Edited version of private advice

Authorisation Number: 1052059286645

Date of advice: 18 November 2022

Ruling

Subject: Residency of trust

Question

Is the trust a resident of Australia for the purposes of the Double Tax Agreement between Australia and Country A (the DTA)?

Answer

No.

Subsection 95(2) of the Income Tax Assessment Act 1936 states that a trust will be a resident trust in relation to an income year if a trustee was a resident at any time during that year. Therefore, the trust in this case is a resident trust for Australian income tax purposes for the income years during which the trust had a trustee who was a resident of Australia. However, under article 4 of the DTA, a trust that is a resident of both Australia and Country A is deemed to be a resident only of the country in which its place of effective management is situated. Consequently, based on the facts provided, the trust is deemed a resident only of Country A for the purposes of the DTA.

This ruling applies for the following periods:

Year ended 30 June 20XX to Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

The trust was created by a Deed of Variation to the Will of X by their spouse Y.

X died on XX/XX/20XX and the Deed of Variation was dated XX/XX/20XX.

X was a Country A resident at death.

The following is a summary of the trustees over the trust's existence:

On creation:

•         Y (Country A resident)

•         W (Country A resident)

•         Q (Australian resident)

•         Company U (Country A company)

Changes over time:

•         Company U (Country A company) resigned

•         Q (Australian resident) died in 20XX

•         Y (Country A resident) retired XX/XX/20XX

•         Z (Australian resident) appointed XX/XX/20XX

Current trustees

•         W (Country A resident) - lead trustee appointed on creation of trust

•         Z (Australian resident) appointed XX/XX/20XX.

The tax authority of Country A considers the trust to be a Country A resident trust.

The trust is registered with the Country A Trust Registration Service and W is registered as the lead trustee.

As the lead trustee, W is responsible for the administrative duties in relation to the tax affairs of the trust and is the main contact point that the tax authority of Country A use.

W, who is a Country A resident, has since the creation of the trust been predominately responsible for the management and control of the trust through performance of the following duties:

•         Overseeing the trust's investments

•         Keeping accounts and related information

•         Sources advice and suitability of investments in Country A.

Although Z, an Australian resident, is currently a trustee, Z does not undertake the day-to-day duties required for the trust.

During the period Q was a trustee, Q played a lesser role to the lead trustee in the management of the trust.

The trust's assets are principally investments in Country A.

The trust does not have any assets in Australia.

A number of X's descendants reside in Australia and are beneficiaries of the trust.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 95(2)

International Tax Agreements Act 1953 section 4

International Tax Agreements Act 1953 section 5