Edited version of your written advice

Authorisation Number: 1051517011105

Date of advice: 14 May 2019

Ruling

Subject: Residency

Question 1

Did you cease to reside in Australia according to ordinary concepts on your departure from Australia?

Answer

Yes

Question 2

Have you changed your domicile from Australia to any other country?

Answer

No

Question 3

Is the Commissioner satisfied that you had a permanent place of abode outside Australia from early 20XX to the date in 20XY that you ceased living and working in country X?

Answer

Yes

Question 4

Is the Commissioner satisfied that you have had a permanent place of abode outside Australia since the date in 20XY that you ceased living and working in country X?

Answer

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

Year ended 30 June 2017

Year ended 30 June 2018

Year ending 30 June 2019

The scheme commences on:

1 July 2011

Relevant facts and circumstances

You are an Australian citizen and hold an Australian passport.

You departed Australia for country X to live and work.

At the time you left Australia, you intended to make your home indefinitely in country X.

After arriving in country X, you travelled to country Y to purchase a vessel.

You lived on the vessel while you were renovating it and later sailed it to country X.

The vessel was moored in country X and all your personal possessions were stored on board.

In early 20XX, you started working in country X.

You were employed on two different types of visas which allowed you to stay in country X for a specified period of time and the visas were not permanent visas.

You did not apply for a permanent resident visa in country X because you did not earn enough. A permanent resident visa has a minimum threshold and you did not meet the threshold.

You did not have a partner while you lived in country X.

You finished working in country X several years later.

You sailed your vessel throughout neighbouring countries for approximately a year.

Then you commenced working on a cruising vessel.

You commenced living on the vessel and had a cabin for your exclusive use.

You met your current partner on board the vessel and commenced sharing a cabin together on the vessel.

You store all your personal possessions in the cabin.

You have been engaged on the vessel 365 days a year and are required to take leave that will cause minimum disruption to the vessel’s operation. Therefore, you may only take leave when the vessel is in dry dock or is not being chartered

With the exception of when you take leave, you do not stay in any one port for longer than two or three days.

You enter and leave foreign ports using your seamen’s discharge book. The discharge book allows three month visas in most countries.

The discharge book is stamped in on arrival and stamped out with customs on departure.

Since originally leaving Australia, you have returned to Australia for periods of a maximum of six to ten days per year and have not returned to Australia at all in some years.

When you return to Australia, you tick the visitor’s box on the immigration card.

On your visits to Australia, you have stayed with your parents, friends and at hotels.

You do not own any assets or have any belongings in Australia.

You are not on the Australian electoral roll.

You do not hold a Medicare card.

You hold overseas medical insurance.

You still hold an Australian driver’s licence as this is necessary for you to drive overseas.

You have an Australian bank account and credit card which are rarely used.

You have a foreign bank account into which your wages are paid.

You are not eligible to contribute to the Public Service Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) and are not the spouse or child under 16 of such a person.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Domicile Act 1982

Reasons for decision

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 an individual 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.

Only one of the tests needs to be met for an individual to be considered to be a resident of Australia for tax purposes.

The resides 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.

In your case, you left Australia to work overseas indefinitely and have only returned here occasionally since then.

Therefore, we consider that you ceased to reside in Australia from when you left Australia.

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

‘Domicile’ is a legal concept determined according to the Domicile Act 1982 (Domicile Act) and common law rules.

A person’s domicile is usually their country of origin unless they acquire a different domicile of choice or operation of law. To obtain a different domicile of choice, a person must have the intention to make their home indefinitely in another country. The domicile of choice which a person has at any time continues until that person acquires a different domicile of choice.

Specifically, section 10 of the Domicile Act states:

The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country.

While section 12 of the Domicile Act states:

The acquisition of a domicile of choice in place of a domicile of origin may be established by evidence that would be sufficient to establish the domicile of choice if the previous domicile had also been a domicile of choice.

The Commissioner’s view on how a domicile of choice may be acquired can be found in Taxation Ruling IT 2650 Income Tax: Residency - permanent place of abode outside Australia, at paragraph 21:

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 e.g., through having obtained a migration visa. A working visa, even for a substantial period of time such as 2 years, would not be sufficient evidence of an intention to acquire a new domicile of choice.

The courts have provided guidance on the concept of domicile over the years. Although the recent case decided by the Full Federal Court of Australia, Harding v Commissioner of Taxation [2019] FCAFC 29 (Harding), did not have to determine the domicile of the taxpayer, the court restated some observations from earlier cases concerning evidence of an intention to change domicile:

30. ….In Terrassin v Terrassin (1968) 14 FLR 151, Selby J observed that a person alleging a change of domicile had to prove by “clear and cogent evidence that the change has taken place” (at 154-155). His Honour referred to the decision of Lord Curriehill in Donaldson v M’Clure (1857) 20 D. 307, where his Lordship said:

… it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges, and immunities which the law and constitution of the domicile confer on the denizens of the country,—in their domestic relations … in their purchases and sales and other business transactions … in their political or municipal status,—and in their daily affairs of common life; but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proved by satisfactory evidence.

36. ….As Lord Macnaghten observed once in Winans v Attorney-General [1904] AC 287 at 291:

Lord Chelmsford’s opinion [in Udny v Udny (1869) LR 1 HL, Sc 455] was that “in a competition between a domicil of origin and an alleged subsequently acquired domicil there may be circumstances to shew that however long a residence may have continued, no intention of acquiring a domicil may have existed at any one moment during the whole of the continuance of such residence. The question in such a case is not whether there is evidence of intention to retain the domicil of origin, but whether it is proved that there was an intention to acquire another domicil.”

As can be seen from the above, a stated intention to change domicile must be backed up by actual evidence of the change.

In your case, you were an Australian resident and citizen whose domicile was in Australia. You left Australia and worked in country X using visas which were valid for limited periods of time. You did not become a permanent resident or citizen of country X. Following a period of several years in country X, you sailed in your yacht for a period of time before commencing work on a cruising vessel which did not spend more than two or three days in any one port. You have a seamen’s discharge book which allows three month visas in most countries.

From the above, there is no evidence to prove that you changed your domicile from Australia to country X or to any other country.

Therefore, your domicile is still Australia.

Permanent place of abode

A person’s ‘permanent place of abode’ is a question of fact to be determined in the light of all the circumstances of each case. ‘Permanent’ does not mean everlasting or forever but it is to be distinguished from temporary or transitory.

In FC of T v Applegate (79 ATC 4307; (1979) 9 ATR 899), Fisher J described ‘permanent place of abode’ as being:

.....the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

In 15 CTBR Case 56 (Case 56), a seafarer was found to have a permanent place of abode on a vessel that spent its time sailing the seas and moving from country to country. The court in Subrahmanyam v FC of T [2002] AATA 1298 made reference to Case 56, at 28, as follows:

Mr Gibson considered the dictionary meanings given to "abode" and "place" and formed the view that, in one of its senses, a "place of abode" was a place of habitation or home. The ship was the taxpayer's place of abode because it was the place where he slept, ate, worked and had his recreation. It was immaterial where the ship was moored. It was his permanent place of abode because he was residing on it for an indefinite time and his presence was not merely fleeting. Mr Gibson also considered that the expression "place of abode" might be given a broader interpretation and that:

"… meaning may be a 'person's home or dwelling-house or other habitation or the village, town, city, district, county, country, or other part of the world in which a person has his home or dwelling-house or other habitation or in which he habitually resides'. In the broader of these senses the taxpayer's 'abode' at the material times was his ship or on his ship, and his place of abode was the particular part of the world where the ship happened to be at any given time. Even applying that sense it could, I think, be held that the tax-payer's permanent place of abode was outside Australia." (pages 425-426)

The Full Federal Court in Harding stated, at 41, that it favoured the construction of the phrase ‘permanent place of abode’ as used at first instance in Applegate v Commissioner of Taxation [1978] 1 NSWLR 126 at 134:

"place of abode" may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in

s. 6(1.) of the Act.

The Full Federal Court in Harding, at 40, summarised its thoughts on ‘permanent place of abode’ as follows:

● the word ‘place’ in the context of the phrase ‘outside Australia’ involves a consideration of the town or country in which a person is physically residing ‘permanently’;

● so long as the taxpayer has ‘definitely abandoned’ his or her residence in Australia, it is not necessary for the taxpayer to be permanently located at a particular house or flat in a particular town within a foreign country or for the person to live in one particular town, suburb or village within a given country;

● the word ‘place’ should accordingly be read as including a reference to a country or state;

● moving between foreign countries is not the same as being permanently in one country; and

● the words ‘permanent place’ require the identification of a country in which the taxpayer is living permanently.

Consequently, we consider that the Full Federal Court in Harding provides two key considerations in determining whether a taxpayer has their permanent place of abode outside Australia. These are:

(1) whether the taxpayer has definitely abandoned, in a permanent way, their Australian residence, and

(2) whether the taxpayer is living permanently in a specific country, rather than moving between foreign countries.

In your case, you left Australia and commenced living and working in country X in early 20XX. While in country X you lived in the yacht you owned at a marina. This period of your life continued to sometime in 20XY when you left country X to sail your yacht throughout neighbouring countries for a year.

Therefore, the Commissioner is satisfied that you had a permanent place of abode outside Australia, namely country X, during the period from early 20XX to the date you left that country in 20XY.

However, from the time you left country X in 20XY, it is evident that you have not spent a significant amount of time in any particular country. You initially lived on your own yacht for approximately a year travelling both between and within the territorial waters of countries before living and working on a cruising vessel as it sailed from place to place, again, between and within the territorial waters of various countries.

Consequently, in using the guidance in Harding, there is no specific country outside Australia that can be identified as being your ‘permanent place of abode’.

We acknowledge that the court in Harding did not need to consider the issue of permanent place of abode in respect of a person living on a boat and was silent on Case 56; however, the court clearly stated that the words ‘permanent place’ require the identification of a country in which the taxpayer is living permanently.

Therefore, the Commissioner is not satisfied that you have had a permanent place of abode outside Australia since the date in 20XY that you ceased living and working in country X.