Edited version of private ruling

Authorisation Number: 1011745263495

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Ruling

Subject: Residency

Question:

Are you a resident of Australia for tax purposes?

Answer:

No

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

The scheme commences on:

1 July 2008

Relevant facts:

You are a citizen of Country X.

You first arrived in Australia in early 2007.

You work in Australia with a shipping company.

Later in 2007 you were granted a temporary work visa (457) which allows you to work in Australia for a number of years.

Since arriving in Australia you have been on a 'X months work and X months leave' cycle.

You work for X months in Australia and go back to Country X for the next X months to rest and to be with your family.

You were present in Australia for more than 186 days in the 2008-09 financial year.

You were present in Australia for more than 186 days during the 2009-10 financial year.

Your visa and employment contract expire later in 2011.

It is likely that your employment contract will be extended.

You live on a vessel that sails from one Australian port to another.

You have an Australian bank account where your wages are deposited.

Most of your other assets including a flat and a saving account are located in Country X.

You do not pay tax in Country X or in any other country.

Your family lives in Country X as it is not convenient for them to live on a ship with you.

You do not have any sporting or social ties in Australia.

You do not have any sporting or social ties in Country X.

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 TR 98/17 provides the Commissioner's interpretation of the ordinary meaning of the word 'resides' within the definition of resident in subsection 6(1) of the Income Tax Assessment Act 1936.

When an individual has entered Australia with no intention of migrating or settling permanently, all the facts surrounding their stay must be examined when determining their residency status for taxation purposes. Broadly, the main issues are:

· Period of physical presence in Australia

· Behaviour while present in Australia

· Intention or purpose of presence

· Family and employment ties

· Maintenance and location of assets

· Social and living arrangements

The importance and weighting of each separate issue depends entirely on the facts of each case. There is no set formula for reaching a decision but rather the law is interpreted according to the precedent set in other cases and the statements of the individual in question.

In your case you were present in Australia for more than six months during each 2008-09 and 2009-10 income years. However you have no intention of living in Australia permanently. The sole purpose of your presence in Australia is to work. You live on different ships, depending on where your employer sends you. Your family, your house and most of your other assets are outside of Australia. You have not established any ties with Australian culture and society.

Therefore, you are not a resident of Australia under this 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.

You are a foreign citizen working in Australia. Your domicile is not 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, i.e. 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.

You live on different ships, depending on where your employer sends you. You do not have a fixed place to live in Australia. Your permanent place of abode is your flat in Country X.

Therefore, you are not a resident of Australia under this test.

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.

You do not intend to take up residence in Australia and your permanent place of abode is outside of Australia.

Although you were physically present in Australia for more than 183 days during the 2008-09 and 2009-10 income years, as discussed above, the Commissioner is satisfied that you have a permanent place of abode in Country X and you have no intention of taking up residence in Australia.

Therefore, you are not a resident of Australia under this test.

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, neither you, nor your spouse, have ever been Commonwealth government employees and therefore you are not able to contribute to the abovementioned superannuation schemes.

Therefore, you are not a resident of Australia under this test.

Your residency status

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

As you are not a resident of Australia, according to section 6-5 of the ITAA 1997, your assessable income only includes income gained from sources in Australia.