Edited version of private advice

Authorisation Number: 1012654491008

Ruling

Subject: Residency

Question and answer:

Are you a resident of Australia for income tax purposes?

Yes.

This ruling applies for the following periods:

Year ending 30 June 2014

The scheme commences on:

The scheme has commenced.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You were born in Australia and are a citizen of Australia.

You are single with no dependants.

You accepted an employment position on a passenger seas vessel.

Your employer is based in overseas.

You departed Australia to commenced employment aboard the vessel.

You arrived in country Z on a visa that allows you to transit through country Z or stay in country Z during normal operation of your ship/employment.

You are employed aboard the vessel as a fulltime permanent.

As a result of your employment you live and work on the vessel fulltime.

While on board the vessel you are assigned a cabin that will be your home and which you will occupy for the duration of your employment.

Prior to departing Australia you lived in a rented apartment which you moved out of to commence your employment overseas.

You have not returned to Australia since your departure.

You do not have sporting or social ties in either Australia or overseas.

Your overseas assets consist of a bank account that your employment income is deposited.

Your assets in Australia consist of bank accounts, credit cards, superannuation and a parcel of shares that you derive a minimal amount of dividend income. You are considering disposing of these shares.

Prior to leaving Australia you disposed of your motor vehicle and donated your household items to charity.

You have not lodged an income tax return in any jurisdiction.

You are yet to inform the Australian Electoral Office to have your name removed from the electoral role and Medicare to suspend your membership.

You have had your private health insurance temporarily suspended as your employer provides you with medical cover. You are considering cancelling your private health insurance as it is no longer needed.

You are yet to advise any financial institutions to have non-resident withholding tax deducted.

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

You intend continuing to work outside Australia for the foreseeable future.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 995-1

Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision

Residency

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 NO. IT 2650 INCOME TAX: 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 a resident of Australia for tax purposes if they satisfy the conditions of one of the other three tests.

The resides test

In FC of T v Miller (1946) 73 CLR 93 at page 99-100 and Subrahmanyam v FC Of T [2002] AATA 1298; 2002 ATC 2303; (2002) 51 ATR 1173 at paragraph 43-44, it was determined that the word 'resides' should be given the widest meaning.

Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia, identifies a number of factors which assist in determining the residency status of a taxpayer. Although Tax Ruling TR 98/17, discusses the Commissioners view on the residency status of individuals entering Australia, the same principles can be applied to determine whether individuals leaving Australia remained residents of Australia for income tax purposes.

According to paragraph 20 of TR 98/17 factors to be considered in determining residency in Australia are:

•  intention or purpose of presence;

•  family and business/employment ties;

• maintenance and location of assets; and

•  social and living arrangements.

Paragraph 21 of TR 98/17 further states that:

No single factor is necessarily decisive and many are interrelated. The weight given to each factor varies depending on individual circumstances.

Recent case law decisions have expanded on the list of factors identified in TR 98/17.  Case 5/2013 and Sneddon v FC of T (Sneddons Case), for example, considered the following factors in relation to whether the taxpayer resided in Australia:

(i) Physical presence in Australia

(ii) Nationality

(iii) History of residence and movements

(iv) Habits and "mode of life"

(v) Frequency, regularity and duration of visits to Australia

(vi) Purpose of visits to or absences from Australia

(vii) Family and business ties to different countries

(viii) Maintenance of Place of abode.^[4]  

Each of these factors will be considered in turn, with reference, where relevant, to recent Australian case law decisions in which the taxpayer was determined to be a resident of Australia in accordance with subsection 6(1).

Physical presence in Australia

A person does not necessarily cease to be a resident of a particular place just because he or she is physically absent. The test is whether the person has retained a continuity of association with the place, together with an intention to return to that place and an attitude that the place remains home (Joachim v Federal Commissioner of Taxation 2002 ATC 2088, at 2090).

In recent court cases taxpayers were found to be residents of Australia for income tax purposes even though they had only spent a minimal period in Australia.

In your case, since your departure you have not return to Australia and intend to live overseas indefinitely.

Nationality

In recent cases, it was noted that in most cases, the nationality of a person would not be a factor to be taken into account along with other circumstances in determining where his or her residence is. However, in cases that could go either way, the citizenship of a person may not be completely irrelevant in the conclusion to be drawn from all the relevant facts.

In your case, you were born in Australia and are a citizen of Australia.

History of residence and movements

In recent cases the Tribunal noted that both past and subsequent history of a person's residence may be relevant in determining whether that person is ordinarily a resident (for taxation purposes) in a country in a particular income year.

Our records indicate that prior departing Australia you were a resident of Australia for income tax purposes.

(iv) Habits and "mode of life"

In recent cases a taxpayer's habits and mode of life in the country where they are/had been living were considered when determining whether a taxpayer continued to be a residence of Australia for income tax purposes.

In Sneddon's Case, the taxpayer who was found by the court to be a resident of Australia for tax purposes lived in a fully-furnished apartment leased by his overseas employer. The taxpayer's only expenses were his everyday living expenses and some furniture and household items that he purchased to make the fully-furnished apartment, provided by his employer more comfortable.

While employed overseas you live on board a vessel in a cabin provided by your employer.

(v) Frequency, regularity and duration of visits to Australia

In Lysaght v Inland Revenue Commissioners (1928) 13 TC 511 (Lysaght's Case) the Court noted that mere fact that visits to a country are of short duration does not of itself exclude residence in that country.

As previously noted, since your departure from Australia you have not returned to Australia.

(vi)  Purpose of visits to or absences from Australia

In recent cases the purpose of the taxpayer's visits to or absences from Australia were considered a factor when determining a taxpayer's residency status.

In considering the purpose of your absence from Australia is for employment.

(vii) Family, assets, business ties to Australia and the overseas country or countries

In recent case's including Sneddon's case the courts have looked at the strength of the taxpayer's ties in terms of family, assets and business between Australia and the country that a taxpayer was living as a factor when determining their residency status.

Family

You are single with no dependants.

Business or economic

As discussed above, you accepted an employment assignment overseas for an indefinite period.

Assets

You do not have any substantial assets in Australia or overseas.

Maintenance of Place of abode

You do not have a home in Australia.

Conclusion

In consideration of all of the factors outlined above, it is concluded that you have ceased to be a resident of Australia for income tax purposes 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.  In your case you were born in the Australia, therefore your domicile of origin is Australia. From the information that you have provided and the nature of your employment you will not become a citizen or resident of any of the countries that you have/will visit. Therefore your Australian domicile remains 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.

In Sully v. Federal Commissioner of Taxation (2012 ATC 10-272), the taxpayer who was a marine engineer, worked on ocean-going vessels in other parts of world. The taxpayer contended that they were a non-resident for income tax purposes, however they were found to be a resident of Australia for income tax purposes under the Domicile test. When considering whether the taxpayer had established a home outside of Australia, it was indicated by the court that there is a requirement that a connection be established with a country, and that ocean-going vessels are not countries. Further in this case it was considered that the taxpayer had not established a home indefinitely out of Australia as they had lived and worked on sea vessels, and that as a result there was no indication that they had established any connection with any country.

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.

For the income years included in this ruling you will serve on board a sea vessel that will be on a voyage/s in international waters. In these circumstances, you will not have a fixed or habitual place of abode overseas, but rather move from one place to another utilising accommodation provided aboard the vessel that you serve. Therefore, your association with any place overseas is temporary in nature and you are not considered to be adopting an alternative domicile of choice or permanent place of abode outside Australia.

As you have an Australian domicile and you will not establish a permanent place of abode elsewhere, you will remain a resident of Australia for income tax purposes.

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

Accordingly you are a resident of Australia under the 'domicile test' for the 2013-14 income year under subsection 6(1) of the ITAA 1936 and subsection 995-1(1) of the ITAA 1997.