Private ruling: International - Residency
Published: August 2017
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2019 | Year ending 30 June 2020
Date scheme commenced: 1 July 2017

Ruling: Q1: Are you a resident of Country Y only under Article 4, Paragraph 3(a) of the Double Tax Agreement between Australia and Country Y? | A1: Yes

Relevant facts and circumstances: You are a citizen of Country Y and have been your entire life. You are a resident of Country Y under Country Y income tax law. You entered Australia a number of years ago on a contributory parent-migrant visa (subclass 143). This is a permanent visa which allows you to travel in and out of Australia for a period of five years, after which you must obtain citizenship or apply for a resident return visa should you wish to leave and return. You intend on applying for citizenship of Australia in xxx 2017. You intend to stay in Australia permanently but will make trips back to Country Y to visit family and maintain an association there for at least 3 months each year. You are retired and have no intention to work in Australia or Country Y. You own a house in Country Y in which the majority of your personal effects are stored. The house is not rented out and is available for your use at all times. Other assets in Country Y include a state pension, work pension, dividends and interest. In Australia you live in a rental property which has an on-going lease. Your assets in Australia are minimal and include a bank account. You have children who live in Australia. Your parent and sibling live in Country Y. You have stated you are a resident of Australia under Australian income tax law.

Relevant legislative provisions: International Tax Agreement Act 1953 Section 4

Reasons for decision: Detailed Reasoning - Double tax agreement between Australia and the United Kingdom: 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 Y Agreement is listed in section 5 of the Agreements Act. The Country Y agreement operates to avoid the double taxation of income received by residents of Australia and Country Y. Article 4 of Country Y /Australia Agreement discusses 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. Article 4 (3) of Country Y /Australia Agreement states: 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: 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). In your case, you have a permanent home available to you in both Australia and Country Y. Therefore your personal and economic relations need to be considered to determine your residency status for the purpose of Country Y /Australia Agreement. Your personal and economic ties with Australia are as follows: You hold a permanent visa Your children live in Australia You have a bank account You live in a rental property Your personal and economic ties with Country Y are as follows: You have been a citizen of Country Y your entire life You return to Country Y for at least three months each year You own a house in Country Y which is available to you at all times You have personal effects in Country Y stored in your house You have a Country Y state pension, work pension, dividends, bank interest You have family ties in Country Y including your parent and sibling. It is evident you have closer personal and economic ties to Country Y and therefore you are a resident of Country Y only for the purposes of the double tax agreement.