Edited version of private advice

Authorisation Number: 1051908683904

Date of advice: 24 October 2021

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes from 1 July 20XX to 30 June 20XX?

Answer

Yes.

Question 2

Are the pensions you receive in Country A assessable in Australia?

Answer

Yes.

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

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You were born in Country A and you are a citizen of Country A.

You were granted a Contributory Parent Visa (subclass 143) on 20XX.

The Contributory Parent Visa granted you permanent resident status in Australia.

You have an intention to apply for Australian citizenship in the near future.

Your intentions are to live in Australia permanently to be close to your immediate family. You have no intentions to live overseas permanently.

You have been present in Australia for the following periods in the ruling period:

•         353 days between the 20XX and 20XX calendar years

•         218 days in the 20XX calendar year

•         229 days in the 20XX calendar year

•         549 days between the 20XX and 20XX calendar years.

You plan to return to Australia in 20XX. You already have a return ticket to Australia.

When you were absent from Australia, you travelled to Country A to visit your extended family and friends.

You state your Australian address on your outgoing passenger card.

You have a motor vehicle and an Australian bank account.

You have both an Australian and Country A's driver's licence.

Your main residence is located in Australia. This is the only property you own.

You leave your main residence vacant when you are absent from Australia. Your family member looks after your property in your absence.

You stay with friends while you are in the Country A.

The only assets you have in Country A is a bank account which your pension is deposited into. You transfer your pension into your Australian bank account on a monthly basis for your living expenses.

You are a resident of Country A for taxation purposes. You have paid tax on your state and personal pension in Country A.

You are retired and you do not intend to engage in employment in Australia.

You worked for Company A on a short contract in the 20XX income year.

You have been an active member of the Australia society, participating in Rotary clubs, church and volunteering your local PCYC.

You do not have any social connections in Country A apart from friends.

You are not a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

Relevant legislative provisions

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

Income Tax Assessment Act 1936 Subsection 6(1)

International Tax Agreements Act 1953 Sections 4 and 5

Reasons for decision

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,

•         the domicile test,

•         the 183 day test, and

•         the superannuation test.

The primary test for deciding the residency status of an individual is whether they reside 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 resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'. These definitions have been highlighted in cases as being definitive observations of the meaning of resides (see Viscount LC in Levene v Commissioners of Inland Revenue [1928] AC 217 and Logan J in Stockton v Federal Commissioner of Taxation [2019] FCA 1679).

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.

Case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

•         Physical presence

•         Intention or purpose of presence

•         Family and business/employment ties

•         Maintenance and location of assets, and

•         Social and living arrangements.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in IT 2650 and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

We consider that your circumstances are consistent with you residing in Australia.

This is because:

•         You have been physically in Australia for more than 183 days for most of the income years in the ruling period.

•         You intend on living in Australia on a permanent basis. You have obtained permanent residence in Australia.

•         You have immediate family members in Australia and your main purpose for residing in Australia is to be close to your family in Australia.

•         You have a main residence in Australia which you reside in when you are in Australia.

•         You maintain the majority of your assets in Australia including a motor vehicle, bank accounts and household/personal effects.

•         You have established social ties in Australia.

You are a resident of Australia under the resides test for all the relevant periods.

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 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 parent at the time of your birth) unless you have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and you must 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.

In your case, you were born in Country A and your domicile of origin is Country A. You immigrated to Australia in 20XX and became an Australian permanent resident.

It is considered that you did not abandon your domicile of origin in Country A and acquire a domicile of choice in Australia. You obtained permanent residency in 2009 and you intend to in Australia indefinitely. However, you have not yet acquired citizenship to permanently establish a domicile of choice in Australia.

183-day 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.

You have been present in Australia for the following periods:

You have been in Australia for 183 days or more in the 20XX, 20XX, 20XX and 20XX income years. We now need to consider whether we are satisfied that, during the 20XX, 20XX, 20XX and 20XX income years, your usual place of abode was outside Australia, and your intention was not to take up residence in Australia.

In the context of the 183 day test, a person's usual place of abode can include both a dwelling or a country where the person usually resides. 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 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, it is necessary to 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).

To determine whether you intend to take up residence in Australia, we look at evidence of relevant objective facts.

Based on your circumstances, the Commissioner is not satisfied that your usual place of abode was outside Australia for the relevant income years and that you did not intend to reside in Australia.

In respect of the usual place of abode this takes into account that:

•         You have established your main residence in Australia. You do not have any other main residences outside of Australia.

•         You maintain most of your assets in Australia and have established social ties through your activities which demonstrates the durability of association you have with Australia.

•         You have limited continuity of association with Country A. The only assets you have in Country A is a bank account and pensions sourced in Country A.

In respect of the intention to take up usual place of abode this takes into account that:

•         The purpose for re-locating to Australia was to be closer to your family members who are Australia residents.

•         You obtained a Contributory Parent Visa (subclass 143) to live in Australia on a permanent basis.

You are a resident of Australia under the domicile test outlined in the definition of 'resident' in subsection 6(1) of the ITAA 1936 for the 20XX, 20XX, 20XX and 20XX income years.

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

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 contributing member of 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 183-day tests of residency and so are a resident of Australia for income tax purposes for the relevant ruling periods.

Question 2

Double tax agreement with Country A

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 (DTA).

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. The Country A Convention is listed in section 5 of the Agreements Act.

The Country A convention is located on the Austlii website (www.austlii.edu.au) in the Australian Treaties Series database. The Country A convention operates to avoid the double taxation of income received by residents of Australia and Country A.

Article 4 of the Country A 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 Residency

Article 4(3a) of the Country A convention advises that where an individual is a resident for tax purposes of both Australia and Country A, their status will be determined by which country they have a permanent home available. Where they have a permanent home in both Australia and Country A that individual will be determined to a resident only in the country with which their personal and economic relations are closer.

In your case, you have a permanent home available to you only in Australia.

Therefore, based on the facts of your case, the provisions of Article 4(3a) of the DTA between Australia and Country A apply to make you exclusively a resident of Australia for income tax purposes.

Article 17 Pensions and annuities

Article 17(1) of the Country A convention advises that pensions (including government pensions) and annuities derived by a resident of Australia shall be taxable only in Australia.

Therefore, provided that you satisfy the requirements of being an Australian resident for tax purposes, the provisions of Article 17(1) of the DTA between Australia and Country A apply to make the two pensions that you received from Country A assessable only in Australia.

Conclusion

The provisions of Articles 4(3a) and 17(1) of the DTA between Australia and Country A apply to make you exclusively a resident of Australia for income tax purposes and the two pensions that you receive from Country A assessable only in Australia.