Private ruling: Residency
Date of advice: 6 November 2017
Published: April 2018
Ruling period: Year ended 30 June 2017 | Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020
Date scheme commenced: 1 June 2016

Ruling: Q1: Am I a resident of Australia for income tax purposes? | A1: Yes | Q2: Am I required to declare my income from Country A when I lodge Australian taxation returns? | A2: Yes.

Relevant facts and circumstances: You are a citizen of Country A as is your partner. You and your partner moved to Australia in January 2017. Your partner has moved to Australia to take up a 12 month specialist training opportunity. When this training position is completed your Partner has arranged another training position in a different location. You are travelling on a temporary visa and your Partner has a 457 visa which allows work in Australia. You are renting a unit and have retained your family home in Country A. You intend to move back to this family home at the conclusion of the training in Australia. You have retained your Country A savings accounts, share investments and also retain your family home. You are a Manager mainly involved in consulting. Almost all of your work is with clients who are based in Country A or outside of Australia. Essentially you are fulfilling the same work duties as before you moved to Australia, but are now doing this work remotely from your home office in Australia. Neither you, nor your Partner, have any intention of applying for Australian citizenship or permanent residency. You have continued to lodge taxation returns in Country A. You have established that you are a tax resident of Country A, despite moving to Australia, given all circumstances. You have maintained professional, social, and financial/investment ties with Country A, but have also necessarily begun to establish social and other connections in Australia. Neither you, nor your Partner, have ever been employees of the Commonwealth Government and hence neither are members of any government superannuation scheme.

Relevant legislative provisions: Income Tax Assessment Act 1997 Subsection 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1) | International Tax Agreements Act 1953 Section 4 | International Tax Agreements Act 1953 Section 5 DTA Australia and New Country A Articles AA, BB, XX, YY and ZZ.

Reasons for decision: Summary: The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) while Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia (TR 98/17) outlines the guidelines used to determine whether the individual is a resident. The definition provides four tests to ascertain if an individual is a resident of Australia for income tax purposes. These tests are: 1. The resides test (residence according to ordinary concepts) 2. The domicile test 3. The 183 day test 4. The superannuation test The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides. However, where the individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for income tax purposes if they meet the conditions of one of the other three tests. | Detailed Reasoning - 1. 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'. TR 98/17 discusses the factors that are taken into account in assessing whether an individual’s behaviour is consistent with residing in Australia. Various court and Tribunal decisions have also considered the ordinary meaning of the word ‘reside’ with the recent being Pillay v. Commissioner of Taxation [2013] AATA 447; Sneddon v. Commissioner of Taxation [2012] ATC 10-264; [2012] AATA 516 ( Sneddon ), Iyengar v. Commissioner of Taxation [2011] ATC 10-222;[2011] AATA 856 ( Iyengar ). The Courts and the Tribunal have generally taken into account the following eight factors in considering whether an individual is an Australian resident according to ordinary concepts in an income year: ● Physical presence in Australia; ● Nationality; ● History of residence and movements; ● Habits and ‘mode of life’ ● Frequency, regularity and duration of visits to Australia; ● Purpose of visits to or absences from Australia; ● Family and business ties with Australia compare to the foreign country concerned; and ● Maintenance of a place of abode. The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive. Physical presence in Australia TR 98/17 considers physical presence or length of time by itself is not determinative of residency. An individual’s behaviour as reflected by a degree of continuity, routine or habit that is consistent with residing here is relevant. Nationality You are a citizen of Country A but you arrived in Australian recently. Frequency, regularity and duration of visits to Australia You arrived in Australia recently and have been onshore for XX days in the 2016/2017 income year. Family and business ties with Australia You have retained your Country A employment which is now performed remotely. Your main social, economic and financial/investment ties remain with Country A. Maintenance of a place of abode You have moved out of your permanent home and established a temporary place of abode in Australia. However you continue to maintain your permanent place of abode in Country A. In the case of Gunawan v Commissioner of Taxation [2012] AATA 119 ; the Tribunal took into account that the applicant owned a property in Australia at which his wife and family lived before deciding he was a resident. Similarly, in the case of Nordern v Commissioner of Taxation [2013] AATA271 ; the Tribunal took into account that the applicant returned to Australia to visit them staying at the family home where his wife and children live before declaring him to be a resident for tax purposes. It is considered that on balance your behaviour is consistent with residing in Australia and being considered a temporary resident for tax purposes under the ‘resides’ test after arrival. | Detailed Reasoning - 2. The domicile test: Under the domicile test, a person is a resident of Australia if their domicile is in Australia unless the Commissioner is satisfied they have a permanent place of abode outside of Australia. | Detailed Reasoning - Domicile: ‘Domicile’ is a legal concept to be determined according to the Domicile Act 1982 and common law rules. A person’s domicile is in their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country, usually done by obtaining a migration visa. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice. In your case, you are a citizen of the C ountry A. You have left and have chosen to live in Australia while your Partner undertakes training placements. It is considered that you have not abandoned your domicile in Country A and acquired a domicile of choice in Australia. You are a Country A national and do not require a visa to work in that country or to remain in that country indefinitely. | Detailed Reasoning - 3. The 183 days 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. This test is applicable to new arrivals in Australia rather than those leaving Australia. In your circumstances your arrival in Australia is to accompany your Partner. You have retained your usual place of abode outside Australia and the Commissioner is satisfied that you do not intend to take up residence in Australia. You will not be treated as a resident under this test. | Detailed Reasoning - 4. The superannuation test: An individual is still considered to be a resident if that person is eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. You are not a contributing member of the PSS or the CSS or a spouse of such a person, or a child under 16 of such a person. You will not be treated as a resident under this test. | Detailed Reasoning - Residency status: As you satisfy one of the four tests of residency outlined in subsection 6(1) of the ITAA 1936, you are a temporary resident of Australia for income tax purposes from arrival. | Detailed Reasoning - Reasons for decision – Declaration of Income in Australia: 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. The Country A Agreement is listed in section 5 of the Agreements Act. This Double Tax Agreement operates to avoid the double taxation of income received by residents of Australia and Country A. Article XX of this Agreement sets out that income derived from property may be taxed in the Contracting State in which the property is situated. In your case, it will be necessary to lodge Australian taxation returns but it will therefore not be necessary to declare your rental income derived from rental of your family home. Article YY of this Agreement sets out that dividends may be taxed in the other Contracting State. In your case it will therefore be necessary to lodge Australian taxation returns and to declare your dividends from share investments. Article ZZ of this Agreement sets out that employment income shall be taxable only in one State if certain conditions are met. Your situation does not meet those conditions hence the Double Tax Agreement does not prevent the taxation of your employment income in Australia. In your case, it will therefore be necessary to lodge Australian taxation returns and to declare your employment income. Accordingly, you will be required to lodge Australian taxation returns and to declare your employment income and dividends on such Australian returns. Your rental income need only be declared when you lodge returns in Country A. You should however note that Article AA of the Agreement sets out a process for the elimination of double taxation which is binding on both Contracting States. This Article provides mutual obligations on both states requiring that they both shall allow a credit for tax paid in the other Contracting State. Hence, either State is obliged to allow a credit for taxes paid in the other State. Finally, Article BB of the Agreement sets out a procedure under which a person who considers that the actions of one or both of the Contracting States which may act to the detriment of that person, has the right to present a case to competent authority of the Contacting State. This case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the Agreement. Should such a case be presented to a competent authority shall attempt to resolve the claim if justified and, if unable to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State. Accordingly, should the process outlined above result in a detrimental situation, a mechanism exists to provide relief from double taxation.