Edited version of private advice

Authorisation Number: 1051563301169

Date of advice: 27 August 2019

Ruling

Subject: Residency for tax purposes

Question 1

Is the Commissioner satisfied that you have had a permanent place of abode outside Australia since early 20XY?

Answer

No

Question 2

Are you a resident of Australia for tax purposes?

Answer

Yes

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You left Australia with the intention of living and working overseas for an indefinite period of time.

You have no intention of returning to Australia to live.

You left Australia on a two year Country X visa.

Prior to leaving Australia you ended their rental property lease, resigned from your job and sold or donated all your belongings, including your car.

You have a partner you first met in 20XX.

You and your partner are professional sailors and spend most of the year working on private motor yachts. You have worked on the same vessels together since 20XX.

The vessels you worked on have visited various overseas destinations.

Your partner is from Country X.

You occupy a room with your partner in the residence of your partner's parents in a city in Country X and this arrangement commenced in 20XY. You use this address as your mailing address and you intend to live there with your partner indefinitely.

On the employment agreement for the current vessel you work on, you used your parents' address in Australia as this address was for 'next of kin' address purposes.

You and your partner leave all of your belongings in the Country X dwelling.

You have a bank account in Country X.

You were going to apply for a Country X spouse visa; however, had to place this on hold as one of the visa requirements was that you had to stay in Country X full time. However, this was not possible due to your working arrangements.

You have no assets in Country X apart from personal belongings and have no assets in Australia.

You have been lodging income tax returns in Country X but are unsure of what your residency status for Country X tax purposes is.

You advised the Australian Electoral Commission that you had left Australia.

When not working, you have spent your time in Country X, holidaying in various overseas destinations and visiting Australia.

You have stayed in the dwelling in Country X on various occasions during the period of the ruling.

You have visited Australia several times since you originally left. The purpose of each trip was a mixture of holiday and seeing family and friends.

Your partner has also travelled to Australia to meet your family and friends.

When completing Australian immigration incoming passenger cards, you have stated that you are visiting family and friends.

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

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6(1)

Income Tax Assessment Act 1997 Section 6-5

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

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.

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'.

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

Therefore, you ceased to reside in Australia from the time you left and are not a resident under the resides test of residency.

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 and this intention must be proven in a legal sense. The domicile of choice which a person has at any time continues until that person acquires a different 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 (IT 2650), 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.

In your case, although you intended to live in Country X indefinitely (when not away working), you have not obtained a Country X visa that allows you to stay permanently in that country nor have you been granted citizenship, for example.

Therefore, you have not proven an intention to change your domicile to Country X and your domicile is still 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:

(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 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.

One of the leading cases on whether a permanent place of abode is outside Australia is FC of T v Applegate (79 ATC 4307; (1979) 9 ATR 899) (Applegate). Referring to this case, paragraph 14 of IT 2650 states that:

The Federal Court also found that the taxpayer's intention regarding the duration of his stay overseas was only one relevant factor to be taken into account. Of more importance is the nature and quality of use which the taxpayer makes of a particular place of abode overseas.

Further, in paragraph 15 of IT 2650, it is explained that the court in Applegate 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 early 20XY, you first commenced occupying a room in the Country X dwelling of your partners' parents. You spent various periods of short duration at the dwelling. However, during this period you spent the majority of your time working on a commercial vessel in international waters which travelled from port to port.

Although you have a right to occupy a dwelling with your partner that is clearly a 'place of abode', you do not have a strong attachment to the dwelling by way of, for example, having a legal interest in the dwelling, a financial interest in the dwelling or carrying out your day to day activities from the dwelling.

In looking at some of the relevant factors for consideration as established by the court in Applegate, and summarised in IT 2650 (above), it is considered that your presence in Country X has not shown a sufficient degree of continuity, your visits have been of short duration and there is limited evidence of you having a durable association with the Country X dwelling, or Country X itself.

Although you left Australia some years ago to live and work overseas indefinitely, the Commissioner is not satisfied that you have established a permanent place of abode outside Australia.

As your domicile remains in Australia, you are a resident of Australian under the domicile test of residency.

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