Edited version of private advice

Authorisation Number: 1051660706319

Date of advice: 6 May 2020

Ruling

Subject: Residency of Australia for taxation purposes

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a citizen of Australia.

You left Australia in mid 20XX to work overseas.

You travel through the European Union (EU) utilising a visa.

You do not have any long term visas and have not applied for residency or citizenship of another country.

In the 20XX year you travelled through the EU and had some casual work during this period.

Mid 20XX you commenced working on a private motor yacht which is registered in Country X.

The home berth of the yacht is Country Y.

You have a permanent cabin available to you.

You live on board the vessel fulltime.

You do not stay onshore in Country Y at any time.

You have full access to the cabin including when you are on personal leave.

The yacht travels to various countries and different ports within those countries.

It does not have a fixed itinerary.

When you are working on board the yacht you are officially stamped out of the EU and must be stamped back in when you leave on personal travel.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Subsection 995-1(1)

Detailed reasoning

The terms 'resident' and 'resident of Australia', in regard to an individual, are defined in subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936). The definition provides four tests to ascertain whether an individual is a resident of Australia for income tax purposes. These tests are:

·         the resides test,

·         the domicile test,

·         the 183 day test, and

·         the superannuation test.

Only one of the tests needs to be met for an individual to be considered to be a resident of Australia for tax purposes.

The resides test

The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of the word resides.

In your case, you left Australia in mid 20XX to work overseas.

Therefore, we consider that you ceased to reside in Australia from mid 20XX.

The domicile test

Under this test, a person is a resident of Australia for tax purposes if their domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside of Australia.

Domicile

'Domicile' is a legal concept determined according to the Domicile Act 1982 (Domicile Act) and common law rules.

A person's domicile is usually their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

Specifically, section 10 of the Domicile Act states:

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

While section 12 of the Domicile Act states:

The acquisition of a domicile of choice in place of a domicile of origin may be established by evidence that would be sufficient to establish the domicile of choice if the previous domicile had also been a domicile of choice.

The Commissioner's view on how a domicile of choice may be acquired can be found in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, at paragraph 21:

In order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able to prove an intention to make his or her home indefinitely in that country e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

The courts have provided guidance on the concept of domicile over the years. Although the recent case decided by the Full Federal Court of Australia, Harding v Commissioner of Taxation [2019] FCAFC 29 (Harding), did not have to determine the domicile of the taxpayer, the court restated some observations from earlier cases concerning evidence of an intention to change domicile:

30. ....In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by "clear and cogent evidence that the change has taken place" (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M'Clure (1857) 20 D. 307, where his Lordship said:

... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges, and immunities which the law and constitution of the domicile confer on the denizens of the country,-in their domestic relations ... in their purchases and sales and other business transactions ... in their political or municipal status,-and in their daily affairs of common life; but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence.

36. ....As Lord Macnaghten observed once in Winans v Attorney-General [1904] AC 287 at 291:

Lord Chelmsford's opinion [in Udny v Udny (1869) LR 1 HL, Sc 455] was that "in a competition between a domicil of origin and an alleged subsequently acquired domicil there may be circumstances to shew that however long a residence may have continued, no intention of acquiring a domicil may have existed at any one moment during the whole of the continuance of such residence. The question in such a case is not whether there is evidence of intention to retain the domicil of origin, but whether it is proved that there was an intention to acquire another domicil."

As can be seen from the above, a stated intention to change domicile must be backed up by actual evidence of the change.

In your case, as at mid 20XX, you were an Australian citizen and resident, whose domicile was in Australia. You left Australia and worked in the EU while you were travelling.

You did not become a permanent resident or citizen of any other country.

Following the period of travel you obtained employment on a private yacht several months after leaving Australia, you currently live on the yacht full time including periods of personal leave.

You use a visa which enables you to live and work in the EU, and which you use to enter and leave Country Y.

From the above, there is no evidence to prove that you changed your domicile from Australia to any other country.

Therefore, your domicile is still Australia.

Permanent place of abode

A person's 'permanent place of abode' is a question of fact to be determined in the light of all the circumstances of each case. 'Permanent' does not mean everlasting or forever but it is to be distinguished from temporary or transitory.

In FC of T v Applegate (79 ATC 4307; (1979) 9 ATR 899), Fisher J described 'permanent place of abode' as being:

.....the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

The Full Federal Court in Harding stated, at 41, that it favoured the construction of the phrase 'permanent place of abode' as used at first instance in Applegate v Commissioner of Taxation [1978] 1 NSWLR 126 at 134:

"place of abode" may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in

s. 6(1.) of the Act.

The Full Federal Court in Harding, at 40, summarised its thoughts on 'permanent place of abode' as follows:

·         the word 'place' in the context of the phrase 'outside Australia' involves a consideration of the town or country in which a person is physically residing 'permanently';

·         so long as the taxpayer has 'definitely abandoned' his or her residence in Australia, it is not necessary for the taxpayer to be permanently located at a particular house or flat in a particular town within a foreign country or for the person to live in one particular town, suburb or village within a given country;

·         the word 'place' should accordingly be read as including a reference to a country or state;

·         moving between foreign countries is not the same as being permanently in one country; and

·         the words 'permanent place' require the identification of a country in which the taxpayer is living permanently.

Consequently, we consider that the Full Federal Court in Harding provides two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia. These are:

(1)  whether the taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

(2)  whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries.

In your case, you left Australia in mid 20XX and commenced living and working throughout the EU until you started employment on the yacht in mid 20XX.

It is evident that from the time you left Australia in 20XX you have not spent a significant amount of time in any particular country. You initially travelled through the EU for several months before living and working on the yacht which travels from place to place, again, between and within the territorial waters of various countries.

Consequently, in using the guidance in Harding, there is no specific country outside Australia that can be identified as being your 'permanent place of abode'.

We acknowledge that the court in Harding did not need to consider the issue of permanent place of abode in respect of a person living on a boat; however, the court clearly stated that the words 'permanent place' require the identification of a country in which the taxpayer is living permanently.

Therefore, the Commissioner is not satisfied that you have had a permanent place of abode outside Australia since the date in 20XX when you left.