Edited version of your private ruling

Authorisation Number: 1012050324495

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Ruling

Subject: Residency

Question

Are you a resident of Australia for tax purposes?

No.

This ruling applies for the following periods

Year ended 30 June 2012

Year ended 30 June 2013

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on

1 July 20XX

Relevant facts

You are a country A citizen.

You arrived in Australia in early 20XX and departed in mid 20XX.

You work full time on a yacht in the Mediterranean.

Your employer is a country B resident.

Your employer does not have a permanent establishment in the foreign countries you undertake work, such that it will be subject to branch profits tax.

You work in the territorial waters of foreign countries.

You are employed in the territorial waters of country C from late 20XX - early 2012, from then onwards the yacht's itinerary is yet to be decided.

Your employment is sometimes undertaken within the 12 nautical mile zone of the foreign countries you will be working in.

Your employment is sometimes undertaken within the exclusive economic zone (EEZ) of the foreign countries which you will be working in. The counties have claimed a 200 nautical mile EEZ.

You will travel through international waters for a month from early 2012 and many other crossings between the foreign countries yet to be scheduled. The exact dates and itinerary are yet to be decided.

You intend to reside overseas permanently and do not intend returning to Australia to live.

You returned to Australia for a few days in late 20XX to visit friends on your way to country A

You live permanently aboard the yacht which you are employed to work and live on.

You have an offshore bank account which you monthly salary is paid into.

When you lived in Australia you lived in a share house.

You do not have a permanent place to live in Australia.

You have a bank account in Australia which does not have money paid into it now that you have left Australia.

You are employed under an indefinite contract on the yacht.

Your family have not accompanied you overseas and you do not have any dependants or a spouse.

Your parents live in country A.

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

You are not/have not been a Commonwealth Government of Australia employee.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1).

Income Tax Assessment Act 1997 Subsection 6-5(2).

Reasons for decision

Residency

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year.

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

· the superannuation 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.  If the primary test is satisfied the remaining three tests do not need to be considered as residency for Australian tax purposes has been established.

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'.

Taxation Ruling TR 98/17 considers the residency status of individuals entering Australia and states that the period of physical presence or length of time in Australia is not, by itself, decisive when determining whether an individual resides here. However, an individuals behaviour over the time spent in Australia may reflect a degree of continuity, routine or habit that is consistent with residing here.

You advised that:

· you lived in share accommodation in Australia from early 20XX and departed in mid 20XX;

· you do not have a permanent place to live in Australia;

· you returned to visit friends for a few days in late 20XX;

· you live and work on a yacht on an indefinite contract basis,

· you have an inactive bank account in Australia,

· your family live in country A, and

· you do not intend returning to Australia to live.

Based on this information you will not be residing in Australian r for the periods in question as your behaviour in Australia does not reflect a degree of continuity, routine or habit that is consistent with residing here.

The domicile test

If a person is considered to have their domicile in Australia they will be considered an Australian resident unless the Commissioner is satisfied they have a permanent place of abode outside of Australia.

You are not an Australian citizen and you have taken no steps to make Australia your domicile of choice.

As your domicile is outside of Australia you are not a resident for tax purposes under this test.

The 183-day test

This test does not apply to as you will not be in Australia for 183 days or more in any financial year in the period under consideration.

The superannuation test

An individual is still considered to be a resident if that person is eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS), or that person is the spouse or child under 16 of such a person. 

You will not be treated as a resident under this test as you are not a member of the PSS or the CSS, a spouse of such a person, or a child under 16 of such a person.

Summary

You will not be an Australian resident for tax purpose from your departure in mid 20XX.

Please note: you indicated in your application that the income you will earn while crewing on the yacht is not taxed, while it will not be taxed in Australia, it may be taxed in another country. It may be taxable in the other countries the yacht is located in or in whose territorial waters it is operating.