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Ruling

Subject: Residency status

Question and answer:

Were you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following period:

Year ended 30 June 2011

Year ended 30 June 2012

The scheme commenced on:

1 July 2012

Relevant facts

You were born in Australia are a citizen of Australia.

You left Australia to work on vessels for an indefinite period.

You were single with no dependants at the time that you left Australia.

You gained an employment work contract.

The employment contract entailed you working aboard vessels.

For an extended period you served aboard vessels with contracts of varying lengths.

All the vessels that you served on were ported overseas with the exception of the one vessel which for a short period ported in Australia.

The nature of the contracts that you served were such that when the vessels arrived in port there was a short turn around before they set out to sea. During this period you generally remained aboard the vessel.

Your remuneration for the service that you provided was paid through an overseas banking institution.

During a break between contracts you returned to Australia for a holiday before accepting another contract.

During another break between contracts you travelled to countries T and S for a number of weeks followed by a brief stay in Australia before returning for your next contract.

During your service aboard vessels you had all your correspondence sent to the vessels that you served aboard.

When you returned to Australia you stayed with friends, siblings and family.

Your social and sporting ties in Australia consisted of family and friends.

Your overseas social and sporting ties consisted of colleagues that you befriended.

You did not have any assets in Australia or overseas.

You have never been an employee of the Commonwealth Government of Australia.

Your intention was to continue to work on vessels for a number of years however due to unforseen circumstances you were required to break a contract to return to Australia permanently.

Relevant legislative provisions

Income Tax Assessment Act 1997, Subsection 995-1(1).

Income Tax Assessment Act 1936, Subsection 6(1).

Reasons for decision

An Australian resident for tax purposes is defined in subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) to be a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936 (ITAA 1936).

The terms resident and resident of Australia, in regard to an individual, are defined in subsection 6(1) of the 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 first two tests are examined in detail in Taxation Ruling IT 2650: Residency - Permanent Place Of Abode Outside Australia.

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 satisfy the conditions of one of the other three tests.

The resides test

The first question to be asked in considering the residency status of a person is whether he or she can be considered to reside in Australia. If the test of residence according to ordinary concepts is satisfied, there is no need to apply any of the other tests. The person is a resident of Australia for income tax purposes.

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'.

In your case, you left Australia and had been employed aboard vessels operating in both Australian and particularly international waters for the majority of the years entailed in this ruling and not residing in Australia as per the definition above.

Accordingly, you are not a resident of Australia under the 'resides test'.

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.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. In order to show that an individual's domicile of choice has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country. From the information that you have provided, you did not demonstrate an intention to become a citizen or resident of any of the countries that you visited and were still a citizen of Australia. Therefore it is considered your Australian domicile remained unchanged.

The expression 'place of abode' refers to a person's residence, where they live with their family and sleep at night. In essence, a person's place of abode is that person's dwelling place or the physical surroundings in which a person lives.

A permanent place of abode does not have to be 'everlasting' or 'forever'. It does not mean an abode in which you intend to live for the rest your life.  An intention to return to Australia in the foreseeable future to live does not prevent you in the meantime setting up a permanent place of abode elsewhere.

Factors used in determining a taxpayer's permanent place of abode include:

· 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 return to Australia at some definite point in time;

· whether the taxpayer has established a home outside Australia;

· whether any residence or place of abode exists in Australia or has been abandoned because of 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.

If an individual with a usual place of abode in Australia has no fixed or habitual place of abode overseas but moves from one country to another, any association with a particular place overseas would be purely temporary or transitory and he or she would not be considered to have adopted an alternative domicile of choice or permanent place of abode outside Australia. In such a case, if the person could not be said to have acquired a domicile of choice or permanent place of abode outside Australia, the taxpayer would be considered to be a resident of Australia.

If an individual establishes or acquires a home in an overseas country, it would tend to show that the place of abode in the overseas country is permanent. However, individuals who utilise temporary accommodation with limited facilities, such as aboard ships, will be less likely to be considered to have established a permanent place of abode overseas.

In the income years included in this ruling, you served aboard vessels that operated in various national and international waters. When the vessels were docked at port, they docked for short periods of time. During these periods you remained on the vessel. In these circumstances, you did not have a fixed or habitual place of abode overseas, but rather moved from one place to another utilising temporary accommodation provided aboard the vessels that you served. Therefore, your association with any place overseas was temporary in nature and you are not considered to have adopted an alternative domicile of choice or permanent place of abode outside Australia. Furthermore during the breaks between employment contracts for the most part you returned to Australia to holiday.

As your domicile was in Australia and you had not established a permanent place of abode elsewhere, you remained a resident of Australia for income tax purposes.

As you were a resident under the 'domicile test' there is need to consider the remaining 2 tests.

Accordingly you were a resident of Australia under the 'domicile test' from the period that you work aboard vessels, under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.