Edited version of private advice

Authorisation Number: 1052132816150

Date of advice: 26 July 2023

Ruling

Subject: Residency of Australia for taxation purposes

Question

Are you a resident of Australia for taxation purposes?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2023

The scheme commenced on:

1 July 2022

Relevant facts and circumstances

You were born in Australia.

You are a citizen of Australia.

You are not a citizen of any other country.

You are not a permanent resident of any other country.

You work outside Australia for several months of the year on a cruise ship.

You have a specific visa that allows you to work.

You live in accommodation in the cruise ship which is supplied by your employer. This accommodation is for your sole use and you are able to have friends and family stay with you.

You work for several weeks and then have a smaller period of time off.

You visit your family in Australia on your time off and also visit other places for holidays.

You have not cancelled your Australian health insurance.

You have not removed your name from Medicare.

You have removed your name from the Electoral roll.

You own a property in Australia which is currently being rented.

You receive rental income and interest in Australia.

You do not have a spouse.

You do not have any dependants.

You are not eligible to contribute to the PSS or the CSS Commonwealth super funds.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 6(1)

Income Tax Assessment Act 1997 section 995-1

Reasons for decision

Overview of the law

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', as applied 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 resides test (also referred to as the ordinary concepts test)

•                     the domicile test

•                     the 183-day test, and

•                     the Commonwealth superannuation fund test.

The resides test is the primary test for deciding the residency status of an individual. This test considers whether an individual resides in Australia according to the ordinary meaning of the word 'resides'.

Where an individual does not reside in Australia according to ordinary concepts, they will still be an Australian resident if they meet the conditions of one of the other tests (the domicile test, 183-day test and Commonwealth superannuation fund test).

Our interpretation of the law in respect of residency is set out in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals.

We have considered the statutory tests listed above in relation to your situation as follows:

The resides test

The ordinary meaning of the word 'reside' has been expressed as 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place': See Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99 per Latham CJ, citing Viscount Cave LC in Levene v Inland Revenue Commissioners [1928] AC 217 at 222, citing the Oxford English Dictionary. Likewise, the Macquarie Dictionary defines 'reside' as 'to dwell permanently or for a considerable time; have one's abode for a time'.

The observations contained in the case of Hafza v Director-General of Social Security (1985) 6 FCR 444 are also important:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248; and Keil v Keil [1947] VLR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place - Levene v Inland Revenue Commissioners [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 - together with an intention to return to that place and an attitude that that place remains "home": see Norman v Norman (No 3) (1969) 16 FLR 231 at 235... [W]here the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

The Commissioner considers the following factors in relation to whether a taxpayer is a resident under the 'resides' test:

•                     period of physical presence in Australia

•                     intention or purpose of presence

•                     behaviour while in Australia

•                     family and business/employment ties

•                     maintenance and location of assets

•                     social and living arrangements.

It is important to note that no one single factor is decisive, and the weight given to each factor depends on each individual's circumstances.

Because the ordinary concepts test is whether an individual resides in Australia, the factors focus on the individual's connection to Australia. Having a connection with another country, or being a resident of another country, does not diminish any connection to Australia: Logan J in Pike v Commissioner of Taxation [2019] FCA 2185 at 57 reminds us that 'it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. ... It is important that ... "resident" not be construed and applied as if there were such adjectival qualifications.' For this reason, the test is not about dominance or exclusivity.

Application to your situation

We have taken the following into consideration when determining whether you meet the resides test:

•                     You work outside of Australia on a cruise ship.

•                     You work outside of Australia for several months of the year.

•                     You work for several weeks and then have a smaller period of time off.

•                     When you are on your time off you return to Australia to see family and friends and you will take holidays in other parts of the world.

•                     You live in accommodation on the cruise ship supplied by your employer.

•                     You have a specific visa which allows you to work in international waters and when docking overseas.

You have not broken your continuity of association with Australia.

Although the cruise ship operates in international waters other than when docking for short periods of time, you did not have a fixed or habitual place of abode overseas but moved from one place to another. Thus, your association with any place overseas was temporary in nature.

Therefore, you are a resident of Australia for taxation purposes for the relevant income year.

Although the law only requires you to be considered a resident under one test, for completeness the other tests are also considered.

Domicile test

Under the domicile test, you are a resident of Australia if your domicile is in Australia unless the Commissioner is satisfied that your permanent place of abode is outside Australia.

Domicile

Whether your domicile is in Australia is determined by the Domicile Act 1982 and the common law rules on domicile.

Your domicile is your domicile of origin (usually the domicile of your father at the time of your birth) unless you have a domicile of dependence or have acquired a domicile of choice elsewhere. To acquire a domicile of choice of a particular country you must be lawfully present there and hold the positive intention to make that country your home indefinitely. Your domicile continues until you acquire a different domicile. Whether your domicile has changed depends on an objective consideration of all relevant facts.

Application to your situation

In your case, you were born in Australia and your domicile of origin is Australia.

You have not abandoned your domicile in Australia by acquiring a new domicile elsewhere in the world.

Your domicile is therefore Australia.

Permanent place of abode

If you have an Australian domicile, you are an Australian resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. This is a question of fact to be determined in light of all the facts and circumstances of each case.

'Permanent' does not mean everlasting or forever, but it is to be distinguished from temporary or transitory.

The phrase 'permanent place of abode' calls for a consideration of the physical surroundings in which you live, extending to a town or country. It does not extend to more than one country, or a region of the world.

The Full Federal Court in Harding v Commissioner of Taxation [2019] FCA 29 held at paragraphs 36 and 40 that key considerations in determining whether a taxpayer has their permanent place of abode outside Australia are:

•                     whether the taxpayer has definitely abandoned, in a permanent way, living in Australia

•                     whether the taxpayer is living in a town, city, region or country in a permanent way.

The Commissioner considers the following factors relevant to whether a taxpayer's permanent place of abode is outside Australia:

a)            the intended and actual length of the taxpayer's stay in the overseas country;

b)            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;

c)            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;

d)            whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence;

e)            the duration and continuity of the taxpayer's presence in the overseas country; and

f)             the durability of association that the person has with a particular place in Australia, i.e. maintaining assets 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.

Application to your situation

We have taken the following into consideration when deciding whether your permanent place of abode is outside Australia:

•                     you work outside Australia on a cruise ship

•                     you work for a number of weeks and then have a few weeks off

•                     you stay in accommodation on the cruise ship when you are working.

•                     You own a property in Australia which is currently being rented.

•                     you return to Australia when you are on your time off

•                     your family remains living 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 of 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.

Generally speaking, a taxpayer who leaves Australia with an intention of returning to Australia at the end of the transitory stay overseas would remain a resident for income tax purposes. As a general proposition, an overseas stay for a duration of less than two years would be considered as being of a transitory nature.

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 your case, you worked as a contractor for several months in the year.

In the income year you worked outside Australia on a cruise ship. In these circumstances, you did not have a fixed or habitual place of abode overseas but moved from one place to another.

Thus, 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. In addition, you have not established or acquired a home in an overseas country and have utilised temporary accommodation, being aboard a ship.

You return to Australia on a regular basis during your time off.

Therefore, you are not a resident of Australia under the domicile test.

183-day test

Where a person is present in Australia for 183 days or more during the year of income the person will be a resident, unless the Commissioner is satisfied that both:

•         the person's usual place of abode is outside Australia, and

•         the person does not intend to take up residence in Australia.

Application to your situation

You were not present for 183 days or more in the relevant income year.

Superannuation test

An individual is a resident of Australia if they are either a member of the superannuation scheme established by deed under the Superannuation Act 1990 or an eligible employee for the purposes of the Superannuation Act 1976, or they are the spouse, or the child under 16, of such a person.

Application to your situation

You are not a member on behalf of whom contributions are being made to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS) or a spouse of such a person, or a child under 16 of such a person.

Therefore, you are not a resident under this test.

Conclusion

You are a resident of Australia for taxation purposes for the relevant income year.