Edited version of private ruling

Authorisation Number: 1011826884698

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Ruling

Subject: Residency for taxation purposes

Question and answer:

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following periods:

Year ended 30 June 2009

Year ended 30 June 2010

Year ended 30 June 2011

The scheme commenced on:

1 July 2008

Relevant facts:

You were born in Country X.

You are a citizen of Country X.

You commenced a permanent employment contract with an Australian company in the income year ended 30 June 2009.

In your position, you live on board a company vessel which operates in Australian waters.

You spend more than six months each year in Australia.

You work a regular cycle of several weeks on and then several weeks off.

You return to Country X after each work period for the duration of your time off.

You have continued this work roster without any holidays or breaks since commencing in 2008.

You state that you would like to reside permanently in Australia in the future.

You own your own home in Country X and also own a second property in Country X.

You hold an Australian superannuation account.

When you return to Country X after each work period, you reside in the house you own.

Your family do not accompany you to Australia because you are living on the vessel and family members are not permitted aboard.

Neither you, nor your spouse, have ever been Commonwealth Government of Australia employees.

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.

Taxation Ruling TR 98/17 considers the residency status of individuals entering Australia. The ruling states that when an individual arrives in Australia not intending to reside here permanently, all the facts about his or her presence must be considered in determining residency status.

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'.

TR 98/17 states that the quality and character of an individual's behaviour while in Australia assist in determining whether the individual resides here. All the facts and circumstances that describe an individual's behaviour in Australia are relevant. In particular, the following factors are useful in describing the quality and character of an individual's behaviour:

· intention or purpose of presence

· family and business/employment ties

· maintenance and location of assets, and

· social and living arrangements.

Application to the facts of the case

You do not reside in Australia according to ordinary concepts. You regularly visit Australia solely to work. You have not established a home in Australia and stay onboard the work vessel. Your family remains in Country X and you regularly return there to be with them and to reside in the home that you own. Your only asset in Australia is your superannuation account. You own your family home and a second property in Country X. You state that you would like to live permanently in Australia in the future, however, at this stage it cannot be said that you reside here.

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 is a legal concept, determined according to the Domicile Act 1982 and common law rules established by private international law cases.

There are essentially 3 types of domicile that an individual can have:

· the domicile of origin

· the domicile of choice, and

· the domicile of dependency.

Basically, the domicile of origin is where the individual was born. 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. In relation to domicile of dependency, such a domicile will normally only exist in relation to minors or individuals who are of unsound mind.

Application to the facts of the case

Your domicile is Country X because you were born in Country X and you are a citizen of
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 place of abode is outside of Australia and they have no intention of taking up residence here.

Application to the facts of the case

You own your home in Country X and your family resides there. You return to this home between your periods of work in Australia. You have not established a usual place of abode in Australia. Your usual place of abode is in Country X.

Although you were physically present in Australia for more than 183 days in the income years in question, as discussed above, the Commissioner is satisfied that you have a usual place of abode in Country X and you have no firm intention of taking up residence in Australia at this time.

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.

Application to the facts of the case

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.