, conduct which occurred subsequently. Lord Sumner at p 501 said:

Light may be thrown on the purpose with which the first departure from the United Kingdom took place, by looking at his proceedings in a series of subsequent years. They go to show method and system and so remove doubt which might be entertained if the years were examined in isolation from one another. The evidence as a whole disclosed that Mr Levene continued to go to and fro during the years in question, leaving at the beginning of winter and coming back in summer, his home thus remaining as before.

You moved to Australia from Country B in 1987. From about 2000 you commenced travelling outside Australia frequently.

In the 2008 income year you were regularly travelling outside Australia for about 2 weeks and returning to Australia for at least 2 days. When outside Australia you used hotels for accommodation.

To 30 June 2008 you lodged Australian income tax returns stating that you were an Australian resident.

During the 2008 income year you spent about 25 days in Australia and the remainder of the year in Country X.

Since July 2009 you have spent at least 2 days every two weeks in Australia.

When in Australia you reside in the family home with your family. In your most recent Australian for the year ended 30 June 2008 you stated that you were a resident of Australia.

This is indicative of significant ties to Australia.

(iv) Habits

The role of an individual's habits and daily routines in relation to their domestic and business arrangements is strongly indicative of residency status (Paragraph 43 of TR98/17):

Where the day to day behaviour of individuals, considered over time, is relatively similar to their behaviour before entering Australia, they are likely to be regarded as residing here. Even when their behaviour over time is different from their behaviour before entering Australia, they are likely to be regarded as residing here, when the facts of their presence indicate a routine establishing they are living in Australia

From 2002 you commenced exploring and developing business interests overseas. Consequently, you were spending several days every couple of weeks overseas. You stayed in hotels during these overseas visits.

In 2008, your family moved with you to Country X. You rented a furnished family sized apartment and your children were enrolled in an International School in Country X.

Your Australian home was rented partly furnished for a 12 month period.

After a year in Country X your spouse and family decided they wanted to move back to Australia because they found it hard to settle in Country X. Your spouse and family moved back into the family home when they returned to Australia.

The fact that when you visit Australia you stay in your family home, you have keys to the house, you use the car here, you leave some clothing and personal items in Australia is strongly indicative of Australian residency.

(v) Frequency, regularity and duration of visits to Australia

From 2002 you commenced travelling overseas regularly to explore and develop business interests.

Apart from the year ended 30 June 2009 when your family were in Country X you have regularly visited Australia for at least 2 days about every 2 weeks since before October 2006.

(vi) Purpose of visits to and absence from Australia

You are in Country X solely for work purposes.

Your visits to Australia are to visit your family and attend to key school dates such as assemblies, graduations, presentations and sports events, as well as birthdays, anniversaries and some school holiday periods.

(vii) Family and business ties

In The Engineering Manager v Commissioner of Taxation [2014] AATA 969 the question at issue before the Tribunal was whether the Applicant was an Australian resident for the income year ended 30 June 2011. The Applicant contended that he was a resident for only part of the year, and was non-resident for the remainder. He argued that during his employment overseas in Oman he maintained a house in Oman for which he paid rent, he had an Omani driver's licence and bank account and spent most of his time in Oman, returning to Australia only for short periods. The Commissioner contended that the Applicant's ties to Australia, including family ties to his wife and children, property owned by him and his wife, private health insurance and an Australian bank account held jointly with his wife, all indicated that he intended to remain a resident of Australia. The Tribunal considered that the Applicant's less than harmonious marriage and intention to obtain future work in Oman on the completion of his contract to be significant factors. The Tribunal concluded that the Applicant had a permanent place of abode outside of Australia and favoured the Applicants residency arguments over the Commissioner's ultimately deciding that the Applicant was not a resident of Australia for the relevant period.

In contrast Shord v FC of T [2015] AATA 355 the AAT decided that the taxpayer, who had worked overseas as a saturation diver and diving supervisor for various foreign companies from 1999 until 2010, was resident in Australia. SM Walsh gives the following summary of authorities about the meaning of “resides”-

Whether a person "resides" in Australia is a question of fact and degree and there is no one rule which will determine the issue in every case:
Federal Commissioner of Taxation v Miller 73 CLR 93 at 101 per Rich J and at 103 and 104 per Dixon J.

That question must accordingly be determined on the basis of a consideration of the whole of the relevant evidence in an individual case:
Dempsey v Commissioner of Taxation [2014] AATA 335 at [97] per Logan J, DP Hack SC and SM Kenny.

Given the question of residence is one of fact and degree, caution should be exercised in relying on precedent in the determination of this question: Dempsey v Commissioner of Taxation at [97] and [122] per Logan J, DP Hack SC and SM Kenny.

A place may be a person's residence even though that person is away from that place for periods of time. The test is whether the person has retained a "continuity of association" with the place, coupled with an intention to return to that place, and an attitude that the place remains "home":
Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449 per Wilcox J, citing
Levene v Inland Revenue Commissioners at 225 per Viscount Cave LC and Lord Warrington and
Norman v Norman (1969) 16 FLR 231.

A person can reside in two places concurrently:
Federal Commissioner of Taxation v Miller 73 CLR 93 at 99 per Latham CJ and at 103 and 104 per Dixon J and Dempsey v Commissioner of Taxation at [95] per Logan J, DP Hack SC and SM Kenny.

Factors that are relevant in reaching a conclusion on where a person "resides" include the persons intentions (Dempsey v Commissioner of Taxation at [96] per Logan J, DP Hack SC and SM Kenny) and the maintenance, or severing, of connections with a place:
Gregory v Deputy Federal Commissioner of Taxation (1937) 57 CLR 774 at 777 and 778 per Dixon J; and

Events occurring before and after the relevant period may be relevant as throwing light on, and disclosing the significance, of conduct within the relevant period:
Gregory v Deputy Federal Commissioner of Taxation at 778 per Dixon J.

In Shord, one of the key factors leading to that conclusion was the taxpayer's "deep emotional connection" to his wife, who resided at a house they jointly owned in Western Australia. While the taxpayer had family ties with the UK, where he was born, his emotional ties to his wife (to whom he had been married for 23 years) were found to be clearly the most significant in his life. The AAT considered that the taxpayer maintained a "continuity of association" with Australia throughout the relevant period, primarily through his wife and the property which they jointly owned.

Similarly, in Landy v FC of T [2016] AATA 754, the taxpayer was found to be a resident in circumstances similar to those that pertained in The Engineering Manager. In Landy, the taxpayer took on a supervisory role at an oilfield in Oman that lasted 21 months. On or before departure, he cancelled his Medicare, notified his private health insurance fund, requested his name be removed from the electoral roll and completed an outgoing passenger card indicating that he was leaving Australia permanently. Nevertheless, throughout his employment in Oman he financially supported his wife in Australia, garaged his two motor vehicles at her home, maintained a joint bank account with his wife, maintained his offices as director and secretary of an Australian company (his wife being the other director and shareholder) and resumed living with his wife on his return. The AAT found that the taxpayer's lack of severance of connections with Australia, and the lack of establishment of enduring and lasting living ties with Oman, required a conclusion that the taxpayer had not ceased to be a resident of Australia as ordinarily understood.

Family

Case law has shown that an individual is more likely to be considered to be residing in Australia where the spouse and any dependent children of the individual continue to reside in Australia during his or her absence overseas.

You have been married since the early 1990s. Your spouse and children live in Australia, apart from 2009 income year when they were living with you in Country X. Your spouse works part-time in Australia and you provide additional financial support for the family.

Business or economic

You are or have been a director of several Australian private companies. You receive director's fees and dividends from at least one of these companies.

You were a founding equity partner in XYZ. You are CEO of the XYZ. You have an on-going employment contract in Country X.

Assets

You have a family home and a rental property in Australia. You have a car in Australia. You have a bank account and other investments in Australia.

In Ellwood v FC of T 2012 ATC10-287;[2012] AATA 869 a New Zealand citizen who worked on construction projects outside Australia was held to be resident in Australia because of the many personal connecting factors with Australia and an intention to treat Australia as his home, at least for the time being. While the taxpayer had expressed the wish to return to New Zealand for 20 years, he had no definite plans to cease work at any particular time, no chosen house, town or locality in New Zealand, no New Zealand investments and no other apparent preparation for retirement life there. By contrast, in Australia after 20 years he had a well-established home, considerable real estate investments, a spouse and immediate family and a long history of returning to Australia when not working.

Similarly to Shord, Ellwood and Landy you have significant emotional and financial ties to Australia that are indicative of Australian residency.

(viii) Maintenance of a place of abode in Australia

Case law has shown that an individual is more likely to be considered to be residing in Australia where a place of residence remains available for the individual and/or family members to live in. Conversely, this may be less likely if the residence is sold or rented to tenants.

You have a family home in Australia, where your spouse and children live and which you return to every 2 weeks. You have a spare key to the family home. Your family residence was rented partly furnished for 12 months in the 2009 income year.

In Sugianto Gunawan v Commissioner of Taxation 2012 AATA 119 the Applicant contended that he was not an Australian resident for the years ended 30 June 2002, 2003, 2005 and 2006 on the basis that he had spent more than 183 days outside of Australia in each of those income years. The Tribunal took into account the facts that the Applicant owned property in Australia at which his wife and family lived, as well as investment properties in Australia and he was the director and employee of an Australian company. The purpose of the Applicant's absences from Australia was to sell Australian properties in Indonesia. The Tribunal took these factors into account in deciding that the Applicant was an Australian resident.

You rent an apartment to live in Country X that is available for your sole use. Since 2011 your employer has paid the cost of your accommodation in Country X.

The fact that your family home in Australia was rented partly furnished is indicative that the move to Country X was not intended to be long term, that is, that it would be quickly possible to resume your previous way of life in Australia, including continuing to travel regularly outside Australia. The fact your employer pays for your accommodation in Country X is indicative that they believe you are incurring additional expenses in maintaining two permanent homes.

Summary

On balancing all the factors above your behaviour is indicative of you being an Australian resident for tax purposes -

You have lived in Australia since 1987

As a Country B citizen you are able to live in Australia without a visa provided you remain of good character.

Your family's visit to Country X was for 11 months

You rented a family sized apartment for 12 months in Country X in the 2009 income year

You visit your family in Australia about every 2 weeks for at least 2 days

You stay with your family in the family home when you visit, you have a key to your home, you have some clothes and possessions in Australia

You have a permanent home available to you in Australia. You have a key to the home in Australia

Your employer has paid for your accommodation in Country X since 2011

You are or have been a director of a company in Australia and continue to have a role in corporate governance of the business

You own a rental property in Australia

You are closely involved with your family while you are in Australia, attending school events, sports events, graduations, birthdays and anniversaries

You have shares in Australian public companies

You own a car in Australian and maintain an Australian driver's licence

You paid for your family visited you 4 to 6 times a year in Country X until 2013 after which time they became more independent and visited less frequently

You are not seeking to become a citizen of Country X

You current Country X visa requires you to be employed or be a director in Country X

You have private health insurance for you and your family in Australia (since 2014)

You continue to have mail directed to the Post Office box in Australia

You stored some of your family possessions when you rented your family house but left it partly furnished with large pieces and some basic utensils

Your spouse and children are Australian citizens

You continue to financially support spouse and family in Australia as your spouse works part-time

Consequently you are considered to be a resident of Australia under the ordinary concepts (resides test) from 1 July 2008 to 30 June 2016.

As you are a resident under ordinary concepts there is no need to consider the other three tests statutory tests.

Your residency status

You are an Australian resident under ordinary concepts outlined in subsection 6(1) of the ITAA 1936.

In Dempsey v FC of T [2014] AATA 335; 2014 ATC 10-363; the Tribunal stated:

Adopting that ordinary meaning of "resides" does not mean that a conclusion on the facts that an individual "resides" in one location precludes a conclusion on the facts that he also "resides" in another. That has long been settled. As Dixon J observed in respect of cognate expressions, and by reference to earlier authority in Gregory v Deputy Federal Commissioner of Taxation (1937) 57 CLR 774 at 777, "The well settled interpretation of the words includes in their application a man who resides in two or more places."

As you are an Australian resident for income tax purposes and Country X also considers you a resident for tax purposes, it is necessary to consider the tie breaker rules in the Country X Agreement.

Residency and taxing rights

In determining liability to Australian tax of foreign sourced income, it is necessary to consider not only the income tax laws but also any applicable tax treaty.

The Country X Agreement operates to avoid the double taxation of income received by Australian and Country X residents.

As you are an Australian resident for income tax purposes and Country X also considers you a resident for tax purposes, it is necessary to consider the tie breaker rules in the Country X Agreement.

Article 4(3) of the Country X Agreement provides tests of residency that are used where the individual is a resident of the two countries (tie breaker tests). The tie breaker tests ensure that the individual is a resident of one country for the purposes of working out liability to tax on their income. The tie breaker rules do not change a taxpayer's residency status for domestic law purposes.

Article 4(3) of the Country X Agreement provides that a person's residency status for the purpose of applying the Country X Agreement shall be determined as follows:

a) The person shall be deemed to be a resident solely of the country he/she has a permanent home available.

b) If the person has a permanent home in both countries, or does not have a permanent home in either, the person will be deemed to be a resident of the country in which he/she has a habitual abode.

c) If the person has a habitual abode in both countries, or does not have a habitual abode in either, the person will be deemed to be a resident of the country with which his/her personal and economic ties are closer.

Permanent home

To assist in the interpretation of the Country X Agreement, reference is made to Taxation Ruling TR 2001/13 - Income tax: Interpreting Australia's Double Tax Agreements.

Paragraph 104 of TR 2001/13 states that the OECD Model Tax Convention and Commentary (OECD Commentary) will often need to be considered in interpreting tax treaties.

The OECD Commentary provides that in relation to a 'permanent home':

For a home to be permanent, an individual must have arranged and retained it for his or her permanent use as opposed to staying at a particular place under such conditions that it is evident that the stay is intended to be of short duration. The dwelling has to be available at all times continuously and not occasionally for the purposes of a stay, which owing to the reasons for it is necessarily of short duration (eg travel for pleasure, business travel, attending a course etc)

Any form of home may be taken into account, including a house or apartment belonging to or rented by the individual and a rented furnished room.

In your case, you have a permanent home available to you in both Australia and Country X. In Australia you have a home readily available to you, being the family home. In Country X you have been living in long term rental accommodation that is available for your sole use.

Habitual abode

The Oxford English Dictionary (3^rd edition) defines the words 'abode', 'habitual' and 'habitually' to mean:

abode: noun formal or literary a place of residence; a house or home: my humble abode. [mass noun] residence: their right of abode in Britain. archaic a stay; a sojourn.

habitual: adjective done constantly or as a habit: his habitual use of heroin this pattern of behaviour can become habitual. doing something constantly or regularly: a habitual late sleeper. regular; usual: his habitual dress.

habitually: adverb by way of habit; customarily: he habitually carried a pocket knife / does he lie habitually?

A person therefore has an 'abode' in a particular country if he actually lives there (whether in his own house or not), or if he has a house there (whether he actually lives in it or not). It follows that he has 'an habitual abode' in a country if it is customary, regular or usual for him to live in that country, whether in a particular establishment or not. A person's 'habitual abode' refers to the place he normally lives, in the same way as his 'habitual dress' refers to the type of clothes he normally wears. Just as a person can have more than one such piece or style of clothing, so too can a person have more than one habitual abode. It therefore follows that he can have 'an habitual abode' in a particular country at a given time even though he is not physically present there at that moment, if his conduct establishes that it is regular, usual, customary or normal for him to live there. On this basis, the Commissioner's view is that a person can have more than one habitual abode at a time. In the same vein, a place may be acquired or discarded by a person as an habitual abode either suddenly or gradually over time.

In relation to a habitual abode, the OECD Commentary indicates that all stays in each country, regardless of the purpose for the stays, must be considered in order to assign a preference to a particular country. Further, the comparison must be made over a sufficient length of time for it to be possible to determine whether the presence in each country is habitual and to also determine the intervals at which the stays take place.

The notion of a habitual abode is not simply a test of where a person stays more frequently but also looks to whether living in a particular country is normal or customary having regard to the taxpayer's circumstances. In your case you have been living in Country X for many years. You live in long term rental accommodation, work there; engage in sport and other social activities. Apart from the 2009 income year you have regularly travelled to Australia about every 2 weeks for at least 2 days and stay in the family home. Although your children are now older and have completed their studies and gained employment you continue to regularly visit Australia about every 2 weeks for at least 2 days and contribute financially and emotionally to the family.

As you have an habitual abode available to you in both Australia and Country X it is necessary to consider which country your personal and economic are closest to.

Personal and economic ties

Personal and economic ties are also known as the centre of vital interests. Although Country X is not part of the OECD the Country X agreement is based on that OECD model taxation convention.

The centre of vital interests test is relevant only where a taxpayer has a permanent home available in both Australia and the Country X, or does not have a permanent home available in either Australia or the Country X.

In Thiel v. Federal Commissioner of Taxation (1990) 171 CLR 338; 90 ATC 4717; (1990) 21 ATR 531, all of the members of the High Court accepted that the OECD Model Taxation Convention's official Commentaries may be relevant to the interpretation of tax treaties based on the OECD Model.

Article 4(3)(c) of the Country X Agreement is based on Article 4(2)(a) of the OECD Model. Consequently the OECD Commentary on Article 4 of the OECD Model can be considered in interpreting the term 'personal and economic relations (centre of vital interests)' in Article 4(3)(c) of the Country X Agreement.

Para 15 of the OECD Commentary on Article 4(2)(a) states:

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.

Klaus Vogel on Double Taxation Conventions, Third Edition, Kluwer Law International 1997, is consistent with paragraph 15 of the OECD Commentary on Article 4(2)(a) and states that 'personal relations encompass a taxpayer's entire way of life' (emphasis added). This includes family and social, political and cultural relations. At paragraphs 74 and 74a of page 249, Vogel suggests that factors that are part of a person's personal relations include intention to spend their old age at a certain place; possession of an identity card; enlistment on the electoral roll; and relations to a thing or to an impersonal entity such as a private collection or membership in a club or the exercise of a hobby.

In Tan v FCT [2016] AATA1062 CR Walsh SM states:

62. Similarly, Vogel 2016 states the following in relation to what is meant by "personal and economic relations" in Article 4(2) of the OECD Model Tax Convention (footnotes omitted):

92. (1) Personal and Economic Relations. As already mentioned, many factors from the taxpayer's private and economic sphere are relevant to determine his personal and economic relations. In practice, the courts have, inter alia, based their decisions on an evaluation of facts surrounding the following non-exhaustive list of facts: house; family home; furnishings; rented apartment; owned apartment; passport; sharing a room, no rent, no lease; place where the taxpayer was born and raised; children; country of birth of children; spouse; country of divorce; where spouse seeks employment; family visits; other family members such as parents; partner; friends; acquaintances; memberships; language skills; work; employer; adaption of professional qualifications such as nursing license; temporal dislocation; no relations apart from day-to-day living expenses (renting on yearly basis, bank account only for needs abroad, no car), relocation support, normally granted when an employee has temporarily moved to work in another country than that in which he had his residence; bank accounts; brokerage account; credit card; money transfers; health insurance; driver's license; personal belongings, such as a car, purchase new home; registration of car; future retirement plans; retirement accounts.

93. ...the criteria of personal relations and, to a lesser degree, economic relations are highly subjective. What constitutes personal relations and how much weight is to be attached to such factors is very much in the eyes of the beholder.

94. In our view, all this suggests that the circumstances should be restricted to actual vital interests (contained in the term 'centre of vital interests')...Vital interests are circumstances in the everyday life of an individual that not only reflect his day-to-day needs but also - in addition - longer-lasting ties. Whereas day-today needs and habits can be shifted quickly and selected by the taxpayer at will, vital interests are characterised by a certain permanence and this cannot be of a sheer temporal nature. (emphasis added)

Your family lives in Australia. You continue to provide financial and emotional support for your family in Australia. You own a car in Australia and maintain an Australian driver's licence. You have Private health insurance in Australia. You are director of an Australian company and own two dwellings in Australia. You also own shares in public companies. Therefore you have close personal relations to Australia.

Your sole economic tie to Country X is XYZ, the company that you developed. The fact that XYZ has paid for your accommodation costs in Country X since 2011 is indicative that they recognise you have additional costs in living in Country X. You are a member of a sporting club and charities in Country X. You have lodged tax returns in Country X since 2011.

Your vital interests are circumstances in your everyday life that not only reflect your day-to-day needs but also your longer-lasting ties. Your family and economic ties to Australia and more significant than those to Country X. Accordingly as you have closer personal relations to Australia, under paragraph (c) of Article 4(3) of the Country X Agreement, you are a resident of Australia for the purposes of applying the provisions of the Country X Agreement to income earned by you from July 2008.

Salary and wages

Under article 15(1) of the Country X Agreement salary and wages and similar remuneration derived by an individual who is a resident of Australia in respect of an employment exercised in Australia unless the employment is exercised in Country X. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in Country X.

However, Article 15(2) remuneration derived by an individual who is a resident of Australia in respect of an employment exercised in Country X shall be taxable only in Australia if:

The recipient is present in Country X for a period(s) not exceeding a total of 120 days in any 12 month period; and

The remuneration is paid by, or on behalf of, an employer who is not a resident of Country X; and

The remuneration is not deductible in determining taxable profits of a permanent establishment or a fixed base which the employer has in Country X; and

The remuneration is, or upon application of this article will be, subject to tax in Australia.

As you are present in Country X for more than 120 days in 12 month period your employment income will not be assessable solely in Australia.

As an Australian resident for the purposes of the Country X Agreement Australia has the primary taxing right over your remuneration from Country X. However, you may be entitled to a tax credits for any tax that you pay in Australia on that income in Country X.

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