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Attn: Aussies & Kiwis
Kgh2378
Posted: Wednesday, September 7, 2016 1:22 PM
Joined: 06/09/2016
Posts: 4


Hi all,

I'm a Australian Offshore Seafarer, and as most likely already know the offshore industry is dead at the moment. 

I was speaking to a former colleague who suggested I join him in the Yacht Industry, only problem he is British and gets all his Tax back at the end of the year so at the end of the day the amount of money going to his pocket is not much less than the Offshore Industry. If I was to follow him into the industry being an Australian citizen I would be liable for Australian Tax leaving my pockets significantly lighter. 

Any Aussies or Kiwis still working in the Industry? If so is it still worth your while as a money earner or just a bit of adventure?


Pete Brooke
Posted: Wednesday, September 7, 2016 1:42 PM
Joined: 01/12/2008
Posts: 62


Hi - I tend to believe that most Australians I meet and advise dont fully understand this and assume that they are clear of the ATO when they physically leave. Here is an article that we wrote for Dockwalk back in December last year, you can find it in the DW archive: 

Demystifying Australian tax residency. 

There are many Australian crew in the yachting industry and I believe many believe they are genuinely non resident of Australia when this may not be the case. For this reason I asked Patrick Maflin of Marine Accounts, the Horizons tax experts, to help demystify this subject.  Remember all tax residency concepts in all jurisdictions are based on FACT not CHOICE.  

The laws for Australian Tax Residency are subjective and require interpretation though they mainly constitute two groups of tests:  

  1. Primary or ‘Ordinary Concepts’ test of residence 

AND  

  1. One of three statutory residence tests (SRT); Domicile Permanent Place of Abode Test, The 183 Day Test, Commonwealth Superannuation Fund Test 

Ordinary Concepts 

Residence is quite different from domicile, nationality and citizenship. You may be deemed resident in Australia, even though living abroad if you visit on a regular basis or maintain a family home there. Residency is further examined in the context of “behaviour over a considerable time” (eg 6 months) that displays a degree of continuity, such as:  

Intention or purpose of presence in Australia 

The extent of family or business/employment ties.  

The maintenance & location of assets 

Social & living arrangements 

Domicile/Permanent Place of Abode Test 

Domicile is a complex concept of general law, but is usually the country your father considered his permanent home when you were born. If you are domiciled in Australia you are deemed to also be resident unless the ATO is satisfied that you have taken a new permanent place of abode outside Australia.  

Uncertainty therefore comes from whether a yacht can constitute a permanent place of abode. Taxation ruling (IT 2650) states that this is unlikely to be satisfactory.  

The 183 Day Test 

Please note that if a person spends more than 183 days outside of Australia this will not necessarily mean that they are non-resident. 

Commonwealth Superannuation Fund Test 

You are resident under the 3rd statutory test if you are contributing to the superannuation fund for Commonwealth government officers.  

Australia has one of the hardest residency schemes of any G20 member state. It is very difficult to establish non-residence without obtaining a ruling from the ATO.  

It is clearly very hard to apply hard and fast rules, however it is possible to minimise the chance of being considered resident in Australia. The most obvious route is to spend less than 183 days a year in Australia and not be part of a government superannuation scheme but the unpredictable nature of yacht crew lifestyles minimises the chance of not falling foul of the ordinary concepts rule but efforts can be made not to establish behavioural patterns over considerable time.  

The Domicile/Permanent Place of Abode Test is the most common rule that yacht crew are deemed to be resident under. It is very hard for an individual working on a yacht to establish the necessary degree of permanence to prevent this rule coming into effect.  

If you have concerns regarding your residency status we would advise that you consult with an accountancy firm who specialise in residency. We at www.my-horizons.com has access to the Marine Accounts residency apps to assist with determining your residency status.  


Kgh2378
Posted: Wednesday, September 7, 2016 9:45 PM
Joined: 06/09/2016
Posts: 4


Hi Pete, 

Thanks for your reply, I am well aware of the ATO's intention to chase me and others to the end of the earth for our tax money.

I'm just wondering if the current crop of Australian & NZ yachties have gone through the painful process you've described to achieve tax free status or are just chancing it.


Pete Brooke
Posted: Thursday, September 8, 2016 11:24 AM
Joined: 01/12/2008
Posts: 62


Hi again.... yes I think it would be interesting to get real life stories from people in the Industry. In my experience many Aussie crew I meet are not really aware of all of this or how (if it is at all possible) to become 'non-resident'. 

hopefully there will be some responses to this post from crew who are 'doing it all properly'. 

Pete


Anonymous
Posted: Friday, September 9, 2016 8:01 PM

"I'm just wondering if the current crop of Australian & NZ yachties have gone through the painful process you've described to achieve tax free status or are just chancing it."

I am currently beginning this process. I wouldn't say it is painful but expensive maybe. I have shopped around for different qoutes from different accountants to prepare tax returns and get private rulings from the ATO. These accountants are australian based and registered as chartered accountants in Australia and specialise in expat tax. Also I think the private ruling thing is a bit of a gamble really. If succesfully ruled as a non resident for tax then great. If ruled as still being a resident you are liable for back taxes leading up to that ruling and future unless you can change things. Then I guess you would have to way up the pros and cons of yachting and whether it is worth it for a near average wage depending what your position is I guess.

For me I don't really visit Australia that often and have severed things pretty well and am looking at buying property and getting married overseas.

If I were still returning to Australia on holidays and had other ties I wouldn't bother doing a private ruling as it would likely fail.

I have asked a few aussie crew and some are blissfully ignorant to this while others seem to have there own unique circumstances and ways around it that wouldn't necessarily work for everyone.



Andy1234
Posted: Saturday, September 10, 2016 1:18 AM
Joined: 03/11/2013
Posts: 2


I spent about 8 years in yachting before moving back to Australia to move into commercial shipping. I sought advice from accountants in regards to my tax status in Australia. 

I did not own any property in Australia, a non resident without any ties and spent only a month a year back in Australia. 

However according to the ATO if you don't pay tax in Australia you have to pay it somewhere else and most people try France because they have low personal tax brackets. 

I went through every option with many Accountants and it did cost a fortune. Unlucky for me the ATO sent me a bill for well over $50k. Any payment from overseas was considered foreign sourced income and subject to tax. You can argue with the ATO but you will get nowhere fast and considering they only looked back 3 years in some ways I was lucky. 

Yachting is great but keep your money offshore and bring it back in cash form. Remember also that you are not getting any superannuation in your pay as well. 

 


Andy1234
Posted: Saturday, September 10, 2016 1:29 AM
Joined: 03/11/2013
Posts: 2


Sorry, forgot to mention if you are going from Oil & Gas to Yachting you are in for a shock. Depending on what you do (Officer, Engineer, IR) don't expect 5 week swings, sub 10 hour days, single cabins, easy wash downs or sitting in the er control room. It will be a massive change but yachting has it's perks, days in port, ability to drink, anchoring, good internet and food, quality machinery.

Roughly your pay as a casual for one swing after tax in the offshore is what you would get for 3-4 months on a yacht. No super, no tax


Kgh2378
Posted: Monday, September 12, 2016 11:11 AM
Joined: 06/09/2016
Posts: 4


Andy1234 wrote:

I spent about 8 years in yachting before moving back to Australia to move into commercial shipping. I sought advice from accountants in regards to my tax status in Australia. 

I did not own any property in Australia, a non resident without any ties and spent only a month a year back in Australia. 

However according to the ATO if you don't pay tax in Australia you have to pay it somewhere else and most people try France because they have low personal tax brackets. 

I went through every option with many Accountants and it did cost a fortune. Unlucky for me the ATO sent me a bill for well over $50k. Any payment from overseas was considered foreign sourced income and subject to tax. You can argue with the ATO but you will get nowhere fast and considering they only looked back 3 years in some ways I was lucky. 

Yachting is great but keep your money offshore and bring it back in cash form. Remember also that you are not getting any superannuation in your pay as well. 

 

 

.

 

 

 

Hi Andy,

Thanks for your reply.

If I understand you correctly, even if you get non tax residency status, you still have to pay tax anyway? Therefore defeating the point of obtaining it in the first place?

My other understanding was the offshore account thing was no longer an option after the Panama Papers scandal as the OS Banks now had an obligation to report all foreign account holders to the relevant authorities



Pete Brooke
Posted: Monday, September 12, 2016 12:15 PM
Joined: 01/12/2008
Posts: 62


Hi - this is a good thread, thanks for all the feedback and sorry to Andy1234 for the horrific story of his dealing with the ATO. 

I believe that the best way to become non Australian resident is to become resident elsewhere... the UK would be the most sensible bet (as they have the Seafarers deduction) BUT you have to actually become resident which means passing whichever country's residency criteria... it isnt just about owning property etc... as many think it is. 

the other issue is about 'splitting income' or using cash from an offshore account... these days are gone - the new Common Reporting Standards means that pretty much every financial institution in nearly every jurisdiction shares information about their account and policy holders. 

here is a link to a bit of information by a colleague of mine about this http://www.spectrum-ifa.com/full-exchange-of-financial-account-information-is-on-the-doorstep/


chiko_roll
Posted: Monday, September 19, 2016 5:55 PM
Joined: 18/08/2011
Posts: 22


Yea good thread. Its a shame Andy never mentioned whether he obtained a private ruling or not from the ATO.

I have heard of something like tax audit insurance you can take out as well but from the case I read it only covered legal fees etc.

Regarding the last post Pete has made. Yeh most countries have tax treatys now. I do remember going through the list of countries that Australia has an agreement with and Isle of Man wasn't in it.


Anonymous
Posted: Thursday, October 13, 2016 10:26 AM

 Hi,

On this very subject, I have this um ....... friend, who is a NZ National but an Australian resident. If he was to open an offshore which country would they report the account to?

As far as I know New Zealander seafarers have a similar situation to the UK with the 182 day rule.


Pete Brooke
Posted: Thursday, October 13, 2016 10:50 AM
Joined: 01/12/2008
Posts: 62


Just to be completely clear, further to Chico's post.... having a tax treaty with the Isle of Man is completely different to the CRS reporting requirements of institutions on the Isle of Man. 

A tax treaty is to do with not paying tax twice on income from different jurisdictions... my point about not splitting income is the LEGAL requirement of a bank, investment or insurance company to now declare information about you to the country of your residence. 

Your bank will send you a form on which you will have to put a load of information about your tax status ... they will then use this to declare information to that country. 

there is a load of info here (including a natty little video) http://www.oecd.org/tax/automatic-exchange/about-automatic-exchange/

there are now 84 countries signed up to this including Australia, New Zealand, UK, France, Isle of Man, Bermuda, Cayman, BVI etc etc.


 
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