Edited version of your written advice

Authorisation Number: 1012882366538

Date of advice: 24 September 2015

Ruling

Subject: Residency and Medicare levy

Questions and answers:

1. Are you a resident of Australia for taxation purposes for the period 1 July 20XX to 30 June 20YY?

No.

2. Are you liable to pay the Medicare levy for the period 1 July 20XX to 30 June 20YY?

No.

This ruling applies for the following period:

1 July 20XX to 30 June 20YY.

The scheme commenced on:

1 July 20XX.

Relevant facts and circumstances:

You are a foreign citizen.

You own a home in another country.

You do not have any assets in Australia.

You work on an oil rig in Australian waters.

You work on a one month on, one month off basis.

The nature of your one month on, one month off arrangement is that you typically spend 183 days in Australia during a financial year.

During your month on you live on the oil rig.

During your month off you return to your country and live in your home.

You have no intention of living in Australia.

You have never been employed by the Commonwealth of Australia.

When your current employment contract ceases you are likely to go elsewhere in the world to work.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 995-1(1).

Income Tax Assessment Act 1936 Section 6(1).

Income Tax Assessment Act 1936 Part VIIB.

Income Tax Assessment Act 1936 Section 251T.

Income Tax Assessment Act 1936 Paragraph 251U(1)(d).

Medicare Levy Act 1986 Section 9.

Reasons for decision

Residency for taxation purposes

Section 995-1 of the Income tax Assessment Act 1997 (ITAA 1997) defines an Australian resident for tax purposes as 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. The tests are:

• the resides test,

• the domicile test,

• the 183 day test, and

• the superannuation test.

If any one of these tests is met, an individual will be a resident of Australia for taxation purposes.

The resides test

The resides test considers whether an individual is residing in Australia according to the ordinary meaning of the word 'reside'. As the word 'reside' is not defined in Australian taxation law, it takes it's ordinary meaning for the purposes of subsection 6(1) of the ITAA 1936.

In Dempsey and Commissioner of Taxation [2014] AATA 335 (29 May 2014) the Administrative Appeals Tribunal noted that the settled position of the courts (at ultimate appellant level) as to the meaning of the word resides in the ITAA 1936 is that the word:

bears its ordinary English meaning, which 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".

Based on the facts of your case, it cannot be said that you are residing in Australia according to the ordinary meaning of the word 'resides' and you will not be a resident of Australia under this test for the period in question.

The domicile test

Under this test, a person whose domicile is in Australia will be considered a resident of Australia for taxation purposes; unless the Commissioner is satisfied the person's permanent place of abode is outside Australia.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person's domicile of origin will not usually change, but can in some circumstances. For example, a person can acquire a domicile in another country by choice.

In order to acquire a new domicile by choice, a person must have an intention to make their home indefinitely in a country outside their domicile of origin. Sufficient proof of such an intention is considered to exist in cases where a person is granted permanent residency, or becomes a citizen of a country outside of their domicile of origin.

Based on the facts you have provided it cannot be said you have an Australian domicile. Accordingly, you will not be a resident of Australia under this test for the period concerned and there is no need to consider where your permanent place of abode is; however, we will do so for the sake of completeness.

Taxation Ruling IT 2650 - Income tax: residency - permanent place of abode outside Australia specifies that a 'permanent place of abode' does not have to be everlasting or forever and does not mean an abode in which a person intends to live for the rest of their lives. In essence, Taxation Ruling IT 2650, specifies that a person's place of abode is where they live and is a question of fact to be determined in the light of all the factors a particular case

Based on the facts you have provided, we consider your permanent place of abode is in a foreign country.

The 183-day test

Under this test, a person who is in Australia for 183 days (not necessarily consecutively) during an income year may be considered a resident of Australia for taxation purposes, unless the Commissioner is satisfied the person's usual place of abode is outside Australia and the person does not intend to take up residence in Australia.

You typically spend 183 days in Australia each year because of your one month on, one month off roster. However, your usual place of abode is in a foreign country and you do not intend to take up residence in Australia. Accordingly, this test will not operate to make you a resident of Australia between 1 July 20XX and 30 June 20YY.

The superannuation test

Based on the facts you have provided, the Commonwealth superannuation test does not apply to you.

Conclusion - your residency status

Based on the facts you have provided, you will not satisfy any of the tests of residency for taxation purposes between 1 July 20XX and 30 June 20YY and will not be a resident of Australia for taxation purposes during that period.

Medicare levy and residency for Medicare levy purposes

The imposition and collection of the Medicare levy is governed by Part VIIB of the ITAA 1936, and the Medicare Levy Act 1986 (MLA 1986).

Broadly speaking:

• Section 251S of the ITAA 1936 provides that the Medicare levy is payable by an individual who is a resident of Australia at any time during the income year.

• An exemption from the levy is available to individuals who are 'prescribed persons' (Section 251T of the ITAA 1936).

• The exemption for a 'prescribed person' is available:

• for the whole of an income year if the individual was a 'prescribed person' for the whole of the year (Section 251T of the ITAA 1936), or

• for that part of the year a person qualifies as a 'prescribed person' (Section 251U of the ITAA 1936 and section 9 of the MLA 1986).

Paragraph 251U(1)(d) of the ITAA 1936 provides that a person who is a non-resident is a 'prescribed person' for the purposes of the Medicare levy.

Taxation Ruling IT 2615 - Income Tax: Medicare Levy notes the expression 'resident of Australia' in paragraph 251S(1)(a) of the ITAA 1936 has the same meaning contained in the definition of that expression in subsection 6(1) of the ITAA 1936. Therefore, if an individual is found to be a resident of Australia for taxation purposes under any of the tests prescribed by section 6(1) of the ITAA 1936 (as discussed above) they will be liable for the Medicare levy. Individuals found to be non-residents for taxation purposes will not be liable for the Medicare levy.

As we have determined you will be a non-resident of Australia for taxation purposes between
1 July 20XX and 30 June 20YY, you will also qualify as a prescribed person for the purposes of the Medicare levy during that time and will be exempt from liability for the Medicare levy during that period.

Conclusion

You are a non-resident of Australia for the period 1 July 20XX to 30 June 20YY. As such, you are a prescribed person for that period for the purposes of the Medicare levy and are not liable to pay the Medicare levy during that time.