Ask Ban Tacs Question
Hi,
I am working on a yacht and have been for the past 5 years. I have been living abroad (from Australia) since 2010 (but spent two years in London – submitted a tax return there). I need some advice with handling my tax situation in Australia, could you help me with this?
The longest period of time that Ive been home for (during the last 7 years) is approximately 2 months per year (if that!). I am apart of a superannuation fund, however have not used it since I left Australia which I believe is the reason why I am still considered a tax paying citizen. In 2013 I worked at home for a month and have PAYG for these jobs, but have not submitted the tax return for that year… and need to do so…
However, what options do I have in relation to not paying tax for the years I have been working on yachts? I am constantly moving around from country to country and not bound to pay tax anywhere else and I am hardly home…? or do I not have strong case due to the super fund still tying me to Australia?
I do intend to move back home eventually but not within the next 3years, however I would like to buy a house in Australia soon, which also complicates things! I will be back in Sydney in October for 2 weeks, if a face to face meeting would be better..?
Thanks in advance.
Answer
Based on the information in your question, I would say, if you set up a home in London then you were probably a non-resident of Australia for tax purposes then but later being on a yacht means you didn’t have a country other than Australia where you could say you had an abode. That is the problem, you need to point to another country where you reside to avoid being considered a resident of Australia for tax purposes.
I will now give you references and further reading so that you can consider your circumstances in more detail than I know about.
The go to ruling on this is IT 2650
http://law.ato.gov.au/atolaw/view.htm?Docid=ITR/IT2650/NAT/ATO/00001
which is quite an old ruling now but still current. If anything cases since that ruling have only cast Australia’s net even wider.
The legislative definition of being a resident of Australia for tax purposes is
(a) a person, other than a company, who resides in Australia and includes a person:
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia;
(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person’s usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii) who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or
(B) an eligible employee for the purposes of the Superannuation Act 1976; or
(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and
Note all these points are linked by â€or†so any of them can catch you but (A) and (B) refer to people who are eligible members of a Commonwealth government superannuation fund. If your superannuation fund is just a public fund you won’t be caught there.
Now to the key point of having a permanent place of abode outside of Australia. The yacht doesn’t count. What happens when you are back here for 2 months a year and when you were working here? Is it always the same place ie your parents home? If so your parent’s home could be your only permanent abode simply because you have no other.
From IT 2650:
28. The fact that an individual has established his or her home (in the sense of a dwelling place; a house or other shelter that is the fixed residence of a person, family or household) in an overseas country would tend to show that the place of abode in the overseas country is permanent. Acquisition of a home in the overseas country would be a very relevant though not conclusive factor. On the other hand, individuals or a family group who "make do" in temporary accommodation with limited resources and facilities such as in barracks, singles’ quarters, aboard ships, oil rigs, or mining towns, will be less likely to be considered to have established a permanent place of abode overseas.
An interesting example from that ruling:
32. A person who had just completed tertiary studies decided to leave Australia for an unspecified period of time to work in one overseas country to gain work experience. Before leaving she closed all bank accounts except for a 5-year interest bearing deposit. She had no established home in Australia and no spouse or children in Australia. While she was forced to return to Australia within 18 months due to an illness, she was considered to be a non-resident as it was her original intention to remain outside Australia for an unspecified period of time and she was considered to have a permanent place of abode in the overseas country.
Result: non-resident.
The opposite conclusion would have been reached if she had intended to (and did) spend one year each in 2 countries and then had travelled for a further period of one year, making do in temporary or transitory accommodation in each country as she went. In that case she would not have a permanent place of abode in any of the overseas countries and would continue to be a resident of Australia.
Result: resident during the 3-year overseas stay.
Note how in the second example she has still but ties with Australia but simply because she didn’t set up home elsewhere she is caught.
Regarding buying a house in Australia, the benefits of being a resident then may outweigh the negatives. It would be wise to try to return to Australia, live here and work ie settle, when you first buy the home, so you can cover it with your main residence exemption, then you can leave for overseas again and continue to cover it with your main residence exemption, for at least 6 years, as long as you don’t die or sell while you are a non resident for tax purposes. Our Expats booklet will fill you in on the difficulties of owning an Australian property if you are considered a non-resident for tax purposes http://www.bantacs.com.au/booklets/Expats%20and%20Australian%20property%20booklet.pdf
