A question that frequently arises is whether an Australian who is living and working on a yacht based in overseas waters is a non-resident and thus not liable to be taxed on wages received while working on the yacht.  Many yachties crewing overseas may consider they are non-residents.  But this may not be the case as the law in this area is very complex.

The principal test to be resolved is whether the yacht is the person’s residence and permanent place of abode.  This will depend on a number of factors which need to be balanced.  These include:

Physical presence in Australia – As a general principle, it is necessary that the taxpayer spends some time physically present in Australia during the year of income to be considered a resident under this test.  So, if you returned to Australia for visits this may weigh in favour of you being a resident.

Period of physical presence in Australia – To “reside” in Australia, a degree of continuity, routine or habit must be displayed.  If, over a period of six months, it can be shown on all of the facts and circumstances that an individual’s behaviours, are consistent with residing in Australia, they will likely be an Australian resident. An individual may still be a resident if they reside in Australia for less than six months

The history of the individual’s residence, including their movement between countries.

The quality and character of individual’s behaviour while in Australia.

Behavioural factors that may be considered include:

• intention or purpose of presence;
• family ties;
• social and living arrangements; and
• Maintenance and location of assets.

Determining whether an individual is a non-resident involves a very careful weighing of the above factors and a sound knowledge of applicable caselaw.

Message

If you are crewing on an overseas yacht you should obtain legal advice as to your liability to tax in Australia.  Waterhouse Lawyers has particular expertise in this area.