Edited version of private advice

Authorisation Number: 1052126495901

Date of advice: 21 June 2023

Ruling

Subject: Residency

Question 1

Am I an Australian resident for taxation purposes for the period XX XXXX 20XX to XX XXXX 20XX?

Answer

Yes.

Question 2

Am I an Australian resident for taxation purposes under the Australian and COUNTRY A, Double Taxation Agreement (DTA)?

Answer

Yes.

Question 3

Is income tax and capital gains tax (CGT) payable in Australia on my COUNTRY A pension and for the disposal of my non-property COUNTRY A assets?

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

Year ended 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

XX XXXX 20XX

Relevant facts and circumstances

You were born in and are a citizen of COUNTRY A

You departed COUNTRY A and arrived in Australia on XX XXXX 20XX on a visa

During the period XX XXXX 20XX to late 20XX you made XX trips to COUNTRY A, varying from XX days to a maximum of XX days. During these trips you resided at your COUNTRY A house before returning to Australia.

Since XXXX 20XX you have not left Australia to travel to any overseas destinations, including the COUNTRY A.

You intend to live in Australia permanently, exempting holidays not exceeding several months.

Since your arrival in Australia, you have been always living with your spouse. Your spouse owns this property and is an Australian citizen

On XXXX 20XX you have sold your property in COUNTRY A. The COUNTRY A tax authority advised you that capital gains tax did not apply to the sale due to it being your primary residence. The property remained unoccupied since your arrival in Australia.

On XX XXXX 20XX you acquired Australian citizenship. You are a dual citizen of Australia and the COUNTRY A.

You have never owned property in Australia.

You have investments in the COUNTRY A, COUNTRY B and COUNTRY C and have held them from XXXX to now. You have no other assets, personal or household effects in COUNTRY A.

You have assets in Australia in the form of shares and bank accounts which you use as an income source.

You have COUNTRY A sourced pension income which is taxed in COUNTRY A.

You do not have or maintain professional, social or sporting connections in Australia or COUNTRY A.

You have friends and relatives you keep in contact within the COUNTRY A.

You are not currently employed in COUNTRY A or Australia and you have no intention on seeking employment in either country.

You and your spouse are not eligible to contribute to the PSS or the CSS Commonwealth superannuation funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 6-5

International Tax Agreements Act 1953

Reasons for decision

Issue

Question 1

Am I an Australian resident for taxation purposes for the period XX XXXX 20XX to XX XXXXX 20XX?

Summary

Yes. We have considered each of the statutory tests in relation to your particular facts and circumstances and conclude that, for the period XX XXXX 20XX to XX XXXX 20XX, you are a resident of Australia for taxation purposes

Detailed reasoning

Overview of the law

For tax purposes, whether you are a resident of Australia is defined by subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The definition has four tests to determine your residency for income tax purposes. These tests are:

•         the resides test

•         the domicile test

•         the 183 day test, and

•         the Commonwealth superannuation fund test.

It is sufficient for you to be a resident under one of these tests to be a resident for tax purposes.

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

The resides test

The resides test is the primary test of tax residency for an individual. If you reside in Australia according to the ordinary meaning of the word resides, you are considered an Australian resident for tax purposes.

Some of the factors that can be used to determine whether you reside in Australia include:

•         period of physical presence in Australia

•         intention or purpose of presence

•         behaviour while in Australia

•         family and business/employment ties

•         maintenance and location of assets

•         social and living arrangements.

No single factor is decisive, and the weight given to each factor depends on your specific circumstances.

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 domicile test

Under the domicile test, if your domicile is in Australia, you are a resident of Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Whether your domicile is Australia is determined by the Domicile Act 1982 and the common law rules on domicile. For example, you may have a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

Whether your permanent place of abode is outside Australia is a question of fact to be determined in light of all the facts and circumstances of each case. Key considerations in determining whether you have your permanent place of abode outside Australia are:

•         whether you have definitely abandoned, in a permanent way, living in Australia

•         length of overseas stay

•         nature of accommodation, and

•         durability of association.

The 183-day test

Under the 183 day test, if you are present in Australia for 183 days or more during the income year, you will be a resident, unless the Commissioner is satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

The question of usual place of abode is a question of fact and generally means the abode customarily or commonly used by you when are physically in a country.

The Commonwealth 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.

Application to your circumstances

We have considered each of the statutory tests listed above in relation to your particular facts and circumstances. We conclude that, for the period XX XXXX 20XX to XX XXXX 202XX you are a resident of Australia as follows.

Taking into account your individual circumstances, we have concluded that you are a resident of Australia according to ordinary concepts.

We also consider that your domicile is Australia and the Commissioner is not satisfied that your permanent place of abode is outside Australia. We considered the following factors in forming our conclusion:

•         You departed COUNTRY A and arrived in Australia on XX XXXX 20XX on a visa.

•         During the period XX XXXX 20XX to late 20XX you made XX trips to COUNTRY A, varying from XX days to a maximum of XX days. During these trips you resided at your COUNTRY A house before returning to Australia.

•         Since XXXX 20XX you have not left Australia to travel to any overseas destinations, including COUNTRY A.

•         Your intention is to live in Australia permanently.

•         During your time in Australia you have always lived with your spouse in the house they own.

•         You sold your only property in COUNTRY A in XXXX 20XX.

•         You acquired Australian citizenship on XX XXXX 20XX.

•         You have investments in Australia that you use as a source of income. You also have investments in COUNTRY A, COUNTRY B AND COUNTRY C.

You were and will be in Australia for 183 days or more during the 20XX-20XX income years and the Commissioner is not satisfied that both:

•         your usual place of abode is outside Australia, and

•         you do not intend to take up residence in Australia.

We considered the following factors in forming our conclusion:

•         You acquired Australian citizenship on XX XXXX 20XX and have been married to an Australian citizen since 20XX.

•         During your time in Australia you have always lived with your spouse in the house they own.

•         You do not maintain professional, social or sporting connections in COUNTRY A or Australia. You intend to live in Australia indefinitely.

•         You do not work in Australia or COUNTRY A and use your COUNTRY A pension and Australian shares and bank accounts as an income source.

You do not fulfil the requirements of the Commonwealth Superannuation test and are therefore not a resident under this test.

Question 2

Am I an Australian resident for taxation purposes under the Australian and COUNTRY A, Double Tax Agreement (DTA)?

Summary

Yes. When applying Article X of the Australian and COUNTRY A, Double Taxation Agreement to your situation, your personal and economic ties are closer to Australia, so therefore you would be considered a resident of Australia from XX XXXX 20XX.

Detailed reasoning

Double Taxation Agreement

It is possible to be a resident for tax purposes of more than one country at the same time in respect of an income year or part of an income year. If this is the case, in determining your liability to pay tax in Australia it is necessary to consider any applicable double tax agreements. Sections 4 and 5 of the International Tax Agreements Act 1953 (Agreements Act) incorporate that Act with the ITAA 1936 and the Income Tax Assessment Act 1997 (ITAA 1997) and provide that the provisions of a double tax agreement have the force of law.

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.[1]

Article X of the DTA 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.

Permanent home

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 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.

We have concluded that you did have a permanent home in Australia and COUNTRY A based on the following considerations:

•         You departed COUNTRY A and arrived in Australia on XX XXXX 20XX on a visa.

•         During your time in Australia, you have always lived with your spouse in the house they own.

•         On XXXX 20XX you sold your COUNTRY A property. The property was your residence until 20XX when you arrived in Australia. From 20XX to the sale of the property in XXXX 20XX it remained unoccupied.

Personal and economic ties (centre of vital interests)

The OECD commentary states that regard should be had to the taxpayer's family and social relations, their political, cultural or other activities, their place of business, the place from which they administer their property etc. As noted in Pike v Commissioner of Taxation [2020] FCAFC 158 at [39], the clause does not place greater weight on personal factors over economic factors. In each case it will be a matter of fact and degree as to whether a taxpayer's personal and economic relations, viewed as a whole, support ties closer to one contracting state over the other contracting state.

We have concluded that your personal and economic ties were closer to Australia based on the following considerations:

•         You have been physically present in Australia since XX XXXX 20XX.

•         During the period XX XXXX 20XX to late 20XX you made XX trips to COUNTRY A, varying from XX days to a maximum of XX days. During these trips you resided at your COUNTRY A house before returning to Australia.

•         Since XXXX 20XX you have not left Australia to travel to any overseas destinations, including COUNTRY A.

•         Since your arrival in Australia, you have been always living with your spouse at their property. Your spouse owns this property and is an Australian citizen

•         You acquired Australian citizenship on XX XXXX 20XX, however you are also a resident of COUNTRY A.

•         You intend to live in Australia permanently exempting holidays not exceeding several months.

•         You do not maintain professional, social, or sporting connections in both COUNTRY A or Australia.

•         You have assets in Australia in the form of shares and bank accounts which you use as an income source.

•         You have several types of investments in COUNTRY A, COUNTRY B AND COUNTRY C.

Conclusion

When applying Article X of the Australian and COUNTRY A, DTA to your situation, your personal and economic ties are closer to Australia, so therefore you would be considered a resident of Australia from XX XXXX 20XX.

Question 3

Is income tax and capital gains tax (CGT) payable in Australia on COUNTRY A pension and for the disposal of my non-property COUNTRY A assets?

Summary

Yes. Your COUNTRY A pension will be taxable in Australia and the disposal of your COUNTRY A assets will be treated as a CGT event in Australia.

Detailed reasoning

If you're an Australian resident for tax purposes, your assessable income includes the ordinary and statutory income you derived directly or indirectly from all sources whether in or out of Australia (worldwide income).

As an Australian resident for tax purposes and DTA purposes, any CGT assets in COUNTRY A that are disposed of will be taxed in Australia.

Article X of the DTA provides that pensions and annuities paid to a resident of Australia for taxation purposes shall be taxable only in Australia. As an Australian resident for tax purposes and DTA purposes, your COUNTRY A pension is taxable in Australia.

You may claim a foreign income tax offset to provide relief from double taxation. Further, you can apply for COUNTRY A double taxation Relief as an individual which will stop COUNTRY A from taxing your pension.

[1] See also ATO ID 2003/1195.