Edited version of private advice

Authorisation Number: 1051662243019

Date of advice: 22 April 2020

Ruling

Subject: Residency

Question 1

Are you a tax resident after departing Australia?

Answer

Yes

Question 2

Would you be regarded as a tax resident of Australia under the double taxation agreement between Australia and Country A?

Answer

Yes

This ruling applies for the following period:

Year ended 30 June 2020

Year ended 30 June 2021

Year ended 30 June 2022

Year ended 30 June 2023

The scheme commenced on:

1 July 2019

Relevant facts and circumstances

You were born in Country A but now are an Australian citizen with no other citizenships. You departed Australia in late 2019 to visit Country A. You travelled using a visa which allows access to that country.

While visiting Country A you realised that your elderly parent required care and attention and you agreed to assist your sibling to provide such care. You returned to Australia in early 2020 and then re-departed shortly after that return. You currently intend to stay with your parent (living at their house) for a year but this will be subject to their health.

Your children are all Australian citizens who have left the family home and have jobs in Australia. They will remain in Australia as required by their careers.

Your spouse would normally live in your family home however they are recovering from an operation and are currently living with your children in Australia. Your spouse may re-occupy the family home when health improves. In the meantime the home remains vacant.

You have maintained all current assets in Australia including bank accounts, health insurance, Medicare membership and health insurance as if you continued to live in Australia. This is because you are not sure when you will be able to return home and your regard yourself as an Australian resident who is temporarily living overseas.

You and your spouse have a self-managed superannuation fund (SMSF) in Australia. This fund has a trustee which is a company and you and your spouse are directors and equal shareholders of this company. The SMSF has only Australian investments and you intend to maintain the fund while overseas.

You are seeking separate advice on maintaining the SMSF while overseas.

You have not advised the Australian Electoral Roll of your departure as you do not wish your name removed from the roll.

Similarly you have not suspended your private health insurance policy in Australia.

You have not joined any clubs or societies in Country A and have maintained your membership of a local professional body while overseas.

Neither you nor your spouse has ever been employed by the Australian Commonwealth government and neither belongs to any Commonwealth superannuation scheme such as CSS or PSS.

Relevant legislative provisions

Income Tax Assessment Act 1997 Subsection 995-1(1)

Income Tax Assessment Act 1936 Subsection 6(1)

Section 5 of the International Tax Agreements Act 1953

International Tax Agreements Act 1953 Subsection 4(1)

Agreement between the Government of Australia and the Government of Country A for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the Country A Convention)

OECD Commentaries on the Model Tax Convention on Income and on Capital: Condensed Version (2010)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether a taxpayer is a resident of Australia for income tax purposes. These tests are:

·   the resides test,

·   the domicile test,

·   the 183 day test, and

·   the superannuation test.

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

Resides Test

When considering the resides test the following factors are normally considered:

·   physical presence

·   intention or purpose

·   family or business ties

·   maintenance and location of assets

·   social and living arrangements

In your case, you are a citizen of Australia who departed Australia in 2019 to visit Country A. During this visit you realised that your parent required care and attention so you have arranged to travel to that country. You will return to Australia as your parent's health allows.

In all other respects you are striving to maintain your normal links and associations with Australia as if you were fully resident.

You are a resident for tax purposes under the resides test after departure in November 2019. You are considered to have maintained an enduring association with Australia as you have an abode in Australia which continued to be occupied by your family (with a hopefully temporary absence as your spouse recovers from their operation).

The domicile test

Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

Domicile

"Domicile" is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person's domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

In your case, you are a citizen of Australia. You have left Australia and have chosen to live, temporarily, at your parent's house in Country A. You have not been granted, nor have you actively sought, permanent residency in any other country.

You have not abandoned your domicile in Australia and acquired a domicile of choice in Country A even though the visa you have been issued allows the right to reside for lengthy periods in that country. You have not taken active steps to stay in Country A permanently; and you have both taken steps, and declared an intention, to remain connected to Australia.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. (Applegate v. Federal Commissioner of Taxation 78 ATC 4051; 8 ATR 372 (Applegate))

In Applegate, the court found that 'permanent' does not mean everlasting or forever but it is to be contrasted with temporary or transitory.

The courts have considered 'place of abode' to refer to a person's residence, where he lives with his family and sleeps at night.

Taxation Ruling IT 2650 Income Tax: Residency - Permanent place of abode outside Australia (IT 2650) provides a number factors which are used by the Commissioner in reaching a satisfaction as to an individual's permanent place of abode. These factors include:

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

(b)          any intention either to return to Australia at some definite point in time or to travel to another country;

(c)          the intended and actual length of the individual's stay in the overseas country;

(d)          any intention either to return to Australia at some definite point in time or to travel to another country;

(e)          the establishment of a home outside Australia;

(f)           the abandonment of any residence or place of abode the individual may have had in Australia;

(g)          the duration and continuity of the individual's presence in the overseas country; and

(h)          the durability of association that the individual has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments, place of education of the taxpayer's children, family ties.

Paragraph 24 of IT 2650 states that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. Greater weight should be given to factors (c), (e) and (f) than to the remaining factors.

In your case it is considered that you have not established a permanent place of abode outside of Australia as:

·   You left a furnished home in Australia, which you own, in which your family live whilst you are away and it remains available to you.

·   The main reason you left for Country A was for a family visit; your Australian family did not and will not be joining you, therefore you have not and will not set up an established home with family in Country A.

·   You have visited Australia since your departure to maintain a family connection

Although you intend living in Country A for a considerable and indeterminable time and you will take some personal belongings with you, you will not abandon your residence in Australia. Your Australian residence is still available to you, and you have retained a durable association with Australia, in particular through your family who remain in Australia.

Consequently, the Commissioner is not satisfied that you have a permanent place of abode outside Australia, and you are therefore a resident under the domicile test of residency during the period you will live with your parent in Country A.

The 183 days test

Where a person is present in Australia for 183 days during the year of income the person will be a resident, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

In your circumstances you anticipate travel to Australia for brief visits after your departure. You are not a resident for tax purposes under this test.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person.

You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You are not a resident for tax purposes under this test.

Residency status

As you satisfy two of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you remain a resident of Australia for income tax purposes after departing Australia.

Country A Convention

Article X of this Convention states -

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. However, 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.

(2) Where, by reason of the provisions of paragraph (1), an individual is a resident of both Contracting States, then the status of that 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 with which the person's personal and economic relations are closer (centre of vital interests).

For the purposes of this paragraph, an individual's citizenship of a Contracting State as well as that person's habitual abode shall be factors in determining the degree of the person's personal and economic relations with that Contracting State.

(3) Where, by reason of the provisions of paragraph (1), a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated.

Tie-Break Test under the Convention

Under the Convention it is clear that you have a permanent home available only in Australian. Accordingly, you would continue to be a tax resident of Australia under the Convention.

Were this determined to be insufficient, the issue of residency under Article X of the Convention must be determined on the basis of your personal and economic relations with the two countries.

It is clear that you have personal and economic ties with both countries. It is helpful to refer to the OECD Commentaries on the Model Tax Convention on Income and on Capital: Condensed Version (2010). Under this version it can be noted that -

·   You are an Australian citizen and hold an Australian passport

·   You spouse is an Australian citizen, as are your children

·   You self-described as an Australian resident in your tax returns

·   You are entitled to Medicare benefits

·   You maintain Australian bank accounts

·   You retain your Australian driver's license

After taking the above factors into account your personal and economic ties to Australia are closer than those to Country A. Accordingly, under the tie-break test of the Convention, you would continue to be a tax resident of Australia.