On 2 November 2022, the Administrative Appeals Tribunal handed down a decision in relation to a case Duff and Commissioner of Taxation (Taxation)  AATA 3675 (2 November 2022). Duff, an Australian, who was employed as a chef on a cruise ship.
The Case and the Facts
For the 2016 year Duff submitted a return not necessary advice with the ATO. He did this on the basis that he was a non-resident and was not required to lodge a tax return. The ATO ignored the return not necessary form and instead issued a default assessment which sought to tax Duff on all of the income that he earned while working on the cruise ship.
The commissioner of taxation (the ATO) argued that the taxpayer was an Australian tax resident under the domicile test. The domicile test says that, a taxpayer is a resident of Australia if their domicile is Australia, unless the Commissioner of taxation is satisfied that they have a permanent place of abode outside of Australia.
In this case the taxpayer was required to argue that he was not a resident of Australia under the domicile test. To be successful he would need to demonstrate:
- he changed his domicile to a country outside of Australia, or
- he had a permanent place of abode outside of Australia.
Mr Duff claimed that as he lived and worked on a Norwegian flagged ship he became a domicile of that flag. He argued that his domicile of choice was Norway and replaced his Australian domicile.
Mr Duff then argued that the ship was his permanent place of abode.
The judge found that he was unable to adequately demonstrate that Norway was his domicile of choice.
He was also unsuccessful with this argument that the cruise ship was his permanent place of abode because it has been established in other cases that the place of abode requires a single country.
Mr Duff was unsuccessful in his arguments and was found to be a resident of Australia for tax purposes. He will be assessed on the income he earnt while working on the ship.
What does this mean for you?
For Australian’s who are living and working in the maritime industry this case highlights the tax challenges. At the same time it provides clarity on how the domicile test is to be applied.
Whether you are already working in the maritime industry and have concerns about how you have prepared your return in the past or if you are planning to work in the industry, contact our team to discuss the tax implications for you.