Edited version of private advice

Authorisation Number: 1051517389475

Date of advice: 23 May 2019

Ruling

Subject: Residency

Question

Are you a resident of Australia for income tax purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2018

The scheme commenced on:

1 July 2017

Relevant facts and circumstances

You were born in Australia.

You are a dual citizen of Australia and Country X.

You moved to Country X when you were very young. You grew up in Country X, and you lived there for most of your adult life. You completed your school education in Country X, and you were issued a Country X passport when you reached adult age.

Due to personal reasons you returned to your birthplace of Australia in mid 20XX, where you permanently abandoned Country X and you then re-established Australia as your permanent home Country. You moved back in with your parent at this time, and you added your name to the Australian electoral roll.

Following your return to Australia in mid 20XX you applied for employment, however this position did not end up generating sufficient income.

As such, in mid- 20XX you decided to recommence your previous vocation, and in late 20XX you travelled to another Continent (Continent X), which included a city in Country Y, to re-establish professional contacts and connections.

Following this trip you returned to Australia to pack up and leave for the same continent you previously visited. However this took longer than anticipated and you eventually left Australia some months later. You commenced working on a vessel (vessel 1) based in Country Y from mid 20XX to late 20XX.

You then visited Country Z, having entered that country on a Country Z visa from late 20XX to the end of 20XX.

After your visit to Country Z you returned to Australia to visit your parent (for a period of time between late 20XX and early 20XX). This period was the total amount of time you spent in Australia during the 20XX-XX financial year and was less than 183 days.

Next you returned to Country Y, and accepted a new permanent employment position on a different vessel (vessel 2), which cruises in the seas surrounding Continent X, in late 20XX.

You are currently still employed by the owners of vessel 2.

You live on board vessel 2 permanently.

You obtained a Seafarer's ID, which permits you to enter the countries on each vessel's itinerary, subject to certain conditions listed in article 6 of the Seafarers' Identity Documents Convention (revised), 2003 (No.185). The main purpose of the Seafarer's ID is to enable you to take temporary shore leave whilst the vessel is in port of each particular country. As such you are not required to obtain a visa for the countries you visit as part of each vessel's itinerary.

You have rented a room in a city of Country Y and you are able to live there for up to three months at a time on a 90 day Continent X Visa which is renewable every six months. Also, if you needed to live in Country Y for a period greater than three months, you can apply for a National Identity Card as your income is derived from work outside of Country Y, and due to the amount of salary you will be receiving from your employment on vessel 2, you would be able to apply for a "Non-lucrative Visa".

You do not intend on returning to Australia.

When you have visited your parent in Australia, you have stayed in the guest room in their property.

Whenever you return to Australia, you only ever intend on doing this as a visitor.

On your last incoming passenger card to Australia, you used your parent's Australian address, and you stated that you were a returning resident on holidays, with the purpose of visiting your Australian family for Christmas.

You have provided documentary evidence confirming that you are on the official crew list and therefore signed onto each vessel, which effectively suspends your 90 day Continent X visa which you originally obtained when you left for Country Y in mid 20XX.

The 90 day visa was not supplied by any of your overseas employers.

You have not been granted permanent residency by any other Country.

You have only spent a very short period in Country Y during the 2017-18 Australian financial year, as for the majority of the time you were living and working on each vessel.

Your work and livelihood is in Continent X for the foreseeable future.

Your parent informed the Australian Electoral Commission on your behalf that you have departed Australia.

You do not hold any Australian private health insurance cover.

In late 20XX you have lodged your Australian 20XX-XX financial year income tax return, where you have stated you are a resident of Australia for taxation purposes.

Accommodation

In late 20XX you commenced renting a room overseas in a city of Country Y. However you perform your employment duties and predominantly reside on vessel 2.

Despite this, you rent the room from your friend (the owner) in Country Y on a continual basis, however there is no formal rental agreement in place, and you pay your friend an agreed nominal amount of rent.

You also use this room to store your additional belongings as there is limited space on the type of vessels you work on for crew personal belongings.

Your overseas employers (on vessel 1 and vessel 2) have provided you with your own permanent berth in a shared cabin on board the vessel, which is owned by each of your overseas employers.

You have exclusive access to your berth in the shared cabin.

Prior to working on board vessel 1 and vessel 2 you lived with your parent in Australia.

Assets

You do not own any property in Australia.

You do not have an Australian bank account.

You will not make any investments in Australia whilst you are living and working overseas.

You do not own any household effects in Australia.

Your personal effects are stored away at your parents' house in Australia.

You do not receive any income from Australian sources.

You have a standard bank account held overseas.

You have not lodged any foreign income tax returns whilst you have been overseas.

You are not a tax resident of Country Y.

Family and social connections

You do not have a spouse or any children.

Your parent will remain in Australia whilst you are living and working overseas.

You will not maintain any professional, social or sporting connections with Australia.

You will not maintain any professional or occupational memberships in Australia.

When you spend time in Country Y, you will undertake some recreational activities.

You will not obtain any overseas qualifications.

Employment

You have been working on vessel 2 since early 20XX, which operates in seas surrounding Continent X, and the vessel's itinerary also includes Country Y, and other countries within Continent X. As such vessel 2 operates in International waters.

You are employed by a foreign company as a sea farer aboard the vessel 2 on a full time permanent basis (having signed a full time contract in early 20XX, which will expire a couple of years later). The foreign company operates a cruising vessel business.

Prior to that you also worked aboard vessel 1 from mid 20XX to late 20XX, where the itinerary was the same as that of vessel 1.

Both vessel 1 and vessel 2 are registered in an overseas territory.

You intend to continue living and working overseas for the foreseeable future.

You do not have a position or job being held for you in Australia.

You do not have a Commonwealth of Australia Superannuation Fund.

For the majority of the time each vessel is either underway or at anchor, which means that each vessel is not in a port or marina. The guests take a tender ashore and the crew (including you) remain on board the vessel.

As part of your employment, you are required to go ashore for short periods of time every few days depending on where each vessel is located at any given point in time, in order to obtain provisions.

You have provided a detailed log for the vessel 1. This confirms that from mid 20XX vessel 1 was located in a shipyard in Country XX for a few weeks. However, following this, the vessel moved around various places / Countries in Continent X as part of its itinerary, and it did not spend any greater than a few days at any given place.

You have also provided a detailed log for the vessel 2. This also confirms that vessel 2 also moved around various places / Countries of Continent X as part of its itinerary, and it did not spend any greater than a few days at any given place.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Detailed reasoning

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 offers four tests to ascertain whether each individual taxpayer is a resident of Australia for income tax purposes. These tests are the:

• the resides test,
• the domicile test,
• the 183 day test, and
• the superannuation test.

The primary test for deciding the residency status of each individual is whether they reside 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.

Where an individual does not reside in Australia according to ordinary concepts, they may still be considered to be an Australian resident if they meet the conditions of one of the other tests.

The resides (ordinary concepts) test

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'.

Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test:

• Physical presence in Australia
• Nationality
• History of residence and movements
• Habits and "mode of life"
• Frequency, regularity and duration of visits to Australia
• Purpose of visits to or absences from Australia
• Family and business ties to different countries
• Maintenance of place of abode.

These factors are similar to those which the Commissioner has said are relevant in determining the residency status of individuals in Taxation Ruling IT 2650 Residency - Permanent place of abode outside Australia and Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia.

It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances.

In your case:

• Whilst you will have a remaining connection with Australia through your parent, you do not have a permanent place of abode in Australia.
• You left Australia with no intention of returning to Australia, and you intend on remaining living and working in continent X for the foreseeable future.
• You spent just over a month in total in Australia during the 2017-18 financial year.

Based on these facts, you are not residing in Australia according to the ordinary meaning of the word. Therefore, you do not meet the 'resides test' and you are a non-resident of Australia for tax purposes under this test.

However, you will be an Australian resident if you meet the conditions of any of the remaining tests.

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 the place that is considered by law to be your permanent home. It is usually something more than a place of residence.

A person's domicile is generally their country of birth. This is known as a person's 'domicile of origin'. A person may acquire a domicile of choice in another country if they have the intention of making their home indefinitely in that country (section 10 of the Domicile Act 1982).

As such, in order to show that a new domicile of choice in a country outside Australia has been adopted, the person must be able prove an intention to make his or her home indefinitely in that country, and this intention needs to be demonstrated in a legal sense, for example, by way of obtaining a migration visa, becoming a permanent resident or becoming a citizen of the country concerned.

In your case, you were born in Australia, and then moved to Country X when you were very young. You then spent most of your adult life in Country X, where you also became a citizen of that Country. This meant that your domicile had changed from Australia to Country X.

However, you returned to Australia on a permanent basis in mid 20XX, having abandoned Country X and re-establishing Australia as your permanent home Country from that point onwards. As such, and in reference to section 10 of the Domicile Act 1982, as you have demonstrated that your intention was to make Australia your permanent home from mid 20XX, your Domicile of choice reverted back to Australia, as you had retained your Australian citizenship.

Since that time you have not taken any legal steps which would have proven an intention to change your Australian domicile to any other Country. As such you have therefore retained your Australian domicile.

Therefore, you will be a resident of Australia under this test unless the Commissioner considers you have established a permanent place of abode outside of Australia.

Permanent place of abode

It is clear from the case law that a person's permanent place of abode cannot be ascertained by the application of any hard and fast rules. It is a question of fact to be determined in the light of all the circumstances of each case.

The Courts have considered a person's 'place of abode' is where they consider 'home'. In R v Hammond (1982) ER 1477, Lord Campbell CJ stated that "a man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression."

A place of abode must exhibit the attributes of a place of residence or a place to live, as contrasted with the overnight, weekly or monthly accommodation of a traveller.

Paragraph 23 of IT 2650 sets out the following factors which are used by the Commissioner in reaching a state of satisfaction as to a taxpayer's permanent place of abode:

1. the intended and actual length of the taxpayer's stay in the overseas country;
2. whether the taxpayer intended to stay in the overseas country only temporarily and then to move on to another country or to return to Australia at some definite point in time;
3. whether the taxpayer has established a home (in the sense of dwelling place; a house or other shelter that is the fixed residence of a person, a family, or a household), outside Australia;
4. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;
5. the duration and continuity of the taxpayer's presence in the overseas country; and
6. the durability of association that the person has with a particular place in Australia, i.e. maintaining bank accounts in Australia, informing government departments such as the Department of Social Security that he or she is leaving permanently and that family allowance payments should be stopped, place of education of the taxpayer's children, family ties and so on.

As with the factors under the resides test, no one single factor is decisive and the weight given to each factor depends on the individual circumstances.

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. This would also include situations where an individual lives and works on a cruising yacht. 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.

This concept was further explored in Harding v Commissioner of Taxation (2019) FCAFC 29 (Harding), where Davies and Stewart JJ stated at paragraph 40 that in reference to the term "permanent place of abode", the word "place" should accordingly be read as only including a reference to a particular country or state.

Further, the Full Court found in Harding at paragraphs 36 and 40 that "permanent place of abode outside Australia" involves two considerations as follows:

1. Whether a 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 consideration of the factors above, despite the fact that you will not be maintaining any Australian residence whilst you are overseas, the Commissioner is not satisfied that you have a permanent place of abode outside of Australia based on the following:

• Your accommodation whilst being employed on each vessel is of a transitory nature.
• You will be living permanently on board vessel 2, which will be moving between countries as part of its itinerary, and only spends short amounts of time in each country.
• Whilst you have secured a room in Country Y to rent on a permanent basis, where you will be storing some of your personal belongings, you only intend on living in Country Y for short periods, as your intention is to remain living and working on board vessel 2 for the vast majority of the time.
• You only spent a very short amount of time in Country Y during the 2017-18 financial year.
• You have not established any associations with another country.
• Whilst you have applied for a three month Continent X visa, you have not obtained or applied for permanent residency in any other overseas country.
• You are not a tax resident of Country Y.
• You have not lodged any foreign income tax returns whilst you have been overseas.

Therefore, as your domicile is Australia and the Commissioner is not satisfied that you have established a permanent place of abode outside of Australia, you are a resident of Australia under the domicile test of residency.

Your residency status

The Commissioner considers that you were a resident under the 'domicile test' there is no need to consider the remaining two tests, and you are a resident of Australia for income tax purposes under subsection 6(1) of the ITAA 1936.

As you are a resident of Australia, section 6-5 of the ITAA 1997 provides that your assessable income includes income gained from all sources, whether in or out of Australia.

You may, however, be entitled to a foreign income tax offset for any foreign tax you pay overseas. Please refer to the guide to foreign income tax offset rules 2018 for further information, which can be found our website ato.gov.au by searching for "QC55222".