Edited version of private advice

Authorisation Number: 1052209260473

Date of advice: 10 April 2024

Ruling

Subject: Residency and double taxation agreement

Question 1

Are you a resident of Australia for taxation purposes as defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) for the first part of the first ruling year (Ruling Period 1)?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes as defined by subsection 6(1) of the ITAA 1936 from the second part of the first ruling year until the end of the eighth ruling year (Ruling Period 2)?

Answer

No.

Question 3

Are you a resident of Australia for taxation purposes according to the tie breaker provisions of Article 4(2) of the Convention between the Government of Australia and [Country A] for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income(the Convention) for Ruling Period 1?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances

Personal and Miscellaneous

You are a citizen of Australia.

You were born in a foreign country and moved to Australia when you were an infant.

You were educated and married in Australia.

Your only dependant and family of origin reside in Australia.

Prior to your relationship breakdown with your former spouse, you held ownership interests in X properties in Australia.

As a result of the relationship breakdown with your former spouse, your ownership interest in Property A was disposed of and your other Property (Property B) was sold prior to the ruling period.

After the relationship breakdown with your former spouse was finalised, you moved your remaining personal effects and belongings to your relative's residence in Australia (your Relative's Home).

You did not freight any belongings to Country A.

Prior to the start of the ruling period, you commenced a relationship with a Country X citizen who was a resident of Country A. This person became a citizen of Country A during the ruling period. From the beginning of Ruling Period 2 for a number of years this person cohabited with you in Country A as your de facto partner.

You held a driver's licence in Australia from the beginning of the ruling period for a number of years. You did not renew it once it expired.

Prior to the ruling period, you sold your vehicle in Australia.

You have held a current Country A driver's licence for a number of years.

You have held current health insurance in Country A for a number of years.

You held health insurance in Australia from the beginning of the ruling period until sometime during the ruling period. Since that point you have not renewed your Australian health insurance.

You have a gym membership in Country A.

You have a gym membership in Australia and have held this throughout the ruling period.

You did not advise the Australian Electoral Commission or Medicare that you were leaving Australia indefinitely.

You do not recall voting in any state or federal elections during the ruling period. You do not recall voting prior to the ruling period but do recall having paid a fine for failing to vote in the past.

You did not advise any financial institutions or Australian companies in which you held investments that you were a foreign resident.

You are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Periods of physical presence in Australia

You have spent approximately X days onshore in Australia during the ruling period of X days. This is approximately X months (X year) in Australia over a period of XX months (X years). During this period, you have been physically present in Country A for approximately X months (X years) over a period of X months (X years).

You were present in Country A on DD MM 20XX, being the commencement of the ruling period.

During the income years 20XX, 20XX, 20XX and 20XX, you spent fewer than XX days in each year onshore in Australia.

During subsequent income years you spent between 0 days and XX days onshore In Australia.

For a substantial duration of time, you did not return to Australia. You have provided the following reasons as to why you were unable to return to Australia.

•         you were not an exempt person under the hard border restrictions which were in place at the commencement of the COVID-19 border lockdowns in Australia.

•         your heavy workload restricted you to only two weeks of travel at a time. Therefore, Australia's 14-day quarantine requirements made any travel to Australia highly impractical.

•         there was uncertainty that you could return to Country A during the lockdowns once you left Country A.

•         you were not eligible to receive your first Covid vaccine in Country A until DD MM 20XX due to the rules in Country A prioritising citizens of Country A.

•         You had (Country A) domestic and international travel commitments for work and you were unable to return home to Australia in month and month 20XX.

You returned home at the first opportunity in month 20XX.

During the income year 20XX you spent fewer than X days onshore in Australia.

Visas

You have resided in Country A under the following authorisations:

•         Visa 1 (limited duration temporary authorisation with no opportunity for renewal/extension)

•         Visa 2 (multi-year duration sponsored work visa with unlimited multi-year extensions permitted)

•         Visa 2A (multi-year duration sponsored work visa with unlimited multi-year extensions permitted)

Accommodation

Country A

Prior to the start of the ruling period, you entered into a X-month lease agreement for a residential apartment in City A. You resided here for more than 12 months.

On or around DD MM 20XX,you entered into an initial X month lease agreement for another residential apartment in City A. You resided at this property for a number of years.

On or around DD MM 20XX, you entered into a X month lease agreement on a property located in City B. You terminated the lease early and moved to City C in month 20XX.

On or around DD MM 20XX, you entered into a X month lease agreement on a property located in City C. You resided at this property until DD MM 20XX.

In Month 20XX you entered into a X month lease agreement for a property located in City C. You renewed this agreement and as of 30 June 20XX, you continue to reside at this property. The lease agreement has an end date of DD MM 20XX.

Australia

Prior to the commencement of the ruling period, on or around month/month 20XX, you vacated Property A.

From month/month 20XX until the month 20XX you resided with your sibling at Property B.

You sold Property A on or around month 20XX. You moved into your Relative's Home upon the sale of Property B in month 20XX.

Between month 20XX and month 20XX, you have resided at your Relative's Home when you are in City A, Australia. There is no formal agreement in place providing you with a legally enforceable right to reside at your Relative's Home. The bedroom you stay in remains unoccupied and available to you. You have offered to pay weekly payments to your Relative for the room, but they declined the offer.

On or around DD MM 20XX, you entered into a X-month lease agreement for a rental property located in City A, Australia (Property C).

Employment and Business Interests

Country A

You are currently in the role of X for Company A. The address on the employment contract is your residential address in City B, Country A

On or around DD MM 20XX, you commenced employment with Company B. You were employed with this company until your contract end date of DD MM 20XX.

On or around DD MM 20XX, you commenced employment with Company C. You were employed with this company until your contract end date of DD MM 20XX.

In Month 20XX, you commenced X with Company D Your address on the contract of engagement is your residential address in City A, Country A.

On or around DD MM 20XX, you commenced a X with Company E. The address on the employment contract is your residential address in City B, Country A.

On or around DD MM 20XX, you were appointed by Company A in the role as X. The address on the employment contract is your residential address in City B, Country A.

Your employment is performed predominantly in Country A. When you are overseas or in Australia you are able to work remotely.

During the ruling period, you have been employed by, or held board member or directorship roles with the following entities:

(Table redacted to protect confidentiality)

Australia

During the ruling period, you have held board member or directorship roles with the following entities.

(Table redacted to protect confidentiality)

You perform the required work for your Australian roles in Country A and Australia.

You have provided the following addresses to the Australian Securities investment corporation (ASIC):

•         Your addresses in Country A.

•         Property A, Australia.

•         Your Relative's Home, Australia.

Assets

Country A

You hold a Country A bank account, into which your Country A sourced income is paid.

You purchased a vehicle in Country A in Month 20XX.

You held an interest in Country A partnership. You sold this during the 20XX income year.

Australia

You hold Australian bank accounts into which your Australian sourced income is paid. You also hold an Australian credit card.

You currently hold ASX listed shares.

You have assets held in a Trust including shares and a bank account. The Trust made distributions or loan repayments to you which you used towards living costs and liabilities.

As previously mentioned, you sold your Australian vehicle on DD MM 20XX, and you did not acquire another vehicle in Australia for the remainder of the ruling period.

Real Property

You have not acquired or otherwise held an ownership interest in any Australian real property or residence since prior to the commencement of the ruling period.

You do not hold, nor have you ever held, an ownership interest in any real property in Country A or in any other foreign country.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

International Tax Agreements Act 1953

Reasons for decision

Overview of the law

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... 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 resides test is about 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. The ordinary meaning of reside does not require an individual to have a principal or usual place of residence in Australia.

Application to your situation

Period 1 - DD MM 20XX to DD MM 20XX.

You lived in a single residence in City A, Country A from DD MM 20XX to DD MM 20XX. At the start of the ruling period, you were physically present in this residence and you had disposed of your previously owned properties in Australia.

You were physically present in Australia from DD MM 20XX until DD MM 20XX (X days), and again from DD MM 20XX until DD MM 20XX (X days)

Your employment responsibilities were undertaken in the Country A for Country A companies, with work responsibilities for your Australian X able to be performed remotely.

You remained in Country A on consecutively held Visa 1 authorisations of Country A. In the High Court case of Addy v Commissioner of Taxation [2021] HCA 34 ('Addy'), their Honours found that an individual's residency in a particular place is not dictated by the holding of a particular visa, confirming that the nature and quality of the individual's manner of life in a place trumps the individual's visa status in providing an indication of an individual's residency status according to the ordinary meaning of the word.

In Handsley and Commissioner of Taxation [2019] AATA 9 17 ('Handsley'), Deputy President, FD O'Loughlin of the Administrative Appeals Tribunal considered whether the applicant was a resident of Australia as ordinarily understood. In Paragraphs 39 to 41 the Deputy President expounds the distinction between an ongoing durability of connection to Australia and a historical connection to Australia in which the individual's residency is in the process of being severed:

39. In the following situation] The Applicant's connection with Australia is properly characterised as historical.

40. They had family here; namely their parents and children for whom they did not have day-to-day care. An absent parent (working overseas) who:

(a) is in a continuing relationship as life partner with the other parent of children living in Australia;

(b) provides for those children; and

(c) returns to Australia when possible,

stands in a very different position to an absent parent who:

(i) does not have day-to-day care of their children;

(ii) is formally separated or divorced from the parent who does have day-to-day care of the children of the former partnership; and

(iii) visits Australia from time to time to see their children for milestone events or holiday periods.

41. Depending on other factors associated with trips to Australia, the latter can be seen as visiting and the former can be seen as coming home.

Paragraph 42 of the Decision in Handsley further delineates the difference between returning home to reside with one's spouse and children in their established familial home and returning to one's historical domicile to stay with their children at the applicant's parents' residence; the former being characterised as a maintenance of residency; the latter being characterised as merely visiting with family.

We regard that the nature of your stays in Australia are more closely aligned with the second example, where you stay in your relative's house with your dependant. We regard this to be more correctly characterised as a historical, as opposed to an enduring association with Australia.

We do not regard you to have resided in Australia according to the ordinary definition of the word "resides" for the first period in the first ruling year. Therefore, you are not resident of Australia under the resides test for this period.

Period 2 - DD MM 20XX to 30 June 20XX

In the case of Commissioner of Taxation v Pike [2020] FCAFC 158 ('Pike appeal'), the Court considered the tax residency of Mr Pike, whose employment opportunities saw him obtain employment overseas for a number of years. The Full Court of the Federal Court upheld the decision of the first instance judge, Justice Logan, in Pike v Commissioner of Taxation [2019] FCA 2185 ('Pike') and agreed with Justice Logan's reasoning regarding the ordinary concepts test. Mr Pike was found to be a resident under ordinary concepts, notwithstanding his employment arrangements overseas. In Pike, Justice Logan placed significance on the finding that when Mr Pike returned to Australia, he returned not as a visitor but to resume residing in Australia as a husband (de facto) and father who resumed living at the family home. Significant weight was placed on the continued presence of his family and the maintenance of a home in Australia.

In your case, upon your return to Australia you did not resume residing as a spouse or partner living at the familial home. In 20XX, in accordance with X, you disposed of your own properties in Australia. From mid-20XX, a bedroom at your Relative's Home in City A, Australia was available to you and you relied on Ubers, taxis and family members for transport as you had disposed of your vehicle in Australia prior to the ruling period. The ordinary concepts test is not about dominance or exclusivity of residence in one place versus another; nonetheless, continued connections overseas will inform the nature of your connection to Australia. At the same time, you were working and residing in Country A and had formed a relationship with a resident of Country A and began cohabiting with that person as de facto partners in leased accommodation.

In Handsley, the Administrative Appeals Tribunal stated that little regard should be paid to the taxpayer's passenger (or immigration) cards since it was entirely conceivable that they were completed with a view to immigration and entry entitlement status, not tax status. As the Commissioner himself conceded in that decision, such passenger cards do not contain a box to tick that identifies you as an Australian citizen who is not a tax resident. Accordingly, we do not regard your passenger card declarations to carry significant weight in the determination of your residency status. Given your limited physical presence in Australia throughout the ruling period, we consider the maintenance of your gym membership in Australia to be no more than indicative of a recreational pursuit, as opposed to being indicative of established behaviours consistent with residing in Australia.

The Decision Impact Statement on Harding v Commissioner of Taxation [2019] FCA 29 outlines the Commissioner's support for the first instance Judge's observation which is that "the objective manifestation of a person's intention is often a more accurate indicator of their state of mind at a particular time in the past than is an assertion about that alleged prior intent." We acknowledge, as stated in your application that your intention has always been to remain living in Australia and to keep a strong connection with your dependant and extended family despite employment obligations in Country A. However, the periods of your physical presence in Australia form an important factor which informs the assessment of your residency status. Although it is not a determinative factor taken alone, there is a distinction to be found between 'staying' in Australia and residing here. Merely staying in Australia is normally insufficient. We consider your physical presence during the ruling period does not reflect a continuity, routine or habit consistent with residing in Australia. You stayed in Australia for a number of short periods of time during the ruling period which we regard to be of insufficient duration to be correctly characterised as 'residing' here.

We consider that your succession of employment positions and career progression in Country A, taken into consideration along with your application for an employment visa and subsequent renewals of this visa, as well as co habiting with your de facto partner for X years, demonstrate a clear intention to reside in Country A indefinitely.

In your case, we consider that your behaviour while in Australia does not reflect the attributes of a person who continued to live in Australia, which therefore does not support the conclusion that you had a settled or usual abode in Australia during the ruling period. Our position is that from DD MM 20XX, you relocated permanently to Country A for work, establishing a permanent home in Country A and returning only occasionally to Australia for short stays.

Therefore, we do not regard you to be a resident of Australia for this period under the resides test.

You may still be an Australian resident if you meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

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 of origin and your domicile of origin is Country of Origin. You immigrated to Australia on or around 19XX and became an Australian citizen on or around 19XX. It is considered that you abandoned your domicile of origin and acquired a domicile of choice (Australia)

You entered Country A during 20XX on an initial Visa 1. You subsequently applied for and were issued with Visa 2 in Month 20XX. You have renewed this visa on X separate occasions and your current visa is valid until at least Month 20XX.

It is considered that you did not abandon your domicile of choice (Australia) You were not entitled to reside in Country A indefinitely and while living in Country A you hold a work permit which is valid until MM 20XX

Therefore, your domicile is Australia.

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 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:

•         the intended and actual length of the taxpayer's stay in the overseas country

•         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

•         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.

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

•         the duration and continuity of the taxpayer's presence in the overseas country

•         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.

Application to your situation

Period 1 - DD MM 20XX to DD MM 20XX

In the case of Handsley, Deputy President of the Administrative Appeals Tribunal FD O'Loughlin reiterates the key concepts from the Judgment in Federal Commissioner of Taxation v Applegate [1979] FCA 66 79 ATC 4307 ('Applegate') in determining whether a taxpayer's permanent place of abode is outside of Australia at paragraph 25:

(a) to determine whether a place of abode is a permanent place of abode it is necessary to have regard to the nature and quality of the use made of that place, the continuity or otherwise of the [person's] presence, the duration of [his/her] presence and the durability of [his/her] association with the particular place; Federal Commissioner of Taxation v Applegate (1979) 27 ALR 114 at 128 per Fisher J.

(b) greater weight should be given to these factors than to a person's stated intentions. This is an objective analysis; Federal Commissioner of Taxation v Applegate (1979) 27 ALR 114 at 126 and 128 per Fisher J.

(c) a permanent place of abode is a fixed and habitual place of abode without needing to be a permanent home; and

(d) a permanent place of abode outside Australia is not the same as a temporary or transitory place of abode outside Australia.[39] Federal Commissioner of Taxation v Applegate at (1979) 27 ALR 114 at 123 per Northrop J.

Deputy President O'Loughlin goes on to restate the importance of considering these legal concepts in light of the principles of permanent place of abode established in Harding. To summarise, the decisions in Harding, at first instance and on appeal, confirmed that a permanent place of abode does not have to be a single residence, it can extend to multiple residences within one country, but cannot span multiple foreign countries, a principle also supported in Pike.

The Decision in Harding also provided support for the position that multiple residences of temporary accommodation, if leased to the taxpayer under a legally enforceable commercial contract, can constitute a permanent place of abode for the purposes of Australian taxation law.

From DD MM 20XX to DD MM 20XX, you were residing in Country A according to the ordinary definition of the word. You were located in one accommodation which was rented in your own name under a lease agreement which provided you with a legally enforceable right to reside at the property, and you had, by this time, surrendered any legally enforceable right to occupy or reside in any property in Australia.

You were working and residing in Country A and you had entered into a partnership with a resident of Country A. Furthermore, you physically spent the majority (X days) of your time in Country A, making X trips to Australia summing to a total of X days. You also had disposed of your own properties and residence in Australia as well as your Australian vehicle.

While you are not a resident of Australia under ordinary concepts over this period, we give regard to the fact that your time in Country A over this period was permitted through Visa 1 of Country A, which allows you to remain in Country A for a maximum duration of less than six months with no opportunity for extension or renewal. At the expiry of Visa 1 you are required to depart Country A and apply for a new authorisation to enter Country A.

On the basis that you were required to physically depart from Country A after a relatively short duration and reapply for authorisation to enter the country each time you wish to enter the country, we do not regard the durability of your association with the Country A during this period to be sufficiently permanent or robust to characterise Country A as your permanent place of abode. Instead, we consider that this period may be more accurately characterised as a 'transitory' period, similar to the general concepts outlined in paragraph 45 of Handsley.

As you have not established a permanent place of abode outside of Australia, you are a resident of Australia under the domicile test for this period.

Period 2 - DD MM 20XX to 30 June 20XX

In the leading caseswhich have developed our understanding of the issue of whether or not you have established a permanent place of abode outside of Australia, including Harding, Pike, and Handsley, a common theme of importance is the "family home", in each case being a residence one occupies, whether rented or owned, with one's spouse. For taxation purposes, the Commissioner regards that living with a de facto partner in a genuine, day-to-day domestic basis bears the same magnitude of importance as living with a legally married spouse. The case law does not support the notion that the provision of a room in a relative's home to use when returning to visit family, in the absence of a formal agreement providing a right of occupation, bears the same weight as returning to one's own home with which one continues to hold an enduring association. Without a vested interest in the property, it cannot be said that you are "maintaining" the residence for your occupation in the context described by Williams J in Koitaki Para Rubber Estates Limited v The Federal Commissioner of Taxation (1941) 64 CLR 241 at paragraph 249.

In line with this reasoning, we regard that you definitively established your permanent place of residence in Country A when you began cohabiting with your X partner in City A, Country A on the day you returned on Visa 2DD MM 20XX. At this time, you severed your association with your Australian residency and abandoned it in favour of Country A.

Here, we also compare the conditions of Visa 2 to Visa 1 under which you resided in Country A previously. Visa 2 allows you to reside and work in Country A for a maximum period of X years, and in contrast to Visa 1, Visa 2 may be extended for X years at a time with an unlimited number of extensions allowed. Taxation Ruling TR 2023/1 Income: residency tests for individuals (TR 2023/1) provides the guidance that for the purposes of the permanent place of abode test, we regard that the duration you may remain in Country A under Visa 2 is a sufficient timeframe for establishing a permanent place of abode outside of Australia, indicating that residence in Country A under Visa 2 should not be prevented from being regarded as such.

Supported by O'Loughlin's reiteration of Applegate at paragraph 25 of Handsley, the Decision Impact Statement on Harding confirms that the Commissioner also gives greater weight to observed fact than stated subjective intention. In your case it is observed fact that you have resided in Country A since DD MM 20XX, in a succession of rented accommodations, mostly residing for a number of years in each property, with your de facto partner. Therefore, we regard this as more persuasive than a subjective statement of prior intention.

The Harding case also differentiates residential accommodation occupied under a lease agreement from "temporary, short-term accommodation", and confirms that a series of rented accommodations in one country may be properly characterised as a permanent place of abode, particularly when, as in Harding, the individual resides in that leased residence with a de facto partner. This reasoning can be directly applied to your situation, and supports the finding that you have established a permanent place of abode in Country A for this period. Furthermore, the amount of time you have been physically present in Australia is minimal in comparison to the time you have been in Country A, supporting the conclusion of an abandonment of Australian residency.

Their Honours (Davies and Steward JJ) at paragraph 15 in their reasons for judgment in Harding also observe the significance of relinquishing those assets, including one's car, which are associated with a lifestyle indicative of residency. You sold your car on DD MM 20XX after which point you did not own a car in Australia again during the ruling period. You instead relied upon taxis, Uber and other forms of transport when you returned to Australia over the ruling period. Conversely, in 20XX you obtained a Country A license, and in 20XX you purchased a car in the Country A. While not conclusive in and of itself, taken in concert with the surrounding facts and circumstances, the scenario further illustrates an abandonment of your Australian residency in favour of a permanent place of abode in Country A.

We have considered the fact that you have continued to hold board memberships and directorships in Australia over the ruling period, and we acknowledge the fact that you have attended to business interests when you return to Australia. However, you have provided the information that these interests are able to be attended to from your home in Country A, which paragraph 48 of TR 2023/1 confirms may be less significant if they can be, and are, performed from anywhere in the world. For this reason, we do not regard these roles as being highly persuasive as to your residency status. More persuasive are the employment roles you have held in Country A, to which you are predominantly required to attend in person as a sponsored resident of Country A on a specialty employment visa.

We have also considered the fact that you have continued to hold financial assets in Australia both individually and through a trust of which you are a trustee. Here we look to Harding v Commissioner of Taxation [2018] FCA 837 where the learned Judge states:

...that the factor of where a person maintains investments may, in these days, have little bearing on where a person resides. In the past quarter of a century there has been a growing internationalisation of investment markets which has increased the ability of people in one country to make investments in businesses in other countries. In this case it is, perhaps, not surprising that Mr Harding maintained significant investments in the relatively stable financial markets in Australia despite having abandoned his residency here.

This reasoning was upheld at appeal by the full court of the Federal Court of Australia, and in your case the same reasoning would apply to limit the weight your financial assets in Australia bear upon your residency. Furthermore, Harding's reasoning characterises the taxpayer's continued financial investment in Australian assets as historical, and retained to continue to ensure his financial responsibilities for his dependants are maintained, with the judge explaining:

the financial arrangements which remained in place, or which were put in place subsequent to his departure, are more properly regarded as the remnants of his prior residency and the fact that he retained ongoing responsibilities to [the taxpayer's children's mother] and her children for whom [the taxpayer] provided.

For these reasons, we regard that for the period from DD MM 20XX until the end of the ruling period on 30 June 20, you are not a resident of Australia under the domicile test as your permanent place of abode is outside of Australia.

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 have not been present in Australia for 183 days or more during any income year in the ruling period. 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.

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

Period 1

As you satisfy the domicile test for Australian residency, you are a resident of Australia for income tax purposes for Period 1.

Period 2

As you do not satisfy any of the four tests of residency, you are not a resident of Australia for income tax purposes for Period 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 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 any double tax agreement listed in section 5 of the Agreements Act have the force of law. The Convention between the Government of Australia and [Country A] for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Convention)is listed in Section 5 of the Agreements Act.

The Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements (TR 2001/13) discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements (See also: ATO ID 2003/1195 Assessability of employment income received by a dual resident of Australia and the United States).

Article 4 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.

Article 4(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 under the Convention. The tiebreaker rules do not change a taxpayer's residency status for domestic law purposes.

Article 4(x) provides that if an individual is a resident of both Australia and Country A, the individual shall be deemed to be a resident of the country:

(a) in which the individual maintains their permanent home,

(b) if the provisions of subparagraph (a) do not apply, in which the individual has a habitual abode if they have a permanent home in both countries or in neither of the countries, or

(c) if the provisions of subparagraphs (a) and (b) do not apply, with which the individual's personal and economic relations are closer if they have a habitual abode in both countries or in neither of the countries.

Article 4(X) of the Convention further provides that in determining an individual's permanent home, regard shall be given to the place where the individual dwells with their family, and in determining the country with which an individual's personal and economic relations are closer, regard shall be given to their citizenship (if the individual is a citizen of one of the countries).

The terms 'permanent home', 'habitual abode' and 'personal and economic relations' are otherwise undefined in the Convention. Article X(X) of the Convention provides that any term not defined shall, unless the context otherwise requires, have the meaning which it has under the law relating to taxes of the country applying the Convention.

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.

Period 1 - DD MM 20XX to DD MM 20XX

We have concluded that you do not have a permanent home in Country A or Australia based on the following considerations:

Country A

From DD MM 20XX to DD MM 20XX, You were located in one accommodation which was rented in your own name under a lease agreement which provided you with a legally enforceable right to reside at the property, and you had, by this time, released any legally enforceable right to occupy or reside in any property in Australia.

Following your relationship breakdown with your former spouse, you also had disposed of your own properties and residence in Australia as well as your Australian vehicle. We give regard to the fact that your time in Country A over this period was permitted through Visa 1 of Country A. Visa 1 allows successful applicants to enter Country A for a maximum duration of X days which has no possibility for extension.

On this basis, we do not regard the durability of your association with Country A during a period in which you are staying in the country under an authorisation which requires you to depart the country after X days and reapply for temporary entry to be sufficiently permanent or robust to be characterised as a permanent home. Instead, we consider that this period may be more accurately characterised as a 'transitory' period, similar to the general concepts outlined in paragraph 45 of Handsley.

Australia

From DD MM 20XX to DD MM 20XX, you did not establish any legally enforceable right to occupation of any dwelling in Australia. Following X and the subsequent sale of your properties you moved your personal effects and belongings into a bedroom in your Relative's Home, which you state was exclusively available for your use. However, you did not have a formal arrangement in place.

Accordingly, it is considered that you do not have a permanent home in either Australia or Country A. Therefore, it is necessary to consider the second tie-breaker test in relation to habitual abode.

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 (Davies, White and Steward JJ in Pike v Commissioner of Taxation [2020] FCAFC 158 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.

We have concluded that your habitual place of abode is in Country A based on the following considerations:

From DD MM 20XX to DD MM 20XX, you were working and residing in Country A and you had entered into a de facto partnership with a resident of Country A; and you physically spent the majority (X days) of your time in Country A, making two trips to Australia summing to a total of X days.

Your circumstances can be contrasted with those in the Pike appeal, in that case the Full Court of the Federal Court upheld the decision that the Taxpayer had a habitual abode in both countries, because his life had two aspects, one aspect was working in the contracting state and occupying premises there as a home, the other was living in Australia with his family as long as possible. In your case, you were working in Country A and cohabiting with your de facto partner in Country A and returned to Australia to visit family including your family of origin and your child. We do not consider these trips to be indicative of you continuing to reside in Australia. The frequency and duration of these trips coupled with your accommodation arrangements in Australia, do not support a decision that you had a habitual abode in Australia.

Accordingly, we consider Country A to be your habitual abode for this period as it was here that you maintained your own residence, in the location of your vital economic interest, being your employment obligations, as well as your de facto partner.

Conclusion

The tiebreaker tests in Article 4(X) of Country A Convention apply so that you are deemed to be a resident only of Country A for treaty purposes for the period from DD MM 20XX - DD MM 20XX. The provisions of Country A Convention will therefore apply on the basis that you are a resident of Country A for tax purposes and not of Australia for this period.

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