Private ruling: Residency for tax purposes
Published: August 2014
Ruling period: Year ended 30 June 2014 | Year ending 30 June 2015 | Year ending 30 June 2016
Date scheme commenced: 1 July 2013

Ruling: Questions and answers | 1. Are you a resident of Australia for the purposes of the tie breaker provision of the Double Taxation Agreement between Australia and Country Y? | No. | 2. Are you required to pay tax in Australia at resident rates? | Yes.

Relevant facts and circumstances: You are a resident of both Australia and Country Y for taxation purposes. You are an Australian citizen. You hold an employment visa in Country Y which is valid for one year and can be extended for an additional two years after you arrive. It is your intention to remain in Country Y for at least 3 years. Your spouse has joined you in Country Y. You intend to travel back to Australia for holidays for less than 5 weeks a year. You have properties in Australia, rental property and the another property which was your main residence which is being rented by your extended family for the period you are in Country Y and will not be available to you for the period you are in Country Y. You have Australian shares. Your employer provides you with permanent accommodation and a car in Country Y.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | International Tax Agreements Act 1953 Schedule 4 Article 4

Reasons for decision: Summary: Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a non-resident of Australia for taxation purposes, your assessable income includes only income from an Australian source. 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 Income Tax Assessment Act 1936 (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 Y Agreement is listed in section 5 of the Agreements Act. The agreement operates to avoid the double taxation of income received by residents of Australia and Country Y. In your case, you are a resident of both Australia and Country Y for tax purposes, according to each country's domestic law. Paragraph 2 of Article 4 of the double tax agreement sets out the factors to be considered when determining a person's residence for the purpose of the agreement, where the person is a resident of both Australia and Country Y under domestic law. 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); For the purposes of this paragraph, and individuals citizenship of a contracting state as well as that persons habitual abode shall be factors in determining the degree of the persons personal and economic relations with that contracting state. Your home in Australia will be rented out for the duration of your stay in Country Y and will not be available to you for the period of your stay in Country Y. You will have a permanent home available to you in Country Y for the duration of your work contract in Country Y. Therefore, for the purposes of the DTA you are not a resident of Australia. Although you are a non-resident for the purposes of the DTA you will pay tax at the resident rates of tax in Australia as a resident of Australia for taxation purposes.