Edited version of private advice

Authorisation Number: 1052249489787

Date of advice: 14 May 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for tax purposes between Date one and Date two?

Answer

Yes.

Question 2

Are you a resident solely of Australia for the purposes of the DTA between Date one and Date two?

Answer

Yes.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your country of origin is Country A and you are a citizen of Country A.

You are a resident of Country B for tax purposes for the relevant Country B income years.

In 20XX, you were granted permanent residency of Australia.

In 20XX, your parent(Parent A) relocated to Australia from Country A.

You purchased a house in Australia in 20XX (Property A). You use this property to earn assessable income.

In 20XX, your parent (Parent B) passed away. At the time, they were living in Australia. Your older sibling was also living in Australia at this time.

You purchased another house in Australia(Property B). While in Australia, you reside at Property B.

In 20XX, you decided to get married to your spouse. They reside in Country B and are not a citizen of Country B.

As a result of COVID border closures and related travel restrictions, you could only get married in Country B.

In XXXX, you ceased working in Australia.

You travelled to Country B to get married. At the time of travel, you had obtained a spousal visa from Country B's immigration department.

Several months later you married your spouse.

Your spousal visa expired.

The Australian border reopened after your spousal visa had expired.

Flights to Australia were very expensive and made returning to Australia challenging.

You opted to remain in Country B and apply for a spousal visa with the Country B immigration office.

Due to the effects of COVID and the war in Country C, there was a significant delay in the processing of your spousal visa application.

While in Country B, you continued to pay Parent A's living expenses and bills associated with Property B.

You also kept your existing furniture and household possessions at Property B.

Parent A was diagnosed with a serious illness and passed away shortly afterwards.

Parent A lived at Property B until they passed away.

You remained in Country B until your spousal visa was granted. If you had elected to leave prior to being granted the visa, your application would have been treated as withdrawn.

Since 20XX, you have been regularly travelling between Australia and Country B.

On Date three you flew to Australia from Country B.

On Date four you flew to Country B.

On Date five you flew to Australia.

On Date six you flew to Country A.

On Date seven you flew to Australia.

On Date eight you flew to Country B.

On Date nine you flew to Australia.

After Date nine, you leased out your spouse's apartment in Country B.

On Date ten you flew to Country B.

On Date eleven you flew to Australia.

While in Country B, you resided in your spouse's apartment for the periods you were in Country B. The apartment is a two-bedroom apartment located in City A of Country B.

After that time, while in Country B you resided at your spouse's sibling's apartment after they departed from Country B. They have an apartment in City A which you exclusively occupied and did not pay any rent for.

Your spouse accompanied you to Australia on several trips.

Prior to departing Australia in 20XX, you resided at Property B with Parent A.

You have the following assets in Australia:

•         a house which you use as an investment property (Property A)

•         a house which you reside at when in Australia (Property B)

•         savings in a bank account

•         listed units

•         car

•         mobile phone.

All of your household effects remain at Property B.

Currently, one room of Property B is occupied by your friends. They are not paying you rent.

You have maintained your Australian medical coverage.

You are not on the Australian Electoral Roll as you are not an Australian citizen.

When you left Australia, you did not advise the relevant financial institutions that you were a foreign resident so that non-withholding tax could be deducted.

For the Australian income years ending 30 June 20XX and 30 June 20XX, you lodged your Australian tax returns as an Australian resident.

You have the following professional, social and sporting connections in Australia:

• You have friends that you regularly invite over for dinner and you have flown to City B in Australia for a holiday with friends
• You have joined a Pilates course
• You are a member of your local library
• You baby sit for friends
• For several years you were employed by the same employer located in Australia.

You have the following family members in Australia:

• your sibling lives in Australia
• Parent A and Parent B resided in Australia until they passed away.

You have an Australian driver's licence.

You have the following assets in Country B:

• savings in a bank account
• an investment property.

You have the following family members in Country B:

• your spouse.

You have the following professional, social and sporting connections in Country B:

• you have several friends in Country B
• you have not been employed in Country B.

It was not your intention to live overseas or establish a permanent place of abode during the income years ending 30 June 20XX to 30 June 20XX.

After the death of Parent A, some of your friends have moved into one of the rooms of Property B. They do not pay you rent.

You plan to sell Property B and move to Country B in 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Question 1

Summary

You are a resident of Australia for tax purposes for the period between Date one and Date two.

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... [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. 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 principle or usual place of residence in Australia.

Application to your situation

You are a resident of Australia under the resides test for the period from Date one to Date two based on the following:

• Although you were physically out of Australia for the first year of the ruling period, you always intended to return to Property B in Australia and retained your association with Australia.
• You were granted permanent residency of Australia in 20XX and from then until 20XX you remained employed by the same employer in Australia
• you have family connections in Australia including your now deceased parents and your sibling
• you maintain a property (Property B) at which you have resided while present in Australia along with Parent A prior to their passing
• you have an investment property and a motor vehicle in Australia, along with your household possessions which you keep at Property B
• you have retained your driving licence in Australia
• you have a regular group of friends in Australia and participate in social activities including Pilates and holidays with friends

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 A and your domicile of origin is Country A. You have worked in Australia for several years prior to departing Australia in 20XX to marry your husband. You have resided in Australia since 20XX and were granted permanent residency in 20XX.

It is considered that you abandoned your domicile of origin in Country A and acquired a domicile of choice in Australia. 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

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

• at the time of departing Australia, you always intended to return to Australia and Property B
• the time you were out of Australia was extended due to the time delay in obtaining your spousal visa in Country B
• you maintain a property in Australia (Property B) which is available for your use at any time
• Parent A resided at Property B until the time of their passing
• you always returned to Property B after travelling to Country B
• you continued to pay the expenses for Property B and living costs for Parent A
• you maintained your connections to friends in Australia while in Country B
• you maintained your Australian driver's licence while in Country B

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

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.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live, and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

Application to your situation

20XX income year

You have not been present in Australia for 183 days or more during the 20XX income year. Therefore, you are not a resident under this test for the 20XX income year.

20XX and 20XX income year

You have been in Australia for 183 days or more in the 20XX and 20XX income years. Therefore, you will be a resident under this test unless the Commissioner is satisfied that your usual place of abode was outside Australia and you do not have an intention to take up residence in Australia.

Usual place of abode

In the context of the 183-day test, a person's usual place of abode is the place they usually live and can include a dwelling or a country. A person can have only one usual place of abode under the 183-day test. However, it is also possible that a person does not have a usual place of abode. This is the case for a person who merely travels through various countries without developing any strong connections.

If a person has places of abode both inside and outside Australia, then a comparison may need to be made to determine which is their usual place of abode. When comparing two places of abode of a particular person, we will examine the nature and quality of the use which the person makes of each particular place of abode. It may then be possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the person's usual place of abode: Emmett J at [78] in Federal Commissioner of Taxation v Executors of the Estate of Subrahmanyam [2001] FCA 1836.

The Commissioner is not satisfied that your usual place of abode is outside Australia for the income years ending 20XX and 20XX based on the following:

• you have a property (Property B) in Australia at which you have resided for many years along with Parent A until their passing
• you have an investment property in Country B but this property is being rented out so not available to you
• you maintained the furniture and your household possessions at Property B in Australia
• you have had a permanent residency visa for Australia since 20XX
• each time you departed from and returned to Australia, you returned to Property B.

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 resides and domicile tests of residency and so are a resident of Australia for income tax purposes for the income years ending 30 June 20XX,30 June 20XX and 30 June 20XX.

Question 2

Summary

You are a resident of Australia for the purposes of the DTA from Date one to Date two.

Detailed reasoning

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 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 4 of the DTA 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 OF THE DTA

Residence

1 For the purposes of this Convention, a person is a resident of a Contracting State:

(a) in the case of Country B, if the person is a resident of Country B for the purposes of Country B tax; and

(b) in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax.

A Contracting State or a political subdivision or local authority of that State is also a resident of that State for the purposes of this Convention.

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

3 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) that individual shall be deemed to be a resident only of the Contracting State in which a permanent home is available to that individual; but if a permanent home is available in both States, or in neither of them, that individual shall be deemed to be a resident only of the State with which the individual's personal and economic relations are closer (centre of vital interests);

(b) if the Contracting State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national;

(c) if the individual is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

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':

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 had a permanent home in Country B based on the following considerations:

• until XXXX, you had accommodation available at your spouse's apartment in Country B
• from XXXX, you had exclusive use of your spouse's sibling's apartment at no cost in Country B
• you resided at your spouse's apartment with your spouse and then at your spouse's sibling's apartment with your spouse while in Country B.

We have concluded that you also had a permanent home in Australia based on the following considerations:

• you maintained Property B in Australia which was available to you at all times
• you maintained your furniture and household possessions at Property B
• Parent A resided at Property B until their passing
• after travelling to Country B you always returned to Property B.

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 v Commissioner of Taxation [2020] FCAFC 158 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.

We have concluded that your personal and economic ties are closer to Australia based on the following considerations:

• You have a property in Australia which you own and reside at when in Australia (Property B) while in Country B although you own a property, it is not available for your use at all times
• You own an investment property (Property A) in Australia which you use to earn assessable income
• You own listed units in Australia
• You have your immediate family members in Australia, including your parents until their passing and your sibling while in Country B your only immediate family member is your spouse
• You have an established social network in Australia while in Country B you only have a few friends
• You have a motor vehicle and driver's licence in Australia.

Conclusion

We have concluded that the tiebreaker tests in Item 3 of Article 4 of the Country B DTA apply so that you are deemed to be a resident only of Australia for treaty purposes. The provisions of the Country B Agreement will therefore apply on the basis that you are a resident of Australia for tax purposes and not of Country B.

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).