Edited version of private advice

Authorisation Number: 1052234143627

Date of advice: 20 March 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

Yes.

Question 2

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

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a permanent resident of any other country.

You and your spouse went to Country Z several months ago.

You have gone overseas to travel and intend on returning to Australia.

You have entered Country Z on a skilled worker visa.

Your spouse has entered Country Z on a dependant visa.

You have secured work for a few days a week in Country Z.

Your spouse is not employed in Country Z.

You are a resident of Country Z for taxation purposes for the period you will be in Country Z.

You have secured a furnished rental, current lease being for several months.

You have a vehicle in Country Z.

You intend on making Country Z your base for travel purposes.

You have trips planned to several different countries over the next few months.

Prior to leaving Australia you were a registered professional - the registration status has been changed to 'on hold' (as opposed to deregistration), with a view to returning to Australia.

You have maintained membership with the professional association.

You continue to contribute to a superannuation fund.

Your home in Australia is being rented out while you are in Country Z.

You have placed your belongings in storage in Australia.

You took clothing, bike and some kitchen items to Country Z with you.

You intend on returning to Australia for family reasons.

You will return to Australia permanently in a future year.

You and your spouse have elderly parents in Australia and are aware that if their health deteriorates you will return earlier to Australia than planned.

You and your spouse have children, grandchildren and other immediate family in Australia with whom you maintain close ties.

You have a number of bank accounts and a managed share fund in Australia.

You have not removed your name from the Australian Electoral Roll.

You have suspended your Australian health insurance.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

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

Reasons for decision

For tax purposes, you are a resident of Australia if you meet at least one of the following tests. You are not a resident of Australia if you do not meet any of the tests.

•                    The resides test (otherwise known as the ordinary concepts test)

•                    The domicile test

•                    The 183 day test

•                    The Commonwealth superannuation fund test

We have considered your circumstances, and conclude that you are a resident of Australia for tax purposes for the relevant period as follows:

•                    You are a resident of Australia according to the resides test.

•                    You meet the domicile test.

Your domicile is in Australia and the Commissioner is not satisfied that your permanent place of abode is outside Australia in Country Z.

You do not meet the 183-day test.

You were not in Australia for more than 183 days in the relevant income year and you do not intend on being in Australia for more than 183 days in the future income year.

You will return to Australia permanently in the future income year and you will be in Australia for more than 183 days in the following income year.

You do not fulfil the requirements of the Commonwealth superannuation fund test.

In summary, you are a resident of Australia for tax purposes for the relevant period.

For more information about residency, see Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

Whilst under Australian law, you are an Australian resident for taxation purposes, you have stated that Country Z also considers you to be a resident for taxation purposes.

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.

Article 4 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);

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 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 must 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 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 considered, 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 Z and Australia, based on the following considerations:

•                    You have a permanent home available to you in both Australia and Country Z

•                    You are renting your home out in Australia while you are in Country Z

•                    You intend on returning to your home in Australia

•                    You are renting a property in Country Z.

Personal and economic ties

You have personal and economic ties in both Australia and Country Z.

You have the following in Australia:

•                    family such as parents, child and grandchild

•                    property

•                    bank accounts

•                    Superannuation

You have the following in Country Z

•                    Your spouse

•                    employment

•                    a car

When applying Article 4 of the Convention to your situation, we considered that, based on the information provided to the Commissioner, your ties are closer with Australia than to Country Z. Therefore, in determining your liability to pay tax in Australia you are solely a resident of Australia for taxation purposes under the DTA between Australia and Country Z.