Private ruling: Residency
Published: September 2014
Ruling period: Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you a resident of Australia for tax purposes? | A1: Yes

Relevant facts and circumstances: Your country of origin is Australia and you are a citizen of Australia. You are leaving Australia to work on ships in international waters for an indefinite period. You accepted an employment agreement with a ship company. You will spend approximately nine months per year aboard ships. You will have your own self-contained cabin on board which is for your exclusive use. You are single with no dependants. When you are not on the ship you will spend your time holidaying in Australia and overseas destinations. You will keep your Australian bank account, superannuation fund, private health cover and you have some Australian shares and a motor vehicle garaged at your parents' house. You will remove your name from the Australian electoral roll.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 995-1(1) | Income Tax Assessment Act 1936 Subsection 6(1)

Reasons for decision: Detailed Reasoning - Residency: 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 . 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 (ordinary concepts test) • domicile and permanent place of abode test; • 183 day test; and • Commonwealth superannuation fund 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. Where it is determined that a taxpayer 'resides in Australia' in accordance with the first test, there is no requirement to consider the other tests. The other three tests operate to broaden the definition of resident beyond the resides test. | Detailed Reasoning - The resides (ordinary concepts) test: The outcomes of several Administrative Appeals Tribunal (AAT) cases have determined that the word ' resides' should be given the widest meaning and there have been a number of factors identified which can assist in determining if a particular taxpayer is a resident of Australia under this test. Recent case law decisions have considered the following factors in relation to whether the taxpayer was a resident under the 'resides' test: (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. It is important to note that not one single factor is decisive and the weight given to each factor depends on individual circumstances. (i) Physical presence in Australia A person does not necessarily cease to be a resident because he or she is physically absent from Australia. In relation to this the AAT has stated that: 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 involuntary, 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, together with an intention to return to that place and an attitude that the place remains home. You departed Australia to take up an employment position for a shipping company working on ships in international waters. You intend work aboard ships for an indefinite period. (ii) Nationality You are a citizen of Australia. (iii) History of residence You lived in Australia prior to accepting your employment agreement with the shipping company. (iv) Habits and "mode of life" The Commissioner regards a person's habits and daily routines in regard to their domestic and business arrangements as strongly indicative of residency status. This is particularly relevant to determining the residency of a person who enters Australia, but is also relevant in assisting to determine the residency status of a person who leaves Australia. You are moving away from Australia to work aboard ships for at least nine months per year. (v) Frequency, regularity and duration of visits to Australia You plan to visit Australia for short holiday visits when you are not working on ships. (vi) Purpose of visits to or absences from Australia You will return to Australia to visit family and friends. Summary - resides test As mentioned above, the weight given to each factor varies with individual circumstances, no single factor is necessarily decisive and the term 'reside' should be given a wide meaning. In your case, you left Australia to be employed aboard ships operating in international waters for an indefinite period of time. Accordingly, you are not a resident of Australia under the 'resides test'. | Detailed Reasoning - 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 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 ). In your case, as you are an Australian citizen your domicile remains Australia. Permanent place of abode 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 (paragraph 12 of IT 2650). 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. IT 2650 sets out a number of factors established by Court and Tribunal decisions which assist in determining a taxpayer's permanent place of abode: i. the intended and actual length of the taxpayer's stay in the overseas country; ii. 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; iii. 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; iv. whether any residence or place of abode exists in Australia or has been abandoned because of the overseas absence; v. the duration and continuity of the taxpayer's presence in the overseas country; and vi. 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 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. 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. If an individual establishes or acquired 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 consideration of the factors above, the Commissioner is not satisfied that you have a permanent place of abode outside of Australia based on the following: • Your accommodation while being employed on the ship is of a transitory or temporary nature • You have not established any associations with another country • You still have assets in Australia including a bank account, superannuation and a car 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. As you will be a resident under the 'domicile test' there is no need to consider the remaining two tests. | Detailed Reasoning - Your residency status: As you are a resident of Australia, according to section 6-5 of the ITAA 1997, 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 the foreign tax you paid overseas. Please refer to our website www.ato.gov.au for further information regarding foreign income tax offset.