Edited version of private advice

Authorisation Number: 1052167227643

Date of advice: 18 April 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for the purpose of subsection 6(1) of the Income Tax Assessment Act 1936 for the period from X July 20XX to XX June 20XX?

Answer

Yes.

Question 2

Are you a resident solely of Australia under Article X of the Double Tax Agreement (DTA) between Australia and Country A for the periods from X July 20XX to XX September 20XX and X December 20XX to XX April 20XX?

Answer

Yes.

Question 3

Are you a resident solely of Country A under Article 4 of the Double Tax Agreement (DTA) between Australia and Country A for the periods from XX September 20XX to X December 20XX and from XX April 20XX to XX June 20XX?

Answer

Yes.

Question 4

For the periods you are solely a resident of Country A under Article X of the DTA between Australia and Country A, is Australian tax payable on dividends received indirectly via an Australian discretionary trust limited to XX% of the gross dividend under Article 10 of the DTA between Australia and Country A?

Answer

Yes.

This ruling applies for the following periods:

Year ended XX June 20XX

Year ended XX June 20XX

Year ended XX June 20XX

Year ending XX June 20XX

The scheme commenced on:

X July 20XX

Relevant facts and circumstances

You were born in Country A.

You moved to Australia in 19XX.

You are a citizen of Country A and Australia.

You obtained Australian Citizenship in 19XX.

You travelled to Country A in mid-20XX to care for your elderly Parent A. At this time, you intended to stay for a short period of time and then return to Australia.

You stayed in Country A longer than expected due to the COVID-19 pandemic and the health of your Parent A.

In December 20XX, you decided that you would not return to Australia to live; however, you would visit Australia on occasion due to family ties.

You and your spouse had a residence in Australia which was owned through a family trust. This residence was sold on XX September 20XX.

When you were in Country A you and your spouse lived at a home owned by you in Town A. You purchased the dwelling in 20XX and sold it in April 20XX.

From April 20XX until X December 20XX, you and your spouse lived at a rented apartment in County A, Country A.

For the period between X December 20XX and XX April 20XX, you did not rent a dwelling in Country A as you were in Australia.

From XX April 20XX until X July 20XX, you and your spouse lived in another rented apartment in County A.

From X July 20XX onwards you and your spouse have lived in a home that you own in Village A District A, Country A. The property was first purchased as vacant land in January 20XX. A house was then built on this land and you, and your spouse moved in once it was finished. You moved your personal belongings to this property, leaving minimal personal effects in Australia.

While in Australia, you stay in the guest room of your child's house. This is an informal family arrangement, and you are not able to live permanently in your child's house. Your child only agrees to this as it is short-term arrangement. You do not retain any belongings at your child's house.

The guest room is used by other family and friends throughout the period you and your spouse are not staying there and are in Country A.

You have no specific routine when you visit Australia, you spend time with your child and family.

Going forward, you have the intention to return to Australia intermittently for a maximum period of X months at a time to spend time with your child and family.

•         Your spouse has spent time in both Country A and Australia, with more time spent in Australia due to having a role within the family business; however, your spouse is increasing their time spent in Country A.

Your children are adults and reside in Australia.

You have retired and have no employment in Country A or Australia.

You are a beneficiary of an Australian discretionary trust which owns a family business.

You and your spouse have a joint loan to the X Trust of $X.

You receive annual franked distributions from the trust.

You have lodged your Australian income tax returns as a resident for many years which includes the 20XX and 20XX income years.

You are a tax resident of Country A.

You have a bank account and credit card in Country A. You have one bank account in Australia, which is used to receive funds from the X Trust, these funds are then transferred to your Country A bank account for living expenses.

Apart from the loan to the X trust, you have no investments (including superannuation) in your name in either country,

You do not derive any income from sources in Country A.

You have Private Health Insurance in both Country A and Australia.

You are eligible to vote in both Country A and Australia.

You are in the process of completing your will in both Country A and Australia.

You have a Country A mobile phone number and hold no phone number in Australia.

You are not a member of any clubs, sporting or otherwise, in Country A or Australia.

You are not a member of the CSS or PSS Superannuation scheme, an eligible employee under the Superannuation Act of 1976 or the spouse or child under 16 of a person covered by the act.

In Country A, during the relevant years, you lived in accommodation you owned or rented apart from one period of several months where you had no accommodation in Country A.

You split your time between Australia and Country A during the relevant years.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 995-1

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

Question 1

Residency for tax purposes

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 Draft 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:

•         In mid-20XX, you travelled to Country A to care for Parent A, with intentions to stay a short time and then return to Australia.

•         Due to COVID and the health of Parent A you stayed in Country A longer than expected.

•         In December 20XX, you decided you would not return to Australia to live indefinitely, however would visit Australia on occasion.

•         From mid-20XX you have spent the majority of your time in Country A. You spent XXX days in Australia during the 20XX income year, XXX days here in the 20XX income year, X days here in the 20XX income year and XXX days here in the 20XX income year.

•         You have adult children in Australia. You stay with your child in the guest bedroom of their house when you visit Australia.

•         You have no specific routine in Australia, you spend time with your children and family.

•         You and your spouse previously had a residence in Australia, owned through a family trust. The property was sold in September 20XX.

•         You previously rented accommodation in Country A before moving into a dwelling you built in Country A. Moved into in July 20XX. You have moved your personal belongings to this property.

•         You are a beneficiary of an Australian discretionary trust.

•         You and your spouse have a joint loan to the X Trust for $X.

•         You have received significant annual distributions from the trust, paid to either your Country A or Australian bank account.

•         You have bank accounts in both Country A and Australia.

•         You have Private health Insurance in both Country A and Australia.

•         You are eligible to vote in both Country A and Australia

•         You are in the process of completing wills in both Country A and Australia

Although your situation is not clear cut, it is considered that on balance you have not ceased to reside in Australia for the purposes of the resides test during the period from XX September 20XX. You still have business ties to Australia, an income stream and family ties that are strong enough for you to visit Australia for significant amounts of time. You have also retained private health insurance and the ability to vote in Australia,

Therefore, you are a resident of Australia under the resides test.

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.

When considering intention, we have regard to objectively observable conduct. While assertions of intention will always be relevant, if there is a difference between that assertion and the conduct, we may rely on the conduct.

In Harding v Commissioner of Taxation [2019] FCA 29 the Court stated, at paragraph 30...In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307, where his Lordship said:

... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges, and immunities which the law and constitution of the domicile confer on the denizens of the country, -in their domestic relations ... in their purchases and sales and other business transactions ... in their political or municipal status,-and in their daily affairs of common life; but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence.

Application to your situation

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in 19XX, became an Australian citizen in 19XX, raised a family here, ran a business here and accumulated assets here.

Therefore, it is considered that you acquired a domicile of choice in Australia at some time on or after you became an Australian citizen in 19XX.

Further, although you have a stated intention to live in Country A for the foreseeable future, due to the personal and economic ties you still have with Australia, it is considered that there is insufficient evidence to say that you have abandoned your Australian domicile and acquired a domicile of choice in Country A.

Therefore, your domicile is Australia during the relevant years.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 (Harding case) held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•         whether the taxpayer has definitely abandoned, in a permanent way, living in Australia.

•         whether the taxpayer is living in a town, city, region, or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

a)  the intended and actual length of the taxpayer's stay in the overseas country;

b)  whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;

c)   whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;

d)  whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)  the duration and continuity of the taxpayer's presence in the overseas country; and

f)    the durability of association that the person has with a particular place in Australia, i.e. maintaining assets in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive, and the weight given to each factor depends on the individual circumstances.

TR 2023/1 provides the following guidance in relation to durability of association with a place:

73. The longer you stay in any one particular place, the more permanent it is likely to be. This is because of the practical reality that extended periods will usually and naturally lead to the formation of durable connections overseas and loosening of connections with Australia.

81. The relative strength of the connections established and maintained overseas and of those retained in Australia will be relevant. As noted in this Ruling, the retention of the family home and a consistent return to it may indicate behaviour inconsistent with abandoning Australia and commencing to live permanently overseas. The location of family and social ties and their significance to you will also be relevant.

82. Other factors, such as the location and maintenance of bank accounts, location of other assets, maintenance of professional registrations and licences, and recreational activities, will be relevant as forming part of the matrix of circumstances to be considered.

Application to your situation

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•         In mid-20XX, you returned to Country A to care for Parent A with intentions to stay a short time and then return to Australia.

•         Due to COVID and the health of Parent A you stayed in Country A longer than expected.

•         In December 20XX, you decided you would not return to Australia to live indefinitely, however would visit Australia on occasion.

•         When you returned to Country A you and your spouse lived at a home owned by you in Town A. This home was purchased in 20XX and then sold in April 20XX.

•         From April 20XX until X December 20XX you and your spouse lived at a rented apartment in County A before returning to Australia to visit family and friends until mid-April 20XX.

•         From mid-April 20XX until X July 20XX, you and your spouse lived in another rented apartment in County A in Country A.

•         From X July 20XX onwards you and your spouse have lived in a home that you built in Village A District A. You moved your personal belongings to this property.

•         During your return visits to Australia, you have stayed in the guest room of your child's house. This is an informal family arrangement, and you are not able to live permanently in your child's house. Your child only agrees to this as it is short-term arrangement.

•         You do not retain any belongings at your child's house.

•         The guest room is used by other family and friends throughout the period you and your spouse are not staying there and are living in Country A.

•         You spent XXX days in Australia during the 20XX income year, XXX days here in the 20XX income year, X days here in the 20XX income year and XXX days here in the 20XX income year.

•         You have adult children in Australia.

•         You have no specific routine in Australia, you visit to spend time with your family.

•         You and your spouse previously had a residence in Australia, owned through a family trust. The property was sold in September 20XX.

•         You are a beneficiary of an Australian discretionary trust.

•         You have received significant annual distributions from the trust, paid to either your Country A or Australian bank account. You and your spouse have a joint loan to the Trust of $X.

•         You do not derive any income from sources in Country A.

•         You have a bank account and credit card in Country A, and one bank account in Australia.

•         You have Private health Insurance in both Country A and Australia.

•         You are eligible to vote in both Country A and Australia

•         You are in the process of completing wills in both Country A and Australia

In your case, although it is accepted that you have been living in a town, city, or region of Country A in a permanent way, we do not consider that you have definitely abandoned, in a permanent way, living in Australia as outlined in the Harding case (referred to above). You have retained a durability of association with Australia; for example:

•         You have been splitting your time between Country A and Australia before and during the ruling period.

•         You have returned to Australia for periods of time to see your family.

•         You have a significant interest in the Australian trust your family controls by way of a large investment that is your major asset.

•         Your spouse has had a role in the business over the relevant period.

•         You receive significant annual distributions from the trust that funds your entire lifestyle.

•         You have maintained other ties to Australia such as a bank account and private health insurance.

The Commissioner is not satisfied that your permanent place of abode is outside Australia.

Therefore, you are a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for XXX 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 have not been present in Australia for XXX days or more during the relevant income years.

Therefore, you are not a resident under this test.

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 satisfy the domicile test of residency and so are a resident of Australia for income tax purposes for the 20XX, 20XX, 20XX and 20XX income years.

Question 2

Double Taxation Agreement

It is possible to be a resident for tax purposes of more than one country at the same time in respect of an income year or part of an income year. If this is the case, in determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreement. 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.

You have advised that you are tax resident of Country A and we have concluded that you are a resident of Australia for tax purposes.

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

Article X of the Country A Agreement 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.

Country A Agreement - Article X - Residence

1.    For the purposes of this Agreement, a person is a resident of one of the Contracting States if the person is a resident of that Contracting State for the purposes of its tax.

2.    A person is not a resident of a Contracting State for the purposes of this Agreement if the person is liable to tax in that State in respect only of income from sources in that State.

3.    Whereby reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the status of the person shall be determined in accordance with the following rules:

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 in which the person has an habitual abode;

c)    if the person has a habitual abode 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.

Permanent home

Permanent home is not defined in the Double Tax Agreement. 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':

•         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.

•         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.

The concept of permanent home was considered in detail in Tan v FC of T [2016] AATA 1062 and to a lesser extent in Pike v FC of T [2019] FCA 2185.

In the Tan case, [at 52], the taxpayer was held to have a permanent home at his parent's home in Australia for reasons including:

•         the taxpayer lived with their parents at the Australian address for a period of 7 years up until the relevant income year under consideration.

•         there was no evidence to suggest that their stay at the Australian address was intended to be of short duration.

•         the taxpayer kept the majority of their personal effects at the Australian address (including their car) and retained a key to the Australian address.

•         the taxpayer consistently referred to the Australian address as their address in official documents, and as the Australian address as the registered location and address for service of their business.

Application to your situation

From X July 20XX onwards, your living arrangements in Australia and Country A were as follows.

Australia

You had a home available for you to live in until it was sold on XX September 20XX.

From XX September 20XX onwards, when in Australia, you have stayed in a guest room at your child's house that was available for your use for the duration of each stay. However, when you are not in Australia, the guest room is used for friends and other family members and is not available for your use. The arrangement is an informal family arrangement and you do not keep any personal possessions in the guest room when you are not using it.

In your case, from XX September 20XX onwards, it is considered that your accommodation arrangements in Australia have been more of a temporary arrangement than a 'permanent' arrangement. For example, your situation differs significantly to the example in the Tan case.

Therefore:

•         you had a permanent home in Australia from X July 20XX until XX September 20XX, and

•         did not have a permanent home in Australia for the period from XX September 20XX to XX June 20XX.

Country A

•         From X July 20XX to April 20XX, you had a home available to you in Town A.

•         From April 20XX to X December 20XX, you lived in a rented apartment in County A.

•         From X December 20XX to XX April 20XX, you did not have a rented apartment (or any other accommodation) in Country A as you were in Australia during this period.

•         From XX April 20XX to X July 20XX, you lived in a rented apartment in County A.

•         From X July 20XX onwards, you have lived in a home you built in Village A District A.

From the above, it is considered that you had a permanent home in Country A for the entire period from X July 20XX to XX June 20XX except for the period from X December 20XX to XX April 20XX where you had no accommodation available to you in Country A.

Conclusion

Therefore, you are solely a resident of Country A for the purposes of the Country A Agreement for the periods:

•         XX September 20XX to X December 20XX, and

•         XX April 20XX to XX June 20XX.

Further:

•         you had a permanent home in both countries for the period from X July 20XX to XX September 20XX, and

•         did not have a permanent home in either country for the period from X December 20XX to XX April 20XX.

Therefore, it is necessary to see whether you had a habitual abode in either country for those periods.

Habitual abode

The OECD commentary provides that determining a taxpayer's habitual abode requires a determination of whether the individual lived habitually, in the sense of being customarily or usually present, in one of the two states but not in the other during a given period.

The test will not be satisfied simply by determining in which of the two Contracting States the individual has spent more days during the period. This approach was accepted in Pike v Commissioner of Taxation [2020] FCAFC 158 (Pike (2020)) at [29].

The notion of habitual abode refers to the frequency, duration and regularity of stays that are part of the settled routine of an individual's life and are therefore more than transient. It is possible for an individual to have a habitual abode in two states where the individual was customarily or usually present in each State during the relevant period.

Article 4(3)(b) does not specify over what length of time the determination of whether an individual has an habitual abode in one or both States must be made. The determination must cover a sufficient length of time for it to be possible to ascertain the frequency, duration, and regularity of stays that are part of the settled routine of the individual's life.

Application to your situation

In your case, you split your time between Australia and Country A during the relevant income years and it is considered that the time you spent in Australia from X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX was part of your usual pattern of activity.

Further, it is not possible to definitely determine whether you had a habitual abode in only one of the countries during the aforementioned periods as it is considered that you were customarily or usually present in each country during the ruling years.

Therefore, you had a habitual abode in both Country A and Australia during the periods from X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX.

It now has to be determined to which country your personal and economic ties were closer to.

Personal and economic ties (centre of vital interests)

The OECD commentary states that regard should be had to the taxpayer's family and social relations, their political, cultural or other activities, their place of business, the place from which they administer their property etc. As noted in Pike (2020) at [39], personal factors do not have greater weight than economic factors. In each case it will be a matter of fact and degree whether a taxpayer's personal and economic relations, viewed as a whole, support ties closer to one contracting state over the other contracting state.

Application to your situation

During the periods from X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX, your ties to Country A included the following:

•         Your mother and extended family live in Country A.

•         You have a bank account and credit card in Country A.

•         You have Private health Insurance in Country A

•         You are eligible to vote in Country A and have a Country A mobile phone number.

•         You lodged income tax returns in Country A which covered the relevant periods.

•         You owned a home which was sold in 20XX, and then purchased land on which you built a new home.

In respect to Australia:

•         You have family in Australia.

•         Your spouse spent time with you in Australia during the relevant periods.

•         You lodged an income tax return in Australia which covered the relevant period.

•         You have Private health Insurance in Australia.

•         You are eligible to vote in Australia.

•         You have a bank account in Australia.

•         You are a beneficiary of an Australian family trust.

•         You and your spouse have a joint loan to the Trust of $X.

•         You received substantial franked distributions from the trust which were your sole source of income.

Conclusion

We have concluded that your personal and economic ties were closer to Australia than Country A for the periods from X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX.

Whilst we acknowledge that you had strong family ties to Country A, and owned a property in Country A, we consider that the ties to Australia including strong family ties, your major asset being a loan of $X to the trust, and the distributions from the trust that funded your entire lifestyle are far stronger.

Therefore, your personal and economic ties, viewed as a whole, are closer to Australia than Country A for the periods from X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX, and you are deemed to be solely a resident of Australia for these periods for the purposes of the Country A Agreement.

Conclusion

We have concluded that the tiebreaker tests in Article X of the Country A Agreement apply so that you are deemed to be a resident only of Australia for the periods X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX.

The provisions of the Country A Agreement will therefore apply on the basis that you are a resident of Australia and not of Country A for the period X July 20XX to XX September 20XX and from X December 20XX to XX April 20XX.

We have also concluded that the tiebreaker tests in Article 4 of the Country A Agreement apply so that you are deemed to be a resident only of Country A for treaty purposes for the periods XX September 20XX to X December 20XX and XX April 20XX to XX June 20XX.

The provisions of the Country A Agreement will therefore apply on the basis that you are a resident of Country A and not of Australia for the periods XX September 20XX to X December 20XX and XX April 20XX to XX June 20XX.

Question 4

Taxation of dividend income

Article 10 of the Country A Agreement states that:

1.    Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State.

2.    Such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax, and according to the law of that State, but the tax so charged shall not exceed XX per cent of the gross amount of the dividends.

In your case, you are a tax resident of Australia for the income years X July 20XX to XX June 20XX and are assessable on the gross amount of the franked dividends you have received, or will receive, from the Australian trust for the relevant years.

However, you are a resident solely of Country A under the Country A Agreement for the periods XX September 20XX to X December 20XX and XX April 20XX to XX June 20XX.

Therefore, for the periods you are solely a resident of Country A, Australian tax payable on dividends received indirectly via the Australian trust is limited to XX% of the gross dividend.

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