Edited version of private advice

Authorisation Number: 1051706127650

Date of advice: 9 July 2020

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes

Question 2

Under the tiebreaker test in the Country X Double Tax Agreement (DTA), are you a resident of Australia for the purposes of the DTA?

Answer

No

This ruling applies for the following period:

Year ended 30 June 2020

The scheme commences on:

1 July 2019

Relevant facts and circumstances

You were born in the Country X

You are a citizen of Country X and Country Y. You are a citizen of Country Y as your grandparent was born there.

You are a resident in the Country X.

You have a main residence in the Country X which you have owned since 1990's.

Your spouse is an Australian resident for taxation purposes and resides in Australia.

Your spouse was born in Australia. They are an Australian citizen.

You split your time between Australia and Country X. You always spend less than 182 days in Australia each year. You have been carrying on this arrangement for the past number of years.

The purpose of your visits is to spend time with your spouse in their home country.

In the 2020 income year, you arrived in Australia in late 2019.

You intended to stay less than 182 days in the 2020 year however due to the COVID-19 pandemic, you are unable to travel back to Country X. You will therefore spend more than 183 days in Australia in the 2020 income year.

You have been unable to leave Australia before 30 June 2020.

You entered Australia on a temporary visa.

You stay at the property your spouse owns when you visit Australia.

Your spouse joins you when you return to Country X.

You own a Country X residence. You leave your Country X residence unoccupied during your visits to Australia. Your spouse stays with you at your Country X residence when you go back to Country X.

Your spouse travels to the Country X on a visitor Visa granted on arrival.

Your spouse's stay in the Country X does not exceed 183 days. This means they usually leave 4 weeks earlier than you to go back to Australia.

You do not work in Australia and have stated you have no intention of taking up residence in Australia.

You have 3 adult children who all live in Country X. They are all independent from you.

Your spouse is retired.

You are not employed in any other country.

You are a member of a sporting club in Australia.

You maintained professions, social and sporting connections in Country X:

You have bank accounts in Country X.

You co-own with your spouse rental properties in Australia.

You have joint term deposits in Australia with your spouse.

You have joint bank accounts with your spouse in Australia.

You receive pensions from Country X

You and your spouse are not members of the PSS or CSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Summary

You will be a resident of Australia for taxation purposes.

You will to be a resident of Country X for the purposes of applying the relevant Double Tax Agreement.

Detailed reasoning

Question 1: Australian residency

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

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 will still 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'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

¢whether the person is physically present in that country at some time during the year of income

¢the history of the person's residence and movements

¢if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

¢if the person is outside the country for part of the relevant income year, the purpose of the absences

¢the family and business ties which the person has with the particular country, and

¢whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

You are physically present in Australia for a significant amount of time each year. This is usually less than 183 days, however for the year covering the ruling period this will be over 183 days. You have an Australian spouse and your reason given for coming to Australia is so you can spend time in your spouse's home country. When you are in Australia, you live in the house your spouse owns. You co-own rental properties with your spouse in Australia and also have joint bank accounts with your spouse in Australia. These factors indicate significant ties to Australia.

You also have significant ties to Country X, such as your being born there, the residence you own being there and you usually spending more than 183 days there in an income year. You are also a member of many clubs in Country X as opposed to Australia. However, these strong ties to Country X do not prevent you from residing in Australia under ordinary concepts.

Therefore, you are a resident of Australian for taxation purposes under this test.

Domicile Test

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

'Domicile' is a legal concept determined according to the Domicile Act 1982 (Domicile Act) and common law rules.

A person's domicile is usually their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

Your domicile of origin is Country X. You have not taken active steps to change your domicile to Australia. You are able to enter Australia on a temporary Visa due to your Country Y citizenship. You have not taken active steps to become a permanent resident or an Australian citizen. You do not have the intention to make Australia your home indefinitely. Therefore, your domicile will remain in Country X.

You will not be a resident of Australian under this test.

183 day test

You will be a resident of Australia if you spend more than 183 days in Australian in an income year unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

You will be in Australia for more than 183 days in the current income year. Therefore, you are a resident of Australia under this test unless the Commissioner is satisfied that your usual place of abode is outside Australia and you do not intend to take up residence in Australia.

Usual place of abode

In the context of the 183 day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. A person can have only one usual place of abode under the 183 day test. If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, it is necessary to examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode.

You have places of abode available in both Australia and Country X. For the past number of years, you have split your time between Country X and Australia, always spending slightly more time in Country X. You own a residence in Country X and live there when you travel there. Your spouse owns a house in Australia and you live there when you travel here.

Based on your ownership of the property, the usual longer time spent in Country X and your greater connections there, Country X will be taken as your usual place of abode.

Despite the conclusion that you have a usual place of abode in the Country X, the Commissioner also has to be satisfied that you do not intend to take up residence in Australia. As noted above, you are an Australian resident under the resides test. You have stated that you did not have an intention to take up residency in Australia. However, the facts show that you did in fact take up this residency.

Therefore, the Commissioner is not satisfied that you do not intend to take up residence in Australia.

Therefore, you are a resident of Australian for taxation purposes under this test.

Superannuation Test

You and your spouse are not members of the PSS or CSS.

Therefore, you are not an Australian resident for taxation purposes under this test.

Question 2: Double tax agreement between Australia and Country X

In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.

Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).

On balance, you will be taken to be a resident of Country X for the purpose of the Country X DTA.

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