Edited version of private advice

Authorisation Number: 1052133487526

Date of advice: 22 August 2023

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes from the relevant date?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes under the Double Tax Agreement (DTA) between Australia and Country Z?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Country Z.

You held a visa to enter Australia. You applied for this visa several years ago and this visa has subsequently expired a number of months ago.

The visa falls under the significant investor stream, the main requirement is to comply with the criteria and does not have requirements on days in Australia.

You left Australia in a prior year to return to Country Z as you have a number of business' in Country Z that you need to manage.

You are currently on a bridging visa.

You intend on applying for a business investors visa for Australia.

You hold a number of investments in Australia are able to manage these investments remotely while in Country Z.

You are mainly involved in the two different industries in Country Z.

Your spouse and child live in Australia.

Your spouse is also on a bridging visa to be able to remain in Australia.

Your spouse and child live in a property in Australia owned by you.

You have a mortgage over this property which you pay.

You financially support your spouse and child in Australia.

You send your spouse money to pay their living expenses.

Your spouse does not work in Australia.

Your spouse does not receive any income from any other sources other than you.

You have an adult child in Country Z who works with you.

Prior to going back to Country Z, you and your family lived at the family home.

You have a home in Country Z that you are living in.

This home is owned by you and was purchased a number of years ago.

You own several business' in Country Z.

You have social connections in Country Z.

You hold the positions in different organisations and businesses.

You have a house and car in Australia along with a block of land and investment funds.

You do not have any social and sporting connections in Australia other than people associated with your investments and immigration matters.

You are a beneficiary of a discretionary trust with a corporate trustee that owns parts of commercial properties on lease in Australia.

You had short visits in Australia for less than 183 days in each financial year and have no intention to stay for an extended period in the relevant ruling period.

You do not intend on living and working in Australia.

You have ageing parents-in-law which you need to care for in Country Z.

You have older and younger siblings in Country Z along with a grandchild.

You are a resident of Country Z for taxation purposes.

Neither you nor your spouse are eligible to contribute to the PSS or the CSS Commonwealth super funds.

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

Section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax 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', as applied to an individual, are defined in subsection 6(1) of the ITAA 1936.

The definition offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are:

•                     the resides test (also referred to as the ordinary concepts test)

•                     the domicile test

•                     the 183-day test, and

•                     the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

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 involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - 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 - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                     period of physical presence in Australia

•                     intention or purpose of presence

•                     behaviour while in Australia

•                     family and business/employment ties

•                     maintenance and location of assets

•                     social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•                     You left Australia to return to Country Z.

•                     You have returned to Country Z to manage your business's.

•                     You are living in Country Z in a property you own.

•                     Your spouse and child remain living in Australia.

•                     Your child attends school in Australia.

•                     Your spouse and child remain living in a property in Australia that you own.

•                     You pay the mortgage on this property in Australia.

•                     Your spouse does not work in Australia.

•                     You financially support your spouse and child in Australia.

•                     You send your spouse money each month for their and your child's living expenses.

•                     You have investments in managed funds in Australia and you are the beneficiary of a discretionary trust in Australia.

•                     You make short trips back to Australia to visit your spouse and child.

You have not broken your continuity of association with Australia.

Although we understand that your intention is not live in Australia indefinitely, residency is not shed when departing Australia, merely by asserting an intention to never live in Australia again and on balance, your circumstances demonstrate that you are residing in Australia according to the ordinary meaning of the word during the period of this ruling.

In particular your continued family ties to Australia with your spouse and child remaining in Australia while you are in Country Z, the property (your family home) that you own and continue to pay the mortgage repayments for in Australia, (which you also reside in when returning to Australia), the fact that you are financially supporting your spouse and child in Australia and are sending your spouse money each month for their and your child's living expenses and your significant managed investments in Australia, all point towards you residing here.

Because the ordinary concepts test asks whether you reside in Australia, having a connection to, or being a resident of another country does not necessarily diminish any connection to Australia. For this reason, the ordinary concepts test is not about dominance or exclusivity of residence in one place versus another.

While physical presence is an important consideration, physical absence does not necessarily result in non-residence. It is well established in case law that a person does not cease to be a resident simply by absence; rather, the question is whether they have maintained a 'continuity of association' with Australia which is in turn established by considering their other connections to Australia, which we believe is the case in your situation.

Therefore, you are a resident of Australia for taxation purposes since leaving Australia.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation

In your case, you were born in Country Z and your domicile of origin is Country Z.

It is considered that you did not abandon your domicile of origin in Country Z and acquire a domicile of choice in Australia. You are not entitled to reside in Australia indefinitely and when residing and visiting Australia, you only hold a Bridging visa

Your domicile is therefore Country Z

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•                     the person's usual place of abode is outside Australia, and

•                     the person does not intend to take up residence in Australia.

Application to your situation

You were not present for 183 days or more in the relevant income years.

You do not intend on being in Australia for more than 183 days in the relevant ruling period.

Superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

Application to your situation

You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person.

Therefore, you are not a resident under this test.

Conclusion

You are a resident of Australia for taxation purposes from when you left Australia on DD MM 20XX.

Whilst under Australian law, you are an Australian resident for taxation purposes, you have stated that Country Z also considers you to be a resident for taxation purposes.

In determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreements. Sections 4 and 5 of the International Tax Agreements Act 1953 (Agreements Act) incorporate that Act with the ITAA 1936 and the ITAA 1997 and provide that the provisions of a double tax agreement have the force of law.

Taxation Ruling TR 2001/13 discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements.

Article X of the Convention sets out the tiebreaker rules for residency for individuals. The tiebreaker rules ensure that the individual is only treated as a resident of one country for the purposes of working out liability to tax on their income under the double tax agreement. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes.

The relevant tiebreaker test in the Convention is as follows:

The 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)          the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person;

(b)          if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's economic and personal relations are the closer.

The Tiebreaker tests apply as follows:

•                     If one test resolves the tiebreak, then the following tiebreaker tests do not need to be considered.

•                     If the tiebreaker tests do not resolve the tiebreak, to break the tiebreak there is:

-        A supplementary test, for example citizenship.

-        A requirement to consult the other tax authority to resolve it by mutual agreement of the Competent Authorities of the respective countries.

Permanent home

Permanent home is not defined in the Convention. Therefore, recourse can be made to supplementary materials in order to aid construction. The OECD commentary to the Model Tax Convention provides that in relation to a 'permanent home':

(a)          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 (e.g., travel for pleasure, business travel, attending a course etc). For instance, a house owned by an individual cannot be considered to be available to that individual during a period when the house has been rented out and effectively handed over to an unrelated party so that the individual no longer has possession of the house and the possibility to stay there.

(b)          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.

We have concluded that you have a permanent home in a Country and Australia, based on the following considerations:

•                     You have a permanent home available to you in both Australia and a Country

•                     Your spouse and child are living in a home in Australia which you own and pay the mortgage on.

•                     You stay at this property when you are in Australia.

•                     You have a home in a Country which you own and live in.

Personal and economic ties

You have personal and economic ties in both Australia and a Country.

You have the following in Australia:

•                     Spouse and child

•                     Property

•                     Car

•                     Investments in managed funds

•                     Beneficiary of a discretionary trust

You have the following in a Country

•                     An adult child

•                     Parents-in-law, which you care for

•                     A property which you live in

•                     Ownership interest in 4 business's

•                     You hold various position within a number of clubs, associations and charities

When applying Article X of the Convention to your situation, we considered that, based on the information provided to the Commissioner, your ties are closer with a Country than to Australia.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).