Edited version of private advice

Authorisation Number: 1051966847417

Date of advice: 7 April 2022

Ruling

Subject: Residency

Question

Am I a resident of Australia for taxation purposes from 1 July 20XX?

Answer

Yes

Question 2

Am I a resident of Australia under the double taxation agreement with Country Y?

Answer

Yes

This ruling applies for the following periods:

Year ending 20XX

Year ending 20XX

Year ending 20XX

Year ending 20XX

Year ending 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Country Y.

You are a citizen of Country Z by ancestry.

Country Y is your country of origin.

You lived in a city in Country Y for X years prior to moving to Australia.

You arrived in Australia on XX Month 20XX.

You were granted a XXXX Visa to enter Australia.

Your visa expires on XX Month 20XX.

You applied for a permanent residency visa on XX Month 20XX.

You live with your partner in Australia.

Your partner is citizen of Australia.

Since arriving in Australia, you have been on X short holidays for leisure purposes.

You do not pay rent; however, you contribute towards living expenses.

You intend to reside in Australia permanently.

You have cash and investments in Australia.

You would like to purchase property in Australia in the future.

You may take some short holidays within Australia in the years going forward.

When completing incoming and outgoing passenger cards, you state that you are a permanent resident of Australia.

You are a resident of Country Y for taxation purposes.

You have submitted foreign tax returns in Country Y.

You do not receive any income from sources outside of Australia apart from interest on investments.

You have a driver's licence in Australia.

Your drivers' licence in Country Y has expired.

You worked as an xxxx from XX Month 20XX.

You had a permanent contract in place with the company you were working for which was to come into effect once your permanent residency was approved.

You now work in xxxx in a permanent role.

You have worked in your current role for X as of XX Month 20XX.

You do not have a permanent position or job being held for you in any overseas country.

Prior to living in Australia, you lived in an apartment owned by your parents which has since been sold.

You have some cash and investments in Country Y which remain there in case your family need assistance.

You do not have any property, motor vehicles or household effects in Country Y.

You do not have any children.

Your social connections in Australia include your partner and your friends and work colleagues.

You did not maintain any social or sporting connections in Country Y.

Neither you nor your partner are a member of Commonwealth Superannuation Scheme (CSS) which was established under the Superannuation Act 1976.

Neither you nor your spouse are a member of the Public Sector Superannuation Scheme (PSS) which was established under the Superannuation Act 1990.

You are not enrolled in any course of study in Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Question 1

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 Taxation Ruling IT 2650 Residency: Permanent place of abode outside Australia 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 residing in Australia.

This is because you have been living in Australia since 20XX, you share a home in Australia with your partner, you are attempting to obtain permanent residency and your social connections which include your partner, friends and work colleagues are all in Australia.

You are a resident of Australia under the resides test.

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 father 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 facts.

In your case, you were born in Country Y and your domicile of origin is Country Y.

It is considered that you did not abandon your domicile of origin in Country Y and acquire a domicile of choice in Australia. You were not entitled to reside in Australia indefinitely and while living in Australia you only held a work permit which is valid until 1 June 20XX.

Therefore, you are not a resident of Australia under this test.

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 183 days or more in the relevant period. We now need to consider whether we are satisfied that, during the 20XX income year, your usual place of abode was outside Australia, and your intention was to take up residence in Australia.

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

•                     You have been living in Australia since 20XX.

•                     You share a home in Australia with your partner.

•                     You did not return to Country Y to live.

•                     You do not have a place available to you to live in another country.

•                     You intend to live and work in Australia

•                     You are attempting to obtain permanent residency in Australia.

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.

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 test of residency and the 183-day test and so are a resident of Australia for income tax purposes for the relevant periods.

Question 2

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.

Article 4 of the Xxxxx Agreement 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.

1. For the purposes of this Agreement, the term "resident of a Contracting State" means a person who is a resident of that State for the purposes of its tax. The Government of a Contracting State or a political subdivision or local authority of that State is also a resident of that State for the purposes of the Agreement.

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

3. Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the person's status shall be determined as follows:

(a) the individual shall be deemed to be a resident only of the 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 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 States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

4. 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 only of the State in which its place of effective management is situated.

5. Where under the Agreement any income, profits or gains are relieved from tax in a Contracting State and, under the law in force in the other Contracting State, an individual in respect of such income, profits or gains is exempt from tax by virtue of being a temporary resident of the other State within the meaning of the applicable laws of that other State, then the relief to be allowed under the Agreement in the first mentioned State shall not apply to the extent that such income, profits or gains are exempt from tax in the other State."

Permanent home

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 (see also ATO ID 2003/1195).

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 is taken to be a legitimate aid to construction (Thiel v Commissioner of Taxation [1990] HCA 37: 171 CLR 338).

The OECD Commentary 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.

In your case, you have a permanent home with your partner in Australia. You do not have a permanent home in Country Y as the residence is no longer available to you if you returned as your parents have sold the property.

Therefore, you will be a resident of Australia for the purposes of applying the double taxation agreement.