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Edited version of private advice
Authorisation Number: 1012622439016
Ruling
Subject: Country X Double Tax Agreement
Question
Are you a resident of Country X only under Article 4, Paragraph 3(a) of the Double Tax Agreement between Australia and Country X?
Answer
Yes
This ruling applies for the following period(s)
Year ended 30 June 2014
Year ended 30 June 2015
Year ended 30 June 2016
Year ended 30 June 2017
The scheme commences on
1 July 2013
Relevant facts and circumstances
You are a citizen of Country X and have been your entire life.
You are a resident of Country X under Country X income tax law.
You entered Australia in the 2014 financial year on a contributory parent-migrant visa (subclass 143). This is a permanent visa which allows you to travel in and out of Australia for a period of five years, after which you must obtain citizenship or apply for a resident return visa should you wish to leave and return.
You intend to stay in Australia permanently but will make trips back to Country X to visit family and maintain an association there for two to three months each year.
You are retired and have no intention to work in Australia or Country X but you are studying for a certificate of higher education with Country X University via the internet.
You own a house in Country X in which the majority of your personal effects are stored. The house is not rented out and is available for your use at all times.
Other assets in Country X include a state pension, work pension, dividends and interest.
In Australia you live in a rental property which has an on-going lease.
You assets in Australia are minimal and include a small bank account.
You have adult children who live in Australia.
You have family members who live in Country X and your former spouse who you are power of attorney for lives in Country X.
You have stated you are a resident of Australia under Australian income tax law.
Relevant legislative provisions
International Tax Agreement Act 1953 Section 4
Reasons for decision
Double tax agreement between Australia and Country X
In determining your liability to pay tax in Australia it is necessary to consider not only the domestic income tax laws but also any applicable double tax agreements.
Section 4 of the International Tax Agreements Act 1953 (Agreements Act) incorporates that Act with the ITAA 1936 and the ITAA 1997 so that all three Acts are read as one. The Agreements Act overrides both the ITAA 1936 and ITAA 1997 where there are inconsistent provisions (except in some limited situations).
Section 5 of the Agreements Act states that, subject to the provisions of the Agreements Act, any provision in an Agreement listed in section 5 has the force of law. Country X Agreement is listed in section 5 of the Agreements Act.
The Country X agreement is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country X agreement operates to avoid the double taxation of income received by residents of Australia and Country X.
Article 4 of the Country X/Australia Agreement discusses 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 (3) of the Country X/Australia Agreement states:
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).
In your case, you have a permanent home available to you in both Australia and Country X. Therefore your personal and economic relations need to be considered to determine your residency status for the purpose of the Country X/Australia Agreement.
Your personal and economic ties with Australia are as follows:
• you hold a permanent visa for the next five years
• your adult children live in Australia
• you have a small bank account
• you live in a rental property
Your personal and economic ties with Country X are as follows:
• you have been a citizen of Country X your entire life
• you return to Country X two to three months each year
• you own a house in Country X which is available to you at all times
• you have personal effects in Country X stored in your house
• you have a Country X state pension, work pension, dividends, bank interest
• you have family ties in Country X.
It is evident you have closer personal and economic ties to Country X and therefore you are a resident of Country X only for the purposes of the double tax agreement.