Edited version of private advice

Authorisation Number: 1051788091668

Date of advice: 18 December 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, are you a resident of Australia for the purposes of the DTA?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country X.

You are a dual citizen of Country X and Australia.

You are a resident of Country X for taxation purposes.

You have a main residence in Country X which you have owned for a long time.

Your spouse is a dual citizen of Country X and Australia.

Your spouse is a resident of Australia for taxation purposes and resides in Australia.

You spend most of your time in Country X and have done so for many years.

You were employed, now you are retired.

Your spouse lives in Australia where your spouse's career is primarily based and where your spouse has experienced most of the commercial success.

Your spouse owns a property in Australia, which is registered in your spouse's name only. You stay with your spouse when you visit Australia.

Because of your long career, you and your spouse were away from each other physically for long periods throughout your marriage.

Your spouse visits Country X regularly.

Both of you are free to visit the other without visa restriction.

You lived in Australia many years ago. The reason for your length of stay in Australia was personal injury.

You applied for and was granted a permanent visa and subsequently applied for and was granted Australian citizenship.

You arrived in Australia to visit your spouse.

You have been unable to leave Australia due to the COVID-19 pandemic.

You intend to remain in Australia for longer than you intended to when arrived in Australia for the following reasons:

•         the Australian government has prohibited Australian citizens from leaving Australia except in unusual circumstances;

•         you are in the high-risk category for COVID-19 related complications, you are unable to find suitable non-stop international flights out of Australia; and

•         your spouse requiring a carer.

You wish to return home in Country X as soon as reasonably able to.

You daughter and son-in-law live in Country X, with your granddaughter.

Your family are predominantly in Country X and you visit them regularly.

You have a large group of friends in Country X, you have known most of them for decades and visit most of them regularly.

Although you are retired from your profession, you participate in events throughout the Country X summer months.

You are a member of different clubs which are based in Country X.

You still carry on a business as a freelance journalist and submit articles for publication.

You are currently in the process of writing a series of monthly articles as memoirs of your career.

You receive the Country X aged pension and the employment pension in a Country X bank account.

You have a bank account in Australia.

Both bank accounts are joint bank accounts with your spouse.

You pay income tax in Country X every year while you were employed and since retirement have continued to be taxed as a Country X resident.

You have a National Insurance in Country X.

You have a driver's licence and a pilot's licence in Country X.

All your personal effects are kept in your Country X home.

You use your income derived from Country X to fund your living expenses.

You usually have never been physically present in Australia for more than one-half of the year at any time. In a typical year, you may spend 2 to 3 months in Australia over the summer.

You state you have no intention to take up residence in Australia.

You and your spouse are not eligible members of a Commonwealth superannuation scheme.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

International Tax Agreements Act 1953

Reasons for decision

Question 1

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for taxation purposes as a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms 'resident' and 'resident of Australia', regarding an individual, are defined in subsection 6(1) of the ITAA 1936. The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. The tests are:

•         the resides test,

•         the domicile (and permanent place of abode) 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 resides test is the primary test for determining the residency status of an individual for taxation purposes. If residency is established under the resides test, the remaining three tests do not need to be considered. However, if residency is not established under the resides test, an individual will still be a resident of Australia for taxation purposes if they meet the conditions of one of the other three tests.

The resides (ordinary concepts) 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 an Australian citizen; you visit your spouse who lives in Australia annually, usually over summertime. You physically present in Australia for a significant amount of time. The reasons for the length stay are the COVID-19 travel restrictions and to look after your spouse. When you are in Australia, you live in the house your spouse owns. You have a joint bank account 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 main residence you own being there and you usually spending most of time there in an income year and have done so for many years. You are also a member of different clubs in Country X. However, these strong ties to Country X do not prevent you from residing in Australia under ordinary concepts.

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

Domicile Test

Under this test, a person is a resident of Australia for taxation 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 taken active steps to become an Australian citizen. The Commissioner is satisfied that you have a permanent place of abode outside Australia and you do not have the intention to make Australia your home indefinitely.

You are not a resident of Australia for taxation purposes under this test.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does 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 were physically present in Australia for more than 183 days in 20xx income year. You intend on being in Australia for more than 183 days in 20yy income year. However, your usual place of abode is in Country X due to your greater connections there.

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

A person will be considered a resident under the Commonwealth superannuation fund test if they or their spouse currently contribute to certain superannuation funds for Commonwealth government employees.

Based on the information you have provided; you are not a resident of Australia 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 are taken to be a resident of Country X for the purpose of the Country X DTA.

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