Is the trust a resident of Australia for the purposes of the Double Tax Agreement between Australia and Country A (the DTA)?
No. Subsection 95(2) of the Income Tax Assessment Act 1936 states that a trust will be a resident trust in relation to an income year if a trustee was a resident at any time during that year. Therefore, the trust in this case is a resident trust for Australian income tax purposes for the income years during which the trust had a trustee who was a resident of Australia. However, under article 4 of the DTA, a trust that is a resident of both Australia and Country A is deemed to be a resident only of the country in which its place of effective management is situated. Consequently, based on the facts provided, the trust is deemed a resident only of Country A for the purposes of the DTA. This ruling applies for the following periods : Year ended 30 June 20XX to Year ended 30 June 20XX The scheme commences on: 1 July 20XX
The trust was created by a Deed of Variation to the Will of X by their spouse Y. X died on XX/XX/20XX and the Deed of Variation was dated XX/XX/20XX. X was a Country A resident at death. The following is a summary of the trustees over the trust's existence: On creation: • Y (Country A resident) • W (Country A resident) • Q (Australian resident) • Company U (Country A company) Changes over time: • Company U (Country A company) resigned • Q (Australian resident) died in 20XX • Y (Country A resident) retired XX/XX/20XX • Z (Australian resident) appointed XX/XX/20XX Current trustees • W (Country A resident) - lead trustee appointed on creation of trust • Z (Australian resident) appointed XX/XX/20XX. The tax authority of Country A considers the trust to be a Country A resident trust. The trust is registered with the Country A Trust Registration Service and W is registered as the lead trustee. As the lead trustee, W is responsible for the administrative duties in relation to the tax affairs of the trust and is the main contact point that the tax authority of Country A use.
W, who is a Country A resident, has since the creation of the trust been predominately responsible for the management and control of the trust through performance of the following duties: • Overseeing the trust's investments • Keeping accounts and related information • Sources advice and suitability of investments in Country A. Although Z, an Australian resident, is currently a trustee, Z does not undertake the day-to-day duties required for the trust. During the period Q was a trustee, Q played a lesser role to the lead trustee in the management of the trust. The trust's assets are principally investments in Country A. The trust does not have any assets in Australia. A number of X's descendants reside in Australia and are beneficiaries of the trust.
Income Tax Assessment Act 1936 subsection 95(2) International Tax Agreements Act 1953 section 4 International Tax Agreements Act 1953 section 5