Private ruling: Residency under double tax agreement
Date of advice: 18 July 2025
Published: 15 September 2025
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you solely a resident of Australia for taxation purposes under the Double Tax Agreement (DTA) between Australia and Country Z for the earlier period? | A1: Yes. | Q2: Are you solely a resident of Country Z for taxation purposes under the DTA between Australia and Country Z for the later period? | A2: Yes. | Q3: Are you required to pay tax on your Employer Z employment income in Australia under the DTA with Australia and Country Z for the earlier period? | A3: Yes. | Q4: Are you subject to tax on your Employer Z employment income solely in Country Z under the DTA with Australia and Country Z for the later period? | A4: Yes. | Q5: Are you required to declare any capital gains that arise on the disposal of shares in your Australian tax return? | A5: Yes.

Relevant facts and circumstances: You are a resident of Australia for taxation purposes. You are a resident of Country Z for taxation purposes. For a number of months you were solely based in Country Z and all your employment income has been earned in Country Z from Employer Z. You were granted Country Z Visa status, which was sponsored by your employer. Your spouse was also granted a visa which allowed them to work in Country Z. During the relevant period all of your employment income has been earned and taxed in Country Z. Your employer has made contributions to your Australian superannuation fund as opposed to establishing you in a Country Z pension fund. During the previous taxation year you have sold shares, and for mandatory reporting purposes for those shares you provided the relevant details. Employer Z has offices in multiple countries. Employer Z has a small office in Australia, however your work was not associated with this office and you have rarely interacted with it. You have maintained a lease on a Country Z apartment, in your and your spouse's name, for your sole use. Prior to renting the Country Z apartment you stayed in temporary accommodation in Country Z. Your spouse, who runs their own business in Australia has travelled consistently between Country Z and Australia, spending extended periods in both. You have maintained your home in Australia which your spouse lived in while you were in Country Z, and they were in Australia. You have returned to Australia a couple of times in this period, for leave purposes, but also to conduct business in Australia (meetings presentations) on behalf of Employer Z. On both occasions these visits have been for a few weeks and Employer Z paid your travel costs. You have been covered by both public and private (employer provided) health cover in Country Z. You and your spouse have retained an investment property in Australia. This property is rented by your child. You own a percentage of the rental property, and your spouse the remaining percentage. One of your children lives in the rental property in Australia. You have recently negotiated your exit from full time employment with Employer Z, and you returned to Australia, that exit was completed under Country Z laws, including minimum redundancy provisions You received no employment income from Australia during the previous income year. You have signed a consultancy agreement for work in Australia, invoicing for which will commence in the current financial year. It is your intention to live in Australia going forward. Other than rental income on the investment property in Australia you have received negligible interest income on cash amounts held in Australian bank accounts in the period you were in Country Z. You have several assets in Australia. You have around an amount of money in a Country Z bank account for potential taxation liabilities in Country Z. You have stocks and shares listed overseas. You were paid bonuses and termination payments when finishing up in Country Z.

Relevant legislative provisions: Income Tax Assessment Act 1936 subsection 6(1) | Income Tax Assessment Act 1997 subsection 995-1(1) | International Tax Agreements Act 1953

Reasons for decision: Summary: 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 Income Tax Assessment Act 1936 (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. 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 between Australia and the Country Z 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); If one test resolves the tiebreak, then the following tiebreaker tests do not need to be considered. 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. Earlier period We have concluded that you had a permanent home available to you only in Australia. This is due to you not having a lease on permanent accommodation until XX when you leased an apartment. Up until XX, you were living in temporary accommodation in Country Z and only had a permanent home available to you in Australia at your family home in Australia. Therefore, in determining your liability to pay tax in Australia, you are solely a resident of Australia under the DTA between Australia and Country Z for the earlier period. Later period For the period XX, we have concluded that you had a permanent home in both Country Z and Australia, based on the following considerations: • you had a home available to you in Australia at your family home. • you rented an apartment in Country Z from XX to XX. Consequently, we need to consider to which country your personal and economic ties were closer to for the later period. Personal and economic ties 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], personal factors do not have greater weight than economic factors. In each case it will be a matter of fact and degree whether a taxpayer's personal and economic relations, viewed as a whole, support ties closer to one contracting state over the other contracting state. You have personal and economic ties in both Australia and Country Z. You have the following in Australia: • Family such as your spouse and children • Your family home • Share in a rental property with your spouse • Cash • Vehicles • Superannuation You have the following in Country Z • Your spouse periodically lived with you in Country Z • Your income from Employer Z • Cash Later period When applying Article 4 of the Convention to your situation, we consider that on balance your personal and economic ties were closer to Country Z for the later period than Australia. Although you had strong ties to Australia during the relevant period, including a higher value of assets here, you also derived significant income from your employment in Country Z (far exceeding your Australian source income) which funded your life and lifestyle. Therefore, in determining your liability to pay tax in Australia, you are solely a resident of Country Z under the DTA between Australia and Country Z for the later period. Employment income The DTA between Australia and Country Z considers employment income. It states: 1. Subject to the provisions of Articles 17 and 18 of this Convention, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived from that exercise may be taxed in that other State. This means that your employment income for the earlier period is taxed in Australia (and also Country Z). This is because you are a resident of Australia under domestic law and you do not tie break to Country Z for the earlier period. For the later period, your employment income is only taxed in Country Z as you tie break to Country Z. Disposal of shares You are a resident of Australia for domestic law purposes. This means you are assessable on all worldwide capital gains unless a provision of the UK DTA prevents it. Article 13 of the DTA deals with 'Alienation of property' such as real property, business property and shares. Paragraph 6 of Article 13 states: Nothing in this Convention affects the application of a law of a Contracting State relating to the taxation of gains of a capital nature derived from the alienation of any property other than that to which any of the preceding paragraphs of this Article apply. In your case, none of the other paragraphs of the Article apply to the sale of the company shares you disposed of. Therefore, the DTA does not override Australia's taxing right under domestic law. Consequently, you are assessable on any capital gains from shares sold during the ruling period: Elimination of double taxation Article 22 of the DTA looks at the elimination of double taxation. It states: 1. Subject to the provisions of the laws of Australia from time to time in force which relate to the allowance of a credit against Australian tax of tax paid in a country outside Australia (which shall not affect the general principle of this Article): (a) Country Z tax paid under the laws of Country Z and in accordance with this Convention, whether directly or by deduction, in respect of income or gains derived by a person who is a resident of Australia from sources in Country Z shall be allowed as a credit against Australian tax payable in respect of that income; (b) Where a company which is a resident of Country Z and is not a resident of Australia for the purposes of Australian tax pays a dividend to a company which is a resident of Australia and which controls directly or indirectly at least 10 per cent of the voting power of the first-mentioned company, the credit shall include Country Z tax paid by that first-mentioned company in respect of that portion of its profits out of which the dividend is paid. 2. Subject to the provisions of the law of Country Z regarding the allowance as a credit against Country Z tax of tax payable in a territory outside Country Z (which shall not affect the general principle hereof): (a) Australian tax payable under the laws of Australia and in accordance with this Convention, whether directly or by deduction, on income or chargeable gains from sources within Australia (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowedas a credit against any Country Z tax computed by reference to the same income or chargeable gains by reference to which the Australian tax is computed; (b) in the case of a dividend paid by a company which is a resident of Australia to a company which is a resident of Country Z and which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Australian tax for which credit may be allowed under the provisions of subparagraph (a) of this paragraph) the Australian tax payable by the company in respect of the profits out of which such dividend is paid. 3. For the purposes of paragraph 1 and 2 of this Article, income or gains owned by a resident of a Contracting State which may be taxed in the other Contracting State in accordance with this Convention shall be deemed to arise from sources in that other Contracting State. For the earlier period, you are an Australian resident under the DTA and you can claim a tax credit in Australia for Country Z tax paid. For the later period, you are a Country Z resident under the DTA and you can claim a tax credit in Country Z for Australian tax paid under paragraphs 2 and 3 of Article 22.