1 Are you a resident only of Country A under Article 4 of the Double Tax Agreement (DTA) between Australia and Country A?
Yes Question 2 Is the income you derive from your workplace in Country A subject to tax in Australia? Answer No. Question 3 Is the income you derive from Portfolio A, Portfolio B and your Country A Bank interest subject to tax in Australia? Answer No. Question 4 Is the income you derive from Employer B and Organisation A for services performed in Country A subject to tax in Australia? Answer No. Question 5 Is the income you derive from your employment with Employer A subject to tax in Australia? Answer Yes. This ruling applies for the following periods : Year ended 30 June 20XX Year ended 30 June 20XX The scheme commenced on: XX XXXX 20XX
On XX XXXX 19XX, you were born in the Country B to Country A parents and were primarily raised in Country A. You are a citizen of both Country A to Country B. You are a tax resident of Country A. Your extended family and close friends live in Country A. For over X years, you have owned your home in Country A. The market value of your Country A property is approximately $X. Every year, you lodge a tax return in Country A. Your children are citizens of Country A, Country B and Country C. As a sole trader, you own a specialist workplace in Country A. The value for your interest in the specialist workplace in Country A is approximately $X. The approximate future income from the specialist workplace in Country A is approximately $X. Your spouse is an XXXX in Country A. Your spouse has family who live in Australia. You have a driver's licence in Country A and Australia. You maintained the following profession, social or sporting connections overseas: • Research fellow at the University A, in Country A • Alumni, Country A • Association A in Country A • Active member of Country A Workplace Council
• Specialist registration A • Specialist registration B • Specialist registration C • Specialist registration D You own the following assets not otherwise mentioned outside of Australia: • Portfolio A in Country A from which you derive dividend income. • Portfolio B in Country B from which you derive dividend income. • Bank accounts in Country A and Country B. • Interest in your workplace in Country A from which you derive income. • You and your spouse own X vehicles in Country A. • You and your spouse own pets in Country A, which are currently cared for by your friends. The value of Portfolio A is approximately $X. Portfolio A's income will be approximately $X. The value of Portfolio B is approximately $X. Portfolio B's income will be approximately $X. On XX XXXX 20XX, you were granted visa A, which allows you to stay in Australia permanently. On XX XXXX 20XX, you travelled to Australia with your spouse and 2 dependent children.
For a period, you and your family travelled to Australia, renting accommodation, and intermittently staying with family. While in Australia, your home in Country A is looked after by a caretaker. The property is not leased to anyone and is available to you and your family when you are in Country A. On XX XXXX 20XX, you and your family returned to Country A. For a period, you retuned to Australia for work and your accommodation was supplied by your employer. On XX XXXX 20XX, you returned to Country A. For a period, you and your family travelled Australia and stayed with family. On XX XXXX 20XX, you returned to Country A. On XX XXXX 20XX, you solely purchased Property A in Australia for approximately $X. Property A is currently listed for sale. The market value of Property A is approximately $X. You intend to rent another property once Property A is sold. Since XX XXXX 20XX, you hold an ad hoc position as a workplace consultant for Organisation A, a Country A biotech firm. While in Australia you have performed duties associated with your consultant work for Organisation A but have not received any income from this work.
On XX XXXX 20XX, you returned to Australia with your family and moved Property A. From XX XXXX 20XX, you became an Australian tax resident. When moving to Australia, you left your personal effects and most of your household effects in Country A. You brought some personal items with you to Australia. You have enrolled your children into school in Australia. Property A is currently listed for sale. You have had multiple casual employment contracts with the Australian Employer A. You were contracted for the following periods: • Period A. • Period B. • Period C. • Period D With Employer A, you worked in a locum position where you attend to the training of final year students, interns and residents. From Employer A, you have approximately received $X. You serve as an advisor to Employer B, in Country A. Your advisor role with Employer A will only commence on regular visits to Country A. You will not perform this work while in Australia. For a period, you travelled to Country D. For a period, you retuned to Australia. For a period, you travelled to Country A. Since XX XXXX 20XX, you have been in Australia.
While in Australia, you obtained the following profession, social or sporting connections: • Specialist registration E. • Specialist registration F. • Surf and lifesaving club. When flying internationally to and from Country A, you state you are a citizen of Country A and use your Country A address. When flying internationally to and from Australia, you state you are an Australian permanent resident and use your Australian address. Since coming to Australia, you have not applied for citizenship. You and your spouse are not Commonwealth of Australia Government employee for superannuation purposes. You and your spouse are not members of the Public Sector Superannuation Scheme (PSS). You and your spouse are not an eligible employee in respect of the Commonwealth Superannuation Scheme (CSS).
Income Tax Assessment Act 1936 section 6(1) Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 6-20 Income Tax Assessment Act 1997 section 995-1 International Tax Agreements Act 1953
Question 1 Double Taxation Agreement (DTA) Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are an Australian resident, your assessable income includes income derived directly or indirectly from all sources, whether in or out of Australia, during the income year, unless that income is exempt income or otherwise not assessable income. It is possible to be a resident for tax purposes of more than one country at the same time in respect of an income year or part of an income year. If this is the case, 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. In your case, you are a Country A tax resident and are also a tax resident of Australia from XX XXXX 20XX. Taxation Ruling TR 2001/13 Income tax: Interpreting Australia's Double Tax Agreements
discusses the Commissioner's views about interpreting double tax agreements. Paragraph 104 of TR 2001/13 provides that the OECD Model Tax Convention and Commentary will often need to be considered in interpreting double tax agreements. There is a DTA between Australia and Country A. Article X of the DTA 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 DTA. It is important to note that the tiebreaker rules do not change a taxpayer's residency status for domestic law purposes. Article X.x of the DTA states: x. Where by reason of the preceding provisions of this Article a person, being an individual, is a resident of both Contracting States, then the person's status shall be determined as follows:
(a) the individual shall be deemed to be a resident only of the 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); (b) if the State in which the centre of vital interests is situated cannot be determined, the individual shall be deemed to be a resident only of the State of which that individual is a national; (c) if the individual is a national of both States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement. Permanent home Permanent home is not defined in the DTA. Therefore, recourse can be made to supplementary materials in order to aid construction. The OECD commentary to the Model Tax Convention provides that in relation to a 'permanent home':
• 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 has to 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 considered to 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. • any form of home may be taken into account, including a house or apartment belonging to or rented by the individual and a rented furnished room. We have concluded that you have a permanent home in Country A based on the following considerations: • You have owned your home in Country A for over X years.
• You left your personal effects and most your household effects in Country A when travelling to Australia. • When in Australia, your Country A home remains vacant and under the care of a caretaker. • This property is available at all times continuously and not occasionally for the purposes of a stay. We also have concluded that you have permanent home in Australia based on the following considerations: • You own Property A in Australia, which you are advertising to sell. • Once Property A is sold you intend to rent another property when in Australia. Personal and economic ties (centre of vital interests) 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. Your ties to Country A, include the following: • You are a citizen and tax resident of Country A. • Your extended family and close friends live in Country A. • You own your home in Country A. - The market value of your home is approximately $X. • You own multiple vehicles in Country A. • As a sole trader, you own a specialist workplace in Country A. - The value for your interest is approximately $X. - Approximate future income ZAR X.X million (approximately AUD $XX,000). • You derive dividend income from Portfolio A. - Market value is approximately $X. - Portfolio A income will be approximately $X.
• You hold a position as a workplace consultant for Organisation A. • You serve as an advisor to Employer B • You have maintained the profession, social or sporting connections in Country A. Your ties to Australia include the following • You were granted visa A, which allows you to stay in Australia permanently. • Your family lives with you in Australia. • You own your home in Australia, which you intend to sell. - The market value is approximately $X.. • You own vehicles in Australia. • You are employed by Employer A in Australia. - Your income from Employer A is approximately $X. • You have enrolled your children into school in Australia. • You have profession, social or sporting connections in Australia. Application to your circumstances
We have concluded your personal and economic relations are closer to Country A. Although, you and your family currently reside in Australia, you have significant economic ties to Country A because of the value of your Country A assets and the resulting income streams. Therefore, the tiebreaker tests in Article X of the DTA between Australia and Country A apply so that you are deemed to be a resident only of Country A for treaty purposes. The provisions of the DTA will therefore apply on the basis that you are a resident of Country A for tax purposes and not of Australia. Taxation of income Question 2 Workplace in Country A. Article X of the DTA deals with Business profits and states: 1 The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated in that other State. In your case, the profits of the business you derive in your own name are only taxable in Country A. Question 3 Portfolio A Article X of the DTA deals with dividend income and states:
1 Dividends paid by a company which is a resident of a Contracting State for the purposes of its tax, being dividends beneficially owned by a resident of the other Contracting State, may be taxed in that other State. 2 However, those dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax, and according to the law of that State, but the tax so charged shall not exceed: (a) 5 per cent of the gross amount of the dividends if the beneficial owner of those dividends is a company which holds directly at least 10 per cent of the voting power in the company paying the dividends; (b) 15 per cent of the gross amount of the dividends in all other cases. In your case, as you are a resident of solely Country A under the DTA, Australia does not have a taxing right to the Portfolio A dividends. Therefore, the Portfolio A dividend income you derive is exempt in Australia. Country A bank interest Article X of the DTA deals with interest and states.
1 Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other State. 2 However, such interest may also be taxed in the Contracting State in which it arises and according to the law of that State, but the tax so charged shall not exceed 10 per cent of the gross amount of the interest. In your case, as you are a resident of solely Country A under the DTA, Australia does not have a taxing right to the Country A bank interest. Therefore, the bank interest you derive from this source is exempt in Australia. Portfolio B Article 21 of the DTA deals with other income and states: 1 Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Agreement shall be taxable only in that State. In your case, as you are a resident of Country A under the DTA, Australia does not have a taxing right to the Portfolio B dividends. Therefore, the Portfolio B dividend income you derive is exempt in Australia. Question 4 Employer B and Organisation A. Article X of the DTA deals with independent personal services and states:
1 Income derived by an individual who is a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless a fixed base is regularly available to the individual in the other Contracting State for the purpose of performing the individual's activities. Article X of the DTA deals with dependent personal services and states: 1 Subject to the provisions of Articles 16, 18 and 19, salaries, wages and other similar remuneration derived by an individual who is 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. Regardless of whether you are an employee or consultant, if the services you provide to these entities are only performed in Country A, the income you derive will only be subject to tax in Country A. Question 5 Employer A
This income is also covered by Article X of the DTA. You are a resident solely of Country A under article X, however you perform your employment services in Australia. Therefore, the remuneration you receive from this employer is taxable in Australia.