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The impact of this case on ATO policy is discussed in Decision Impact Statement: The Engineering Manager and Commissioner of Taxation (Published 2 March 2015).
Case 9/2014
Members:G Lazanas SM
Tribunal:
MEDIA NEUTRAL CITATION:
[2014] AATA 969
G Lazanas (Senior Member)
INTRODUCTION
1. The Applicant, also referred to as "Mr M" in these reasons, is in dispute with the Commissioner as to whether he was a resident of Australia for the whole of the income year ended 30 June 2011. Mr M was working as a lead instrumentation engineer and manager in Oman for a multinational company in the oil and gas industry from 4 January 2010 to 29 April 2011, when he returned to live with his family in Perth. He had been working overseas on different engineering jobs since 2004.
2. Mr M contends that he was a resident of Australia for only part of the year ended 30 June 2011, that is, from 29 April 2011 when he permanently returned from working overseas, but the Commissioner contends that he was a resident of Australia for the whole of the year ended 30 June 2011 ("the Relevant Year"). Specifically, the Commissioner contends that due to the connection between Mr M and his family living in Australia, and Mr M's pattern of consistently coming to Australia when on leave from his overseas employment, Mr M retained a continuity of association with Australia and, therefore, was a resident of Australia for the whole of the Relevant Year.
3. The Commissioner issued a Notice of Amended Assessment for the Relevant Year to Mr M on 1 October 2013 and included in his amended taxable income an amount of $274,509 derived from services in Oman. Mr M lodged an objection on 9 October 2013 disputing the inclusion of this amount on the basis that he was not a resident of Australia. On 2 December 2013, the Commissioner disallowed the objection in full. On 6 January 2014, Mr M applied to the Tribunal for review of the Commissioner's objection decision.
4. I have decided that Mr M was not a resident of Australia for the whole of the Relevant Year as contended by the Commissioner.
THE ISSUE
5. As noted above, the sole issue for the Tribunal's determination is whether the Engineering Manager was a resident of Australia within the meaning of s 6(1) of the Income Tax Assessment Act 1936 ("ITAA 1936") in respect of the whole of the 2011 income year. The Engineering Manager does not dispute that he was a resident of Australia from 29 April 2011 onwards when he moved permanently back to Australia. It was common ground between the parties that Mr M's domicile was Australia and that he was not present in Australia, continuously or intermittently, for more than 183 days in the 2011 income year.
THE RELEVANT LEGISLATION
6. The relevant statutory provisions are brief. Subsection 6-5(2) of the Income Tax Assessment Act 1997 (Cth) ("ITAA 1997") provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Subsection 995-1(1) of the ITAA 1997 relevantly defines "Australian resident" as meaning: "a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936".
7. Subsection 6(1) of the ITAA 1936 relevantly states, as follows:
resident or resident of Australia means:
- (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
- …
8. The effect of the definition in s 6(1) is to provide a number of tests in determining whether an individual will be regarded as a resident for Australian tax purposes. Broadly, insofar as material to the present case, these tests are whether, a person is resident in Australia as ordinarily understood (the residence according to the ordinary concepts test) and, secondly, where a person is domiciled in Australia, the person will be regarded as a resident unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia (the permanent place of abode test).
9. It follows that where Mr M does not reside in Australia within the ordinary concepts test, he may still be considered a resident of Australia for taxation purposes if his permanent place of abode is not outside Australia. None of the other statutory tests apply. It follows that my reasons deal only with the issue of residence according to the ordinary concepts and the permanent place of abode tests.
THE EVIDENCE
10. The primary facts were not in dispute between the parties, except that there was uncertainty as to the nature of the relationship between Mr M and Mrs M, to which I will come shortly. The following findings of fact are based on the evidence given by Mr M and his wife, referred to as "Mrs M". Both Mr M and Mrs M filed written statements and gave evidence at the hearing. They were also extensively cross examined by the Commissioner's counsel.
11. A copy of Mr M's employment contract was not provided in evidence and it is necessary to say something briefly about its absence. Mr M gave evidence that he could not locate a copy of his contract and he had tried to obtain a copy from his employer but had been unsuccessful. The Commissioner had also tried to obtain a copy of it from Mr M's employer and had been unsuccessful. Importantly, the existence of the employment contract was confirmed and Mr M gave evidence about its key terms which is set out below. For the reasons given below, I do not consider the resolution of the issue to depend on the terms of the contract.
Background
12. Mr M is 48 years old and an engineer who works in the oil and gas industry. He stated that he had worked around the world and lived in multiple countries, including for the first 21 years of his life in New Zealand where he was born, followed by a stint in Scotland where he worked in the North Sea, before returning to work in New Zealand for a couple of years.
13. In 1997, he emigrated from New Zealand to Australia with his wife, Mrs M. They have four children born in 1994, 1997, 1999 and 2001. The children were all still at school during the Relevant Year. When Mr M and Mrs M arrived in Australia, they initially lived in or around Perth, Western Australia; these suburbs included Karratha and Kinross.
14. In or about May 2003, Mr M and Mrs M purchased a residential property as joint tenants in a suburb outside Perth ("the Perth Property") and built a house there to accommodate their large family. Mrs M stated that at about the time she and the children moved into the new house in 2004, Mr M started working overseas for engineering companies and only some of his personal belongings were moved to and kept at the Perth Property, such as some of his clothes.
Overseas Positions
15. Mr M's first, overseas full-time role as an engineer involved him working, in 2004, in the off-shore platforms of an international oil company in the Gulf of Thailand, then as a consultant for a Korean oil company in South Korea, then pursuing other positions on specific projects for other oil and gas companies situated in Qatar (from September 2006 to December 2007), Japan (from mid-January 2008 to December 2009) and then, relevantly, in Oman (from January 2010 to April 2011). That is to say, he lived and worked overseas from about 2004 to April 2011.
16. Mr M took his favourite personal belongings including his squash gear, laptop, guitar and most of his clothing when he left Australia and lived in these overseas places. As mentioned above at [14], Mr M had left some belongings including clothes at the Perth Property.
17. Mr M stated that part of his decision to work overseas in 2004 was "marital issues" that he started having around about that time (discussed further below). His wife and their four children remained in Australia at the Perth Property while he worked overseas. Mrs M stated that she was at home full-time with the children and that she had no extended family in Australia. Her parents lived in New Zealand.
18. In or about October 2009, while Mr M was working in Japan, he received an email from a former work colleague who was a construction and engineering manager at a multinational petroleum company based on a large project in Oman. That email drew Mr M's attention to an employment opportunity with the same company. Apparently, the multinational company was interested in Mr M because of his experience with enhanced oil recovery technology.
Contractual Terms
19. In December 2009, after a few months of negotiations, Mr M signed an employment contract to commence work as an engineering manager with a company in January 2010. It was not clear whether Mr M's employer was the parent company based in the US or a related company in Oman but nothing turns on this. Mr M stated that the initial employment contract was based on a one year term and it was renewable annually. He stated that his contract had been renewed in early 2011. He also stated that, had he not returned to Australia in April 2011, he expected the role in Oman to be "ongoing". He based this on the fact that the project is a "continuing project" and an "upgrade project" which he explained to mean that it was his "role to take it from an 8,000 barrels per day oil field… into… 150,000 barrels of oil per day".[1]
20. He was paid on the basis of a daily rate for his work, regardless of the hours worked each day although the contract referenced a nominal 9 or 10 hours a day. The contract had a one month's notice period for termination. The contract also incorporated a number of policies including as to housing, leave and travel. In relation to leave, Mr M was entitled to take leave without pay "every couple of months" based on approval from his line managers at appropriate times, namely, so as to not disadvantage the project.[3]
21. Mr M stated he was not a FIFO worker.[6]
…all my contracts (Qatar, Japan and Oman) were deliberately negotiated as RESIDENT rotational type (Time in Resident Country and leave period externally) to allow better time flexibility for my personal requirements and the need to see my children as often as I could.[9]
T7-69
22. Mr M stated that when he took up the new job in Oman, he moved straight there from his position in Japan. Mr M clarified in evidence to the Tribunal that when he resigned from his position in Japan, he returned to Australia on 24 December 2009 and spent Christmas and the New Year holiday period with his family at the Perth Property. It appeared that he had also spent that same festive season at the Perth Property in the other years when he worked overseas with the exception of Christmas 2006, which he spent in Qatar.[10]
23. Mr M left Australia and arrived in Oman on 4 January 2010 to work with his employer at the head office in Muscat, the capital city of Oman. To work in Oman, Mr M obtained a special working visa which was renewable every two years (his visa covered the period 24 January 2010 to 23 January 2012). As noted above, he returned to live permanently in Australia on 29 April 2011. The reasons for his decision to return to Australia are set out below.
24. Mr M stated that the work was very challenging and enjoyable and represented a promotion for him in his career. He was considered a key or integral employee and had approximately 12 staff directly reporting to him and about 100 or so staff, including managers, indirectly reporting to him. Mr M reported directly to executive management and worked in the design office in Muscat. Mr M stated that he had a small team also working on site at the oil field which was located about 700km from Muscat, close to the border of Yemen. Occasionally, he would fly by turboprop to the oil field and back in the same day; it was too dangerous to go by car.[11]
Housing
25. Mr M lived in a large detached house in Muscat. He found the house with the assistance of his employer and estate agents by researching on the internet and after inspecting some properties. He chose it for its location as it was in an exclusive residential part of the city. The rental was approximately US$5,000 per month which he stated he paid and which was substantially covered by the housing allowance paid to him by his employer as part of the housing policy incorporated in his employment contract.[12]
26. The Commissioner cross-examined Mr M about some furniture (three chairs and a stool) that he purchased in Oman which he shipped to Australia in July 2010, only 6 months after he had arrived in Oman and some 10 months before he left Oman.[13]
27. Mr M mostly cooked his own meals and did his grocery shopping at the local shops. Sometimes he would go out for dinner at local restaurants and this was always at his expense. Other times, he shared dinners with his neighbours or with colleagues at their homes. As his rented house was in a residential area, his neighbours included Omanis and he got to spend a lot of time with them. They had dinners and barbeques at each other's homes. He took his own lunch to work most days and on those days he did not, he would go to lunch with colleagues at cafes or restaurants near the office.[15]
28. The rented house was exclusively his and he lived alone at all times. When he was on leave of absence from work, he locked the house and took the keys with him.
29. His employer provided him with a car, which he drove to work each day. The trip to the office was only a short distance from his home and took about 10 minutes each way. He paid for the fuel. Mr M held a driver's license in Oman. When he was on leave of absence from work, he left his car at home and took a taxi to and from the airport.
Work and Social Life
30. Mr M's typical work day started between about 8.30am and 9.00am and finished around 5.00pm to 6.00pm when he returned to his home. He usually worked five days a week, however, when work deadlines had to be met, he would also work late into the evenings and on weekends.
31. During his days off he tried to relax by taking in some of the local culture. More often, however, he stayed at home and rested or exercised such as by jogging in the streets around his house. He was also a member of the local squash club and enjoyed playing squash as well as golf with colleagues.[16]
32. He socialised with work colleagues and on Friday nights, would enjoy sharing drinks and meals. In order to purchase alcohol in Oman, a person has to hold a special permit. As an expatriate, he had acquired such a permit and bought alcohol to drink on special occasions with his friends.
Bank Accounts
33. He held a bank account in Oman with HSBC and his income was paid into this account in USD. Using internet banking, he was able to transfer money into his Australian ANZ Bank account which was held jointly with Mrs M. Mr M transferred the bulk of his income to that Australian ANZ Bank Account and it was used exclusively by Mrs M to cover living expenses including for raising their children.
34. When Mr M required funds, he would withdraw cash from the HSBC automatic teller machines in Oman. He also held credit cards with HSBC and used these to cover his daily personal expenses in Oman, which he then paid for using funds from his HSBC bank account.
Trips to Perth
35. Mr M made four trips to Perth during the Relevant Year. Each trip varied in duration, as shown below:
| Period starting | Period Ending | Place | Days in Oman | Days in Australia |
| 1 July 2010 | 23 July 2010 | Oman | 22 | |
| 23 July 2010 | 6 August 2010 | Australia | 14 | |
| 6 August 2010 | 1 October 2010 | Oman | 56 | |
| 1 October 2010 | 15 October 2010 | Australia | 14 | |
| 15 October 2010 | 23 December 2010 | Oman | 69 | |
| 23 December 2010 | 10 January 2011 | Australia | 18 | |
| 10 January 2011 | 4 March 2011 | Oman | 53 | |
| 4 March 2011 | 20 March 2011 | Australia | 16 | |
| 20 March 2011 | 29 April 2011 | Oman | 40 | |
| Return to Australia: 29 April 2011 | ||||
| TOTALS | 240 | 62 |
36. When Mr M returned to Perth on his leave from work, he stayed at the Perth Property where his family lived. When Mr M was on leave, he was still "on duty" and required to read and attend to emails, and speak to staff to ensure works were being attended to.[17]
37. Mr M stated that he used his leave to return to Perth because he wanted to see his children. He stated that they were his priority and that Oman was not a secure place for a holiday with four school-aged children as it is situated in an unstable region of the world so he chose to return to Perth to see them in order to keep them safe and also not to disrupt their school routine with long overseas travel. Staying at the Perth Property was the best way to do this.
38. Before Mr M moved to Oman, Mr M had worked in Japan where his wife and four children had visited him once in Tokyo. He stated that if his wife had taken the children to live in New Zealand, he "would be flying back there".[18]
39. When he returned to the Perth Property from his work in Oman he would often rest for the first two days by catching up on sleep. His routine would then revolve around the children's activities. This involved driving them to school and after-school activities, taking them on outings and catching up with the happenings in their lives. Mr M stated that he tried to make the time with them special because he missed them while he was working overseas. Mrs M stated that even though the children did not see him much, "they still respected him" and "still would listen to what he said."[19]
Return to Perth
40. The circumstances which led to Mr M to return to Perth in April 2011 centred on his eldest son who was doing his last year of high school. Mrs M had begun to talk about how overwhelmed she was with raising the children on her own, particularly as their eldest son was studying for his high school certificate. Mr M also stated he wanted to make his "relationship stronger".[20]
41. In her written statement, Mrs M stated:
Around March 2011, I decided I had had enough and demanded that [Mr M] finish working overseas. [Mr M] was resistant to this - he explained that he was working on a significant project and this was one of a kind opportunity and that his work contract had just been renewed. [Mr M] and I continued to argue over this and eventually he saw my point of view and realised that for the sake of his children, it was crucially important that he finish working overseas and returned once and for all to Perth in order to father his children.[21]
Exhibit A2, paragraph 17
42. Mr M made the decision of ending his employment with his employer in or about April 2011 and he returned to Perth on 29 April 2011. Since returning to Perth he has held various consulting contracts with oil and gas companies. He also established a new entity with a business partner with whom he formed a close friendship while he was living in Oman.
Health Insurance and Other Accounts
43. While overseas in the period from 2004 to 2011, Mr M maintained his Medibank Private health insurance policy in Australia which covered him, his wife and their four children. The registration of a vehicle continued in his name with his address being the Perth Property (as it was for all his mail). Also, the electricity and gas accounts for the Perth Property continued in his name because Mrs M stated that she wasn't able to transfer them into her name as she was not working. She also preferred to have his name on them for security reasons as his name on the accounts suggested that he was home.
Immigration Passenger Cards
44. In his outgoing and incoming immigration passenger cards during the Relevant Year, Mr M had indicated that he was an Australian resident departing temporarily or an Australian resident returning to Australia. Mr M explained to the Tribunal that although he accepted that these immigration passenger cards were legal documents, to him, "it was a tick and flick" and he had not turned his mind to any taxation consequences.[22]
Relationship between Mr M and Mrs M
45. The relationship between Mr M and Mrs M became an issue of some interest to the Commissioner during the Tribunal proceedings, due in part to Mr M stating that his leaving for overseas in 2004 coincided with his marriage breakup and the suggestion that he was on the periphery of the family unit. Mr M stated that he stayed at the Perth Property when he periodically returned to Australia for convenience so as to spend as much time as possible with his children. He mostly slept in a spare room as he was estranged from his wife. He also stated that he "felt it necessary to keep up appearances as a functioning family within the local community and for the children's sake".[23]
46. At the hearing Mrs M explained that her husband was emotionally distant from her when he lived and worked overseas, especially when he was in Japan and that that situation continued while he was in Oman.[25]
… our relationship wasn't that great …sometimes he wouldn't - if I was trying to get hold of him he wouldn't return my calls…I always tried to keep him in the loop with the children because he's their father, that's what we sort of wanted.
…we had like parallel lives … he obviously knew where we were and what we were doing but I had no idea what he was doing. We certainly didn't talk daily.[26]
Transcript P-105 … In 2009 every time he would come - when he did come back he would always threaten to divorce me …
…Before this came up I hadn't even told [Mr M] I'd been to see a divorce lawyer.[27]
Transcript P-106 … I went and saw the lawyer in 2009, she told me … if he wanted to basically cut me off and cut the kids off and he was still overseas and paid overseas, I couldn't really do much about it.[28]
Transcript P-109 to P-110 … the kids had no idea what was going on with [Mr M] and I. We'd try and keep them sheltered from that, so we used to try and keep it as normal as possible for them.[29]
Transcript P-110 … there's been damage done like any relationship when the trust has been - there's no trust on my part.[30]
Transcript P-112
47. A copy of the invoice issued by a firm of family lawyers based in Perth to Mrs M dated 7 December 2009 referencing the initial consultation between Mrs M and "the divorce lawyer" referred to above (see [46]) was also provided in evidence.[31]
48. I accept that Mrs M gave an honest account of the situation with Mr M especially her strained relationship with him, as well as more generally, including in relation to Mr M's comings and goings and her asking him to return to Australia in or about April 2011 to assist their eldest child with his studies. Significantly, I find that their marital relationship was fractured, especially in the period from late 2009 and throughout most of the Relevant Year.
49. Mr M presented his evidence in a more circumspect manner, however, I am satisfied that he is a reliable witness. There was no evidence which put into doubt the veracity of Mr M's evidence. In any event, Mr M's description of his contractual terms was entirely plausible and, in the end, nothing turned on the precise terms of his contract. This is because, as borne out by his visits to Australia, I find that Mr M's contract allowed him to take leave and travel on a periodic basis to Perth. I accept and find that he intended to live in Oman and that his living there was dependent on the renewal of his employment contract which had a term of 12 months and a one month's notice period for termination. I accept that his contract had already been renewed once for another term of 12 months. Moreover, Mr M clearly intended to pursue his career overseas (as he had done since 2004) and he, therefore, expected to remain in Oman for a considerable period of time by virtue of the size and ongoing nature of the project he was working on. Mr M was committed to his job and relished the leadership role.
50. I also conclude that Mr M intended to eventually return to Australia. So much was clear from the fact that he had shipped a few items of furniture to the family home in Australia in order, as he acknowledged, to keep them. But I find that his change of mind, namely, to give up his engineering manager role in Oman and to permanently return to Australia, happened in or about April 2011, as specifically corroborated by Mrs M.
WAS THE ENGINEERING MANAGER A RESIDENT OF AUSTRALIA UNDER THE ORDINARY CONCEPTS TEST FOR THE 2011 INCOME YEAR?
51. The Tribunal (constituted by Logan J, Deputy President Hack SC and Senior Member Kenny) recently canvassed the law with respect to the issue of an individual's residence in Australia for tax purposes, in
Re Dempsey and the Commissioner of Taxation [2014] AATA 335. It is appropriate to set out the following extracts from
Re Dempsey (omitting some footnotes) as those extracts including the cases there referred to are directly relevant to how I have approached the issues in this proceeding:
[89] In
Federal Commissioner of Taxation v Miller [(1946) [1946] HCA 23; 73 CLR 93] (Miller) and in the context of the ITAA 36, the following statement of Viscount Cave LC in
Levene v Inland Revenue Commissioners [[1928] AC 217 at 222] (Levene) as to the meaning of the word "resides" were regarded as authoritative:… the word 'reside' is a familiar English word and is defined in the Oxford English Dictionary as meaning 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place.' No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word 'reside.' In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure.
In another case decided on the same day as Levene,
Inland Revenue Commissioners v Lysaght [[1928] AC 234], the House of Lords adopted this same approach to the interpretation of that word.[90] At the time when Miller was decided, the definition of "resident" in s 6 of the ITAA was in similar, though not identical form to the definition as it stood in the 2009 and 2010 income years. Notably, it was then, as now, cast in a "means and includes" format. Neither party to the review submitted, nor do we consider, that the differences raise any issue as to the meaning to afford the word "resides" in the definition. In Miller, Latham CJ [73 CLR at 99] prefaced his quotation of this passage from Viscount Cave's speech in Levene with the following observations:
I should have thought that there was no doubt that a man resided where he lived, and I do not think that there is any interpretation of the word "reside" by the courts which makes it impossible to apply the ordinary meaning of the word "reside" in the present case.
Having quoted Viscount Cave's speech, Latham CJ continued [73 CLR at 100]:
In Cesena Sulphur Co. Ltd. v. Nicholson, Huddleston B. said: "There is not much difficulty in defining the residence of an individual; it is where he sleeps and lives." …
[91] In Miller, Rich J [73 CLR at 100-101] likewise emphasised that the word "resides" was "not a term of art denoting a field with precisely defined boundaries" and "is an ordinary English word extending over a field the boundaries of which constitute a broad limbo with blurred edges". His Honour [73 CLR at 101] and Dixon J [73 CLR at 103] were of the view that the meaning of the word "resides" being so understood, the question as to where someone resided entailed questions of degree and was one of fact.
[92] Miller, and hence the guidance offered by Viscount Cave LC in Levene remains authoritative in Australia as to the meaning of "resides" in the ITAA 36. That guidance also remains authoritative in the United Kingdom on that same subject.
[93] The settled position at ultimate appellate level has thus long been that, as used in the definition in s 6 of the ITAA 36, "resides" bears its ordinary English meaning, which 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".
[94] Miller provides no warrant for adopting some broad meaning of the word "resides" (whatever that may be), much less any broad application of that word. Even were we at liberty to depart from the meaning given to the word in Miller, and neither we, nor before us the Commissioner, enjoy any such liberty, neither the text of the definition nor its context lead to any conclusion other than that the word "resides" bears its ordinary meaning, not some broad meaning. Adopting and applying what was said in [
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27] as to the approach to statutory construction should put any contrary notion firmly and finally to rest.[95] Adopting that ordinary meaning of "resides" does not mean that a conclusion on the facts that an individual "resides" in one location precludes a conclusion on the facts that he also "resides" in another. That has long been settled. As Dixon J observed in respect of cognate expressions, and by reference to earlier authority in
Gregory v Deputy Federal Commissioner of Taxation [(1937) [1937] HCA 57; 57 CLR 774 at 777] (Gregory), "The well settled interpretation of the words includes in their application a man who resides in two or more places." …[96] Also long settled is that the reaching of a conclusion as to where a person "resides" entails the consideration not just of physical elements but also intention . Dixon J proceeded on just such a basis in Gregory[18]. [Emphasis Added]
52. In
Re Dempsey, the Tribunal found that, in all the circumstances, Mr Dempsey's settled home during the relevant period was in Saudi Arabia and that he was intentionally, "but a casual visitor to Australia" (at [121]). Also, Mr Dempsey's visits to Australia were "casual and fleeting" not only in comparison to the time he spent in Australia but also in comparison to the time Mr Dempsey spent on holidays in Thailand, being his favourite holiday destination. "Mr Dempsey was a free agent, both in terms of the transferability internationally of his skills and his personal circumstances." (at [109]). The Tribunal held that Mr Dempsey was not a resident of Australia under either the ordinary concepts test or the permanent place of abode test.
53. The Commissioner's position in the present case was that "whatever the status of [Mr M's] residence was in Oman, and certainly he did eat and sleep there and worked there, he continued to be resident in Australia" for the Relevant Year. He based this proposition on the fact of Mr M having a connection with his children and returning to the family home in Perth on his absences of leave from Oman on a regular basis. The Commissioner contended that the family home at Perth was his base, from which he left to work overseas and to which he always returned. The Commissioner further submitted that Mr M's "physical, emotional and financial ties to Australia were significant. They cannot be described as casual or fleeting. Rather than being peripheral to his life, those connections were central to it."
54. I disagree. Where a person resides is a question of degree and therefore one of fact (
Commissioner of Inland Revenue v Lysaght [1928] AC 234 at 247-8 per Lord Buckmaster). As noted in
Re Dempsey at [91], in
Federal Commissioner of Taxation v Miller (1946) 73 CLR 93, Rich J [at 100-101] emphasised that the word "resides" was "not a term of art denoting a field with precisely defined boundaries" and "is an ordinary English word extending over a field the boundaries of which constitute a broad limbo with blurred edges". A person can of course have more than one residence (
Gregory v Deputy Commissioner of Taxation (1937) 57 CLR 774 at 777 and 778 per Dixon J and
Re Dempsey at [95]), but this was not the case here.
55. Mr M was not a resident of Australia under the ordinary concepts test, during the whole of the Relevant Year. The ordinary meaning of the word "resides" requires the issue of whether a person is a resident of Australia to be determined on the totality of the taxpayer's factual circumstances, not those of his family unit. For the most part, Mr M was not physically present in Australia nor did he intend to live in Australia, in the Relevant Year. He spent 62 days in Australia and 240 days in Oman in the period up to 29 April 2011. Mr M worked and lived in Oman and it was Mr M's intention to continue to work and live in Oman, dependent on the renewal of his employment contract. Mr M's priority was his work, and his career. Mr M's attachment to his work in Oman is a very significant factor in my conclusion that he was not a resident of Australia, when weighed with the other considerations. He had established himself in Oman, including by renting a house which was for his exclusive use and having routines which involved partaking in social and sporting activities. He used his leave to travel back to Perth to spend time with his four children, but his connection with his children is not in my view determinative of the question of whether he was a resident of Australia. That it was a significant factor is supported by the fact that it ultimately led to Mr M's change of mind to return permanently to live with his family in April 2011. But that only reinforced my conclusion that for the period up to 29 April 2011, he was not a resident of Australia as he was living in Oman, pursuing his career. In the circumstances, Mr M's work ties outweighed his family ties, even though he financially supported his family by sending the bulk of his income to the joint bank account held with his wife in Australia. Mr M ordered his lifestyle around his work commitments.
56. I have taken into account the fact that Mr M's marital relationship was far from harmonious and I consider that to be a very significant factor. While I reached no conclusion as to whether Mr M had left Australia in 2004 to work overseas due to "marital issues", the circumstances pertaining to the Relevant Year were clear. Indeed, as noted at [46] above, the situation was that he not only repeatedly threatened to divorce Mrs M when he visited from overseas but Mrs M had privately sought her own legal advice as to the possibility of divorcing him. The gist of the lawyer's advice, as relayed by Mrs M to the Tribunal, was that if Mr M had wanted to cut Mrs M and the children off and Mr M was still overseas and paid overseas, Mrs M could not really do much about it. The reality is that Mr M was still living overseas and was being paid overseas throughout most of the Relevant Year.
57. Mr M's lifestyle of working and living overseas meant that he did not regard the Perth Property as his home in the Relevant Year until he made the decision to return to Australia.
DID THE ENGINEERING MANAGER HAVE A PERMANENT PLACE OF ABODE OUTSIDE AUSTRALIA DURING THE 2011 INCOME YEAR?
58. It is not in dispute that Mr M's domicile was Australia, namely, his domicile of choice based on his immigration to Australia from New Zealand. The key issue is whether Mr M had a permanent place of abode outside Australia during the period up to 29 April 2011.
59. The principal authority on the meaning of "permanent place of abode" in s 6 of the ITAA 1936 is
Federal Commissioner of Taxation v Applegate [1979] FCA 66. In that case, the issue was whether the taxpayer, a lawyer, whose domicile was Australia, had a permanent place of abode in the New Hebrides. Mr Applegate had given up his home in Sydney and had moved to the New Hebrides to set up a branch of his law firm. He intended to live there indefinitely, but not permanently, intending ultimately to return to Australia at some time in the future. Mr Applegate returned to Australia sooner than expected due to illness.
60. The Full Court dismissed the Commissioner's appeal and confirmed that Mr Applegate's permanent place of abode was outside Australia. The following extract from the decision of Fisher J in Applegate (at [128]) as to the meaning of "permanent place of abode" encapsulates my approach to the application of that test of residence in the present case:
To my mind the proper construction to place upon the phrase "permanent place of abode" is that it is 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 that 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.
It follows then that in my opinion the intention of the taxpayer as far as returning to Australia is concerned is just one of the factors for consideration. But it is a factor which I consider has less significance than the taxpayer's intention in relation to his place of abode outside Australia. Intention to return to Australia is a crucial feature in considering whether the taxpayer has retained an Australian domicile. Intention to make his home for the time being in his place of abode outside Australia is an important element in characterizing that place of abode as his "permanent" place of abode.
61. I have also been influenced in my consideration of the meaning of "permanent place of abode" by the decision of Sheahan J in
Commissioner of Taxation v Jenkins (1982) 12 ATR 745. In Jenkins, the taxpayer had no intention to remain indefinitely in New Hebrides but had agreed to go there for three years. The question was whether this fact made the taxpayer's stay overseas "temporary" in the sense in which that word is used in contradistinction to "permanent". As decided by his Honour in Jenkins, I am similarly reluctant to conclude that a stay outside of Australia by a person for a fixed period is not "permanent" simply because the limits of the stay are fixed and ascertainable. In any event, Mr M's employment contract was for an initial term of one year and renewable annually subject to the possibility of termination at one month's notice.
62. I am satisfied that Mr M's permanent place of abode for most of the Relevant Year was outside Australia. This is because Mr M established his fixed and habitual place of abode in Oman, close to his work even though he intended to return to Australia in the future. For the time being, namely, for the duration of his work (dependent on the annual renewal of his employment contract), he intended to live in Oman. Mr M's intention to treat Oman as his home for the time being is an important aspect of that conclusion. I am also reinforced in my conclusion by the fact that the issue of residency for tax purposes must be determined annually, that is, in respect of each income year:
Federal Commissioner of Taxation v Applegate [1979] FCA 66.
63. Finally, I do not regard the information completed by persons on passenger immigration cards to be important to the issue of residency status for income tax purposes. I accept that Mr M had not turned his mind nor sought any legal advice to the specific tax issues when completing the forms.
CONCLUSION
64. Mr M is not a resident of Australia for the whole of the year ended 30 June 2011. Accordingly, the Commissioner's decision is set aside and substituted with a decision that Mr M's objection in respect of the amended assessment for the 2011 income year is allowed in full.
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