Edited version of private advice

Authorisation Number: 1052136019375

Date of advice: 10 August 2023

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

Are you a resident of Australia for taxation purposes under the Double Tax Agreement (DTA) between Australia and the Country Y?

Answer

No.

This ruling applies for the following period:

Period ending 31 December 2024

The scheme commenced on:

20 June 2023

Relevant facts and circumstances

You were born in Country Z.

You came to Australia when you were a child.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You went to Country Y to work.

You entered Country Y on a specific visa.

This visa was granted to you prior to departing Australia.

The visa expires in a later financial year.

You commenced paid employment in Country Y.

Your initial contract is for a number of months and you plan to extend this contract for a further few months or enter into another longer contract.

The reason for moving overseas for work to improve your chances of permanent employment in your desired career in Australia.

You are paid in Country Y currency into an account which was opened in Australia.

You will have tax withheld from your income.

You are considered a tax resident in Country Y due to the number of days you have been residing and working there.

You are living at a rental property in Country Y.

This property is for your sole use.

You arranged the rental of this property prior to arriving in Country Y.

You signed the rental agreement for the property in Country Y upon your arrival.

The lease on this property is for a number of months.

Prior to leaving Australia, you worked in a number of positions.

You have resigned from one of the positions. The other positions were not on contracts (you functioned as a sole trader) - If you choose, on return to Australia, you will be able to resume working at these practices.

You do not intend on living in Country Y on a permanent basis.

You intend on coming back to Australia to liv and work.

All of your family live in Australia.

You have no family in Country Y.

You have not cancelled your Australian health insurance.

You have not removed your name from the Electoral Roll.

You plan to come back to Australia for a visit a few months.

You will stay with your spouse and parents during the visit.

You and your spouse own an apartment in Australia which you will rent out while in Country Y.

The property in Australia has been rented for a short period of time.

The property is being rented at commercial rates through a property manager.

You are storing your belongings between you and your spouse's parents homes.

Your spouse will remain working in Australia for the first few months that you are in Country Y, your spouse will then join you in Country Y to undertake similar work to gain experience for future work in Australia.

Your spouse has not yet applied for positions in Country Y.

Your spouse has not yet secured a position in Country Y and any potential employer needs to provide a certificate of sponsorship for a visa to be granted.

You have not joined any gyms or sporting groups in Country Y.

You have friends in Country Y and work colleagues.

You do not hold a Country Y driver's license.

Neither you nor your spouse are eligible to contribute to the PSS or the CSS Commonwealth super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

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 relevant period 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 in Australia. Although you were born in Country Z and your domicile of origin is Country Z, you immigrated to Australia when you were a young child and are an Australian citizen.

It is considered that you abandoned your domicile of origin in Country Z and acquired a domicile of choice in Australia.

You are not entitled to reside in Country Y and while living there you only hold a work permit which is valid for a specified period.

We considered the following factors in forming our conclusion:

•                     You have gone to the UK for work only.

•                     You are gaining work experience to enhance your ability to obtain work in the Australian public health system

•                     You currently have a 12-month contract and you plan to either extend it for a further 6 months or enter into another 12-month contract. In total you plan to spend between 18-24 months in the UK, before returning to Australia.

•                     Your spouse will join you in the UK after 6 months

•                     Your apartment in Australia is being rented while you are in the UK

•                     All of your family are in Australia

•                     You are renting accommodation in the UK

You will not be in Australia for more than 183 days in the relevant income years.

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

You will be a resident of Australia for taxation purposes for the relevant period.

Whilst under Australian law, you are an Australian resident for taxation purposes, HM Revenue and Customs, in the UK, also consider you to be a resident for taxation purposes.

If the taxpayer is determined to be a dual resident, then you need to apply the residency tiebreaker test in the relevant country's double tax agreement.

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 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 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.

The relevant tiebreaker test in the Convention is as follows:

The status of an individual who, by reason of the preceding provisions of this Article is a resident of both Contracting States, shall be determined as follows:

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

The Tiebreaker tests apply as follows:

•                     If one test resolves the tiebreak, then the following tiebreaker tests do not need to be considered.

•                     If the tiebreaker tests do not resolve the tiebreak, to break the tiebreak there is:

-        A supplementary test, for example citizenship.

-        A requirement to consult the other tax authority to resolve it by mutual agreement of the Competent Authorities of the respective countries.

Permanent home

Permanent home is not defined in the Convention. 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 have a permanent home in Country Y and do not have a permanent home in Australia based on the following considerations:

•                     You are living at a rental property in Country Y.

•                     This property is for your sole use.

•                     You arranged the rental of this property prior to arriving in Country Y.

•                     You signed the rental agreement for the property in Country Y upon your arrival in Country Y on DD MM 20YY.

•                     You and your spouse own an apartment in Australia which you will rent out while in Country Y

•                     The property in Australia has been rented since DD MM 20YY.

When applying Article X of the Convention to your situation, we considered that you have a permanent home in Country Y, and you do not have a permanent home in Australia. Therefore, under the tie breaker test in the Convention, you would be considered a resident of Country Y from DD MM 20YY (when your property in Australia was first tenanted).