Edited version of private advice

Authorisation Number: 1052262416406

Date of advice: 18 June 2024

Ruling

Subject: Residency

Question 1

Are you a resident of Australia for taxation purposes?

Answer

No.

Question 2

Will the employment income you derive from your foreign employer when you exercise your employment in Australia be subject to tax in Australia under Article 14 of the Double Tax Agreement between Australia and Country Y (the Agreement)?

Answer

No.

This ruling applies for the following periods:

Income year ending 30 June 20XX

Income year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You were born in Country X.

You are a citizen and a tax resident of Country Y.

You have an employment contract with Company B which is based in Country Z, with whom you will continue to be employed with, and receive salary from, during the ruling period.

Company B does not have any presence in Australia.

Company B supplies crew to vessel managers/operators.

You have been asked by Company B to work temporarily in Australia on a foreign flagged ship (the Vessel) which is registered in Country W, operating in Australian waters to work for Company C.

Your salary, terms etc are the same regardless of where your employer sends you to work.

Company C has a physical business presence in Australia.

The Vessel is managed and operated by Company D, a Country Y company.

Companies B, C and D are subsidiaries of Company A, which is a global group of many companies.

Company C applied for a visa on your behalf which will permit you to reside in Australia whilst you were working for your overseas employer. The visa was valid for six months from the date you first arrived in Australia.

The Vessel arrived in Australia, and you have been working in Australian waters.

Company C applied for another visa on your behalf to permit you to reside in Australia which was valid for six months from the date your first arrived in Australia.

You are working at sea in Australian waters on a rotation basis, being in Australia for several weeks and then having leave for several weeks until your visas expire, spending less than 183 days in Australia in both income years covered by the ruling period.

Your net income is paid directly into your bank account in Country Y by bank transfer from Company B bank accounts.

Australian tax and superannuation will be calculated by your Country Z employer and the figure sent to an Australian payroll service provider which will remit the amounts to the Australian Taxation Office.

You are salaried and domiciled in Country Y, having a permanently established residence located In Country X where you return to when you are not working on the Vessel.

You do not have any intention to move to or live in Australia.

You have adult children who are not dependant on you.

You maintain several memberships with organisations in Country Y.

You do not hold any assets in Australia with all your assets being located in other countries.

You have not and will not develop any professional, social and/or sporting connections in Australia.

You are not a Commonwealth Government of Australia employees for superannuation purposes and are not eligible to contribute to the PSS or the CSS Commonwealth Super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 subsection 6-5(3)

International Tax Agreements Act 1953 section 4

International Tax Agreements Act 1953 section 5

Reasons for decision

Question 1:

For tax purposes, you are a resident of Australia under subsection 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) if you meet at least one of the following tests.

•         The resides test (otherwise known as the ordinary concepts test)

•         The domicile test

•         The 183-day test

•         The Commonwealth superannuation fund test.

You are not a resident of Australia if you do not meet any of the tests.

Application to your situation

We have considered your circumstances, and have determined that you are not a resident of Australia in either of the income years included in the ruling period as follows:

•         You are not a resident of Australia according to the resides test.

•         You do not meet the domicile test because your domicile is not in Australia.

•         You do not meet the 183-day test because you will not be in Australia for 183 days or more during either of the income years.

•         You do not fulfill the requirements of the Commonwealth Superannuation test.

Question 2:

Subsection 6-5(3) of the Income Tax Assessment Act 1997 (ITAA 1997) states that if you are a foreign resident, your assessable income includes the ordinary income you derived directly or indirectly from all Australian sources during the income year. Ordinary income includes remuneration derived from employment.

In determining your liability to pay tax in Australia, it is necessary to consider any applicable double tax agreement. Sections 4 and 5 of the International Tax Agreements Act 1953 (Agreements Act) incorporate that Act with the ITAA 1936 and the ITAA 1997 and provide that the provisions of a double tax agreement have the force of law.

Article 14 of the Agreement deals with employment income and sets out the rules where remuneration is derived by a resident of a Contracting State when exercising their employment in the other Contracting State as follows:

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.

2)    Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

a)    the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in any twelve-month period commencing or ending in the fiscal year or year of income of that other State; and

b)    the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

c)    the remuneration is not deductible in determining taxable profits of a permanent establishment which the employer has in the other State.

Application to your situation

In your case, you are a tax resident of Country Y and will not be present in Australia for more than 183 days in any twelve-month period commencing or ending in an Australian income year covered by the ruling period.

Your remuneration in relation to the period you are working in Australian waters will be paid by your Country Z employer, which does not have a permanent establishment in Australia.

As outlined above, Australia has a right to tax the employment income of a Country Y resident that is exercised in Australia, unless the person is in Australia for less than 183 days in a specified period and other conditions are met.

Therefore, as you have not met the relevant conditions for you to be taxed in Australia the remuneration you derive when you exercise your employment in Australia during the ruling period for your foreign employer will not be subject to tax in Australia.

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