Edited version of private ruling

Authorisation Number: 1011497640764

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Ruling

Subject: Income Tax - Residence

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following period:

Year ending 30 June 2011

The scheme commenced on:

1 July 2010

Relevant facts and circumstances

You are a citizen of Australia.

Your country of origin is Australia.

You state that you do not have a visa for Country A.

You are employed on a marine vessel in international waters and earn your income there.

You stated that you do not pay tax on the income you receive on your employment income as the income is earned in international waters.

You are employed on a permanent basis as a crew member on a vessel that is based in international waters, with a home berth in Country A. The contract is permanent and ongoing.

You advise that your usual place of abode is Country A and you have no intention of residing in Australia.

You rent apartment accommodation with your partner in Country A.

You have a foriegn bank account. Your personal effects, paintings, car and furnishings are located in Country A.

You return to Australia each year for approximately two weeks.

When you visit Australia, you usually stay with relatives.

You have no dependants in Australia.

You have a gym membership in Country A, you attend weekly restaurant outings with a social group and you pay bills and telephone accounts in Country A.

You have not contributed any superannuation since leaving Australia.

You have not been an employee of the Commonwealth of Australia.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source. 

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 a taxpayer 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.

The first two tests are examined in detail in Taxation Ruling IT 2650.

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.

However, where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be a resident of Australia for tax purposes if they meet the conditions of one of the other three tests.

The resides test

The ordinary meaning of the word 'reside', according to the Macquarie Dictionary, 2001, rev. 3^rd edition, The Macquarie Library Pty Ltd, NSW, is 'to dwell permanently or for a considerable time; having one's abode for a time', and according to the Compact Edition of the Oxford English Dictionary (1987), is 'to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live in or at a particular place'.

Although the question of whether a person resides in a particular country is a question of fact, the courts have referred to and taken into account various factors considered to be relevant. These are:

· whether the person is physically present in that country at some time during the year of income

· the history of the person's residence and movements

· if the person is a visitor to the country, the frequency, regularity, duration and purpose of the visits

· if the person is outside the country for part of the relevant income year, the purpose of the absences

· the family and business ties which the person has with the particular country, and

· whether a place of abode is maintained by the person in the relevant country or is available for his or her use while there.

Taxation Ruling IT 2650 emphasises the intended and actual length of the individual's stay in an overseas country, any intention to return to Australia or travel elsewhere, the establishment or abandonment of any residence, and the durability of association that the individual maintains with a particular place in Australia as the main factors to be considered when determining the residency status of individuals leaving Australia.

In your case, you are physically present in Country A when you are not in international waters. You have resided in Country A since early 2007. You have rented a home and own a car in Country A. You return to Country A as it is the country to which your employer's vessel has established its home berth. You share an apartment with your partner whilst in Country A. You have stated that you have no intention to return to Australia. You are not an Australian resident in accordance with the resides test.

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 and common law rules established by private international law cases.

Domicile is the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

Your legal status in Country A is that of a visitor. Your stay in Country A is permitted under their tourism provisions and you have not established a formal immigration status with Country A to support your expressed intention of long-term residence. Your domicile in the absence of a legal permanent residence defaults to your Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

· the intended and actual length of the taxpayer's stay in the overseas country

· whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time

· whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia

· whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence

· the duration and continuity of the taxpayer's presence in the overseas country, and

· the durability of association that the person has with a particular place in Australia, that is, maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

In relation to the weight to be given to each of the above factors, paragraph 24 of IT 2650 states:

The weight to be given to each factor will vary with the individual circumstances of each particular case and no single factor will be decisive… however… greater weight should be given to factors (c), (e) and (f) than to the remaining factors, though these are still, of course, relevant.

In your case you have no intention of returning to Australia. You have an apartment and car in Country A. You will get a Foreigner's ID number in Country A. Country A is the home berth of the vessel you work on. You have established a home with your partner in Country A. You have no property in Australia. You have no dependants in Australia. You have sold your assets in Australia. You have a foreign bank account, pay telephone bills in Country A and have a gym membership in Country A. You have a permanent place of abode outside Australia.

The 183 day test

Under the 183 day test, a person is a resident of Australia if they are actually physically present in Australia for more than 183 days in an income year unless the Commissioner is satisfied that their usual permanent of abode is outside of Australia and they have no intention of taking up residence here.

This test does not apply to you because as discussed above, as we consider that you have a permanent place of abode outside of Australia.

The superannuation test

A person will be considered a resident under the Commonwealth superannuation fund test if they currently contribute to certain superannuation funds for Commonwealth government employees. The eligible funds are funds:

· established under the Superannuation Act 1976 (such as the Commonwealth Superannuation Scheme), or

· established under the Superannuation Act 1990 (such as the Public Sector Superannuation Scheme), or

· the spouse or child under 16 of a person covered by either of the above funds.

In your case, you have never been a Commonwealth government employee and therefore you are not able to contribute to the abovementioned superannuation schemes.

Your residency status

Non-resident

As you do not meet any of the above tests, you are not a resident of Australia for tax purposes.

Further issues for you to consider:

You could inform the Country A income tax authorities that you are not a resident of Australia and ask about your residency status and the assessability of the income you earn in accordance with Country A's taxation law.