Schiele v FC of T

Members: DK Grigg M

Tribunal:
Administrative Appeals Tribunal, Brisbane

MEDIA NEUTRAL CITATION: [2020] AATA 286

Decision date: 24 February 2020

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DK Grigg (Member)

BACKGROUND & CLAIMS HISTORY

1. Mr Schiele is a German citizen. During the financial year ended 30 June 2016 Mr Schiele came to Australia on a Working Holiday visa (subclass 417). This visa enabled Mr Schiele to stay in Australia for up to 12 months, and to engage in short-term work with one employer.

2. Mr Schiele arrived in Australia on 30 October 2015.

3. During his stay in Australia Mr Schiele worked for approximately three months (between March and June 2016) as a farm hand at Aubrey Fowler & Co (" Aubrey Fowler ") in Western Australia.

4. Mr Schiele departed Australia and returned to Germany in July 2016.

5. On 11 May 2017 Mr Schiele lodged his income tax return (" ITR ") for the financial year ended 30 June 2016 with the Australian Tax Office (" ATO "). In his ITR Mr Schiele declared that:^[1] Exhibit 1, T Documents, T3, pages 12 – 34, ITR of Mr Schiele lodged on 11 May 2017.

• (a) he was a German citizen;
• (b) during the financial year ended 30 June 2016, while working as a farm hand, he received a total gross income of $15,500;
• (c) he was a resident of Australia for income tax purposes; and
• (d) the total tax withheld from his salary and wages was $5,072.

6. The ATO wrote to Mr Schiele on 1 June 2017 and advised that based on its records:^[2] Exhibit 1, T Documents, T4, pages 35 – 36, letter from ATO to Mr Schiele dated 1 June 2017.

• (a) Mr Schiele had been granted a working holiday visa for the 2016 income tax year;
• (b) people on working holiday visas remain foreign residents for tax purposes;
• (c) he was not an Australian resident for tax purposes because of:
  • (i) the type of visa subclass he travelled to Australia on;
  • (ii) the length of his stay in Australia during the relevant income year; and
  • (iii) his employment during the relevant income year.

7. The ATO invited Mr Schiele to complete a residence questionnaire if he wanted his assessment to be reviewed.

8. On 4 July 2017 the ATO advised Mr Schiele that it had completed its audit of his circumstances and decided that he was a non-resident for tax purposes for the financial year ended 30 June 2016 and that it would issue a notice of assessment for the year ended 30 June 2016.^[3] Exhibit 1, T Documents, T5, pages 37 – 38, letter from ATO to Mr Schiele dated four July 2017.

9. As a result of its finding the ATO issued a notice of assessment for the period ended 30 June 2016 which determined that Mr Schiele was only entitled to a refund of $34.50.^[4] Exhibit 1, T Documents, T6, pages 39 – 42, Notices of assessment and withholding tax dated 11 July 2017. The ATO had determined that, as a non-resident, Mr Schiele was not entitled to an income tax threshold (which may have resulted in his receiving a larger tax refund).

10. On 13 December 2017 the ATO received an objection from Mr Schiele to his income tax assessment for the year ended 30 June 2016. Mr Schiele contended that the total number of days he resided in Australia without interruption was 263 days between 30 October 2015 and 18 July 2016. Mr Schiele contends that the Department of Immigration and Border Protection (as the Home Office was then known) record, which showed that his total stay in Australia was only 146 days, was incorrect.^[5] Exhibit 1, T Documents, T7, page 43, Mr Schiele’s objection to his Income Tax Assessment for the year ended 30 June 2016 dated 22 November 2017 and received by the ATO on 13 December 2017. Mr Schiele provided the ATO with the following information and documentation:^[6] Exhibit 1, T Documents, T7, pages 44 – 112, documents supporting Mr Schiele’s objection dated 22 November 2017 and received by the ATO on 13 December 2017.

• (a) he had resided with Aubrey Fowler in Western Australia between 1 December 2015 to 5 June 2016;
• (b) he was employed by Aubrey Fowler between 22 March 2016 on 4 June 2016;
• (c) a copy of his payslip from Aubrey Fowler;
• (d) a copy of his passport indicating that he arrived in Australia on 30 October 2015 and departed Australia on 18 July 2016;
• (e) a copy of an airline ticket indicating that he arrived in Cairns on 30 October 2015;
• (f) a copy of an airline ticket indicating that he flew from Melbourne to Singapore on 18 July 2016;
• (g) a letter from Aubrey Fowler stating that:
  • (i) Mr Schiele "camped" for free on their property between 1 December 2015 to 22 March 2016 using the property as a base to travel Western Australia;
  • (ii) Mr Schiele was employed as a seasonal farm hand from 22 March 2016 to 4 June 2016; and
  • (iii) during his employment Mr Schiele received free accommodation and food;
• (h) copies of his Australian Westpac bank account statements for the 2016 financial year and July 2016;^[7] Exhibit 1, T Documents, T7, pages 84 and 106, documents supporting Mr Schiele’s objection dated 22 November 2017 and received by the ATO on 13 December 2017 and
• (i) from 5 June 2016 to 18 July 2016 Mr Schiele travelled to Darwin, Northern Territory and through the "outback" to St Kilda, Victoria.

11. For the purposes of reviewing his objection the ATO requested that Mr Schiele complete a residency questionnaire.^[8] Exhibit 1, T Documents, T8, pages 113 – 115, email from the ATO to Mr Schiele dated 19 February 2018.

12. Mr Schiele completed his completed residency questionnaire in which he advised the ATO:^[9] Exhibit 1, T Documents, T9, pages 126 – 137, Residency Questionnaire completed by Mr Schiele on 3 March 2018.

• (a) he was a citizen of Germany;
• (b) he was granted a Working Holiday visa (subclass 417) to enter Australia for the period 22 September 2015 to 21 September 2016;
• (c) he entered Australia on 30 October 2015 and departed Australia on 18 July 2016;
• (d) while in Australia he left his personal belongings and furniture at his parents' home in Germany;
• (e) after departing Australia, he returned home to live with his family in Germany;
• (f) at no time between 30 October 2015 and 18 July 2016 did he leave Australia;
• (g) he travelled to Australia to work on a farm, visit friends and "see some of the country";
• (h) he had intended to stay in Australia for nine months;
• (i) he lived at the Aubrey Fowler property between 1 December 2015 and 5 June 2016;
• (j) other than between 1 December 2015 and 5 June 2016 he stayed with friends;
• (k) he worked for Aubrey Fowler doing farm work between 22 March 2016 and 4 June 2016; and
• (l) while in Australia he did not become a member of any community groups, churches, clubs or organisations.

13. On 3 April 2018 the ATO advised Mr Schiele that they had considered his objection and determined that:^[10] Exhibit 1, T Documents, T2, pages 9 – 11, ATO reasons for decision; T10, page 138, ATO notice of objection decision dated 3 April 2018.

• (a) he was not an Australian resident for income tax purposes during the 2016 financial year;
• (b) as a foreign resident he was required to pay tax in Australia on all income earned from working in Australia; and
• (c) he was not entitled to a tax free threshold.

14. On 3 June 2018 Mr Schiele applied to this Tribunal for review of the ATO's decision.^[11] Exhibit 1, T Documents, T1, pages 1 – 8, Mr Schiele’s Application for review dated 3 June 2018. The Tribunal has jurisdiction to review the decision pursuant to section 25 of the Administrative Appeals Tribunal Act 1975 (Cth) (" AAT Act "), and Part IVC of the Taxation Administration Act 1953 (Cth) (" TAA ").

ISSUES FOR THE TRIBUNAL

15. The issue for determination by the Tribunal is whether the income tax assessment for the 2016 financial year was excessive. This involves a consideration of whether Mr Schiele was a "resident" of Australia for income tax purposes within the meaning provided in section 6(1) of the Income Tax Assessment Act 1936 (Cth) (" ITAA 1936 ").

16. Pursuant to section 34J of the AAT Act the parties elected to have the matter decided on the papers.

LEGISLATIVE BACKGROUND

Burden of Proof

17. Section 14ZZK(b)(i) of the TAA provides that Mr Schiele has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been.

18. The High Court decision in
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 confirms that the onus is on the taxpayer to establish that default assessments issued by the Commissioner are excessive. The High Court explained that where the Commissioner and taxpayer have not agreed on the assessment:^[12] Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 , 624, citing Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 [44].

"… the Commissioner is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment … unless the [taxpayer] shows by evidence that the assessment is incorrect, [the default assessment] will prevail."

19. In
Trautwein v Federal Commissioner of Taxation [1936] HCA 77; (1936) 56 CLR 63 Latham CJ found as a general rule:

[2]. "…the taxpayer must…go further and show, not only negatively that the assessment is wrong, but also positively what correction should be made in order to make it right or more nearly right."

20. In
Gauci v Federal Commissioner of Taxation [1975] HCA 54; (1975) 135 CLR 81 Mason J explained:

[6]. "The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence."

What is a "resident" for income tax purposes

21. "Resident or resident of Australia" is relevantly defined in section 6(1) of the ITAA 1936 as follows:

"resident or resident of Australia" means:

• (a) a person, other than a company, who resides in Australia and includes a person ["the residency test"]:
  • (i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia [the domicile test]; or
  • (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 [the "183 days test"]

Relevance of Residency for Income Tax Purposes

22. The Commissioner outlined in its submissions the relevance of whether a person is considered as an Australian resident or foreign resident for taxation purposes. Pursuant to sections 6-5(2) and 6(10)(4) of the Income Tax Assessment Act 1997 (Cth) (" ITAA 1997 "), non-residents are assessed on ordinary statutory income derived from Australian sources, are generally taxed at the rate of 32.5% from the first dollar of income derived and are not entitled to a tax-free threshold.

The 'Ordinary Concepts' or 'Resides' Test

23. Courts have held that in order to be taken to have resided in Australia one needs to consider "the nature, duration and quality of physical presence [of a person] in a particular place as well as [their] intention".^[13] Stockton and Commissioner of taxation [2019] FCA 1679 , Logan J at [23]. See also the Full Federal Court in Harding v Federal Commissioner of Taxation [2019] FCAFC 29 ( Harding (Full Ct), at [60] which referred to Hafza v Director-General of Social Security [1985] FCA 201 (“ Hafza ”) where Wilcox J considered that residence involved the question of a person’s physical presence in addition to a person’s intention to treat particular place as their home.

24. The Commissioner provided a useful summary of the well-known authorities on the ordinary meaning of the word "resident". The Tribunal notes the following:

• • in
  Levene v Inland Revenue Commissioners [1928] AC 217:
  • ○ Viscount Cave LC stated (at 222):

    "[T]he 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.'"

    (emphasis added)

  • ○ Lord Warrington stated (at 232):

    "if [the meaning of reside] has any definite meaning I should say it means according to the way in which a man's life is usually ordered "

    (emphasis added)

• • A person who spends time in a country as part of the "ordinary course of his life" could be considered as "ordinarily resident" in that country:
  Commissioner of Inland Revenue v Lysaght [1928] AC 234, Lord Buckmaster (at 248);
• • "in determining a person's residence, the intention of that person may be vital":
  Comcare Australia (Defence) v O'Dea (1999) 87 FCR 451, 455;
• • Determination of a person's residence is a "question of degree and …fact":
  Federal Commissioner of Taxation v Miller (1946) 73 CLR 93, 103;
• • Physical presence in a country is not determinative on its own,^[14] Re Iyengar and Federal Commissioner of Taxation (2011) 85 ATR 924 , 935 [62]; See also Revenue and Customs Commissioners v Grace [2009] STC 2707 , 2710. "one must consider the amount of time that he spends in that place, the nature of his presence there and his connection with that place":
  Revenue and Customs Commissioners v Grace [2009] STC 2707, 2710;
• • Residency incorporates "some degree of continuity or some expectation of continuity":
  Revenue and Customs Commissioners v Grace [2009] STC 2707, 2710;
• • "a person is not entitled to claim to be a resident at a given town merely because he pays a short, temporary visit. Some assumption of permanence, some degree of continuity, some expectation of continuity is a vital factor which turns simple occupation into residence" :
  Fox v Stirk; Ricketts v Registration Officer for the City of Cambridge [1970] 2 QB 463, 477;
• • "a person does not necessarily cease to be a resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place … together with an intention to return to that place and an attitude that the place remains "home"":
  Koitaki Para Rubber Estates Limited v The Federal Commissioner of Taxation [1941] HCA 13; (1941) 64 C.L.R. 241 at p.249.

The 'Domicile and Permanent Place of Abode' Test

25. Section 10 of the Domicile Act 1982 (Cth) provides:

"The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country"

26. The Tribunal agrees with the Commissioner that "A person entering Australia as a genuine visitor whose principal purpose is to spend a holiday in Australia" does not "acquire a domicile of choice in Australia by that means".

27. The expression a 'place of abode' "has been equated with the concept of home or residence":
Harding v Commissioner of Taxation (2018) FCA 837, at [124]. In
Harding v Commissioner of Taxation [2018] FCA 837, at [34], Derrington J said:

"the concept of 'continuity of association' is an evaluative tool to be applied…to ascertain whether a person has a retained usual place of abode in a place or 'lives' where he is not usually located":

28. In
Commissioner of Taxation v Executors of the Estate of Subrahmanyam (2001) 116 FCR 180, 197-198 [78] Emmett J explained:

"When comparing two places of abode of a particular person, in order to determine whether one is the usual place of abode, it is necessary to examine the nature and quality of the use to which the person makes of each particular place of abode. It is then possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the usual place of abode. "

The '183 Day' Test

29. While Mr Schiele has been in Australia for more than half of the 2016 financial year, this will not be sufficient to satisfy the 183 day test, when his usual place of abode is outside Australia and where he has no intention to take up residence in Australia.

30. The Commissioner pointed out that the Explanatory Notes to this part of the legislation provided that this qualification was enacted "in order that there may be no danger of treating as residents persons who are purely visitors".^[15] Explanatory Notes on Amendments Contained in a Bill to Amend the Income Tax Assessment Act 1922-29 (Cth) (the Income Tax Assessment Bill 1930 (Cth)), p 11.

31. In Harding (Full Ct) Davies and Steward JJ said (at [39]) that the 183 day test:

"… is, initially, concerned with a person who is physically present in Australia for most of a given year of income. The exception to it probably applies to a person who is physically present in Australia for the required number of days but who would not be considered to be an Australian [resident] because he or she is only a temporary visitor of this country for a period of time. That period might even extend to a term of years."

(emphasis added)

32. Davies and Steward JJ referred, with approval, to the judgment of Sheppard J in
Applegate v Commissioner of Taxation [1978] 1 NSWLR 126 where he said (at 134):

"… "place of abode" may mean the house in which a person lives or the country, city or town in which he is for the time being to be found. I am of the view that the latter is the meaning of the expression used in s 6(1) of the Act."

33. As the Commissioner notes, for the purposes of the '183 day test', it is not enough to demonstrate that you have remained in Australia for more than half the year. This fact on its own does not necessarily mean that a person's usual place of abode is in Australia.

EVIDENCE

34. Mr Schiele provided a statement on 8 July 2019.^[16] Exhibit 6, Letter from Mr Schiele dated 8 July 2019 (in German); Exhibit 7, Translation of Mr Schiele’s letter of 8 July 2019, translated on 18 July 2019. Mr Schiele states that prior to his arrival in Australia he had been living full-time with his parents in Germany. When he applied for his working holiday visa, he specified in his application that he intended to stay in Australia for a maximum of one year because he did not know how things would work out for him in Australia. At the time he arrived in Australia his girlfriend was studying in Perth. In his submission Mr Schiele states that when he first came to Australia there was a possibility that he would try to stay with his then girlfriend for another year, and perhaps to study, by applying for another suitable visa. Mr Schiele says he stayed at the Aubrey Fowler farm because he was unable to live permanently with his girlfriend or friends at that time. During his time in Australia his girlfriend decided to end the relationship and he ultimately returned to Germany.

35. In addition to the information provided with his original objection, the following documents have also been lodged with the Tribunal:

• (a) a copy of Mr Schiele's payment summary for Aubrey Fowler for the income year ending 30 June 2016 indicating that Mr Schiele worked for Aubrey Fowler between 22 March 2016 and 4 June 2016, receiving gross payments of $15,500 with a total tax withheld of $5072;^[17] Exhibit 1, ST Documents, ST1, page 1, Mr Schiele’s Payment Summary for Aubrey Flower for the year ended 30 June 2016.
• (b) a copy of Mr Schiele's Department of Immigration and Border Protection Movement Details which indicates that:^[18] Exhibit 1, ST Documents, ST2, page 2, Mr Schiele’s Department of Immigration and Border Protection Movement Details, dated 6 March 2018.
  • (i) Mr Schiele entered Australia on a visa subclass 417;
  • (ii) Mr Schiele arrived in Australia on 30 October 2015;
  • (iii) Mr Schiele departed Australia on 18 July 2016;

36. According to Mr Schiele, between 30 October 2015 and 1 December 2015, Mr he travelled through the 'outback' from Cairns, Queensland to Williams, Western Australia.^[19] Exhibit 1, T Documents, T7, page 43, Mr Schiele’s objection to his Income Tax Assessment for the year ended 30 June 2016 dated 22 November 2017.

37. While Mr Schiele stayed at the Aubrey Fowler farm he was not required to pay rent and could come and go as he pleased.

38. Between 16 February 2016 and 26 February 2016 Mr Schiele visited friends in Melbourne and visited his girlfriend in Perth for a few days from time to time.^[20] Exhibit 1, T Documents, T7, page 43, Mr Schiele’s objection to his Income Tax Assessment for the year ended 30 June 2016 dated 22 November 2017; Exhibit 1, T Documents, T1, page 6, Mr Schiele’s Application for review dated 3 June 2018.

39. In his employment declaration Mr Schiele stated that he was a non-resident of Australia.^[21] Exhibit 6, Letter from Mr Schiele dated 8 July 2019 (in German); Exhibit 7, Translation of Mr Schiele’s letter of 8 July 2019, translated on 18 July 2019.

CONSIDERATION

40. Having considered the legal authorities above and the evidence available to the Tribunal, the Tribunal finds that Mr Schiele was not a "resident" of Australia as per the definition in the ITAA 1936 for the following reasons.

Not A Resident According to Ordinary Concepts

41. Mr Schiele's purpose and intention for entering Australia was to have a working holiday and to visit friends and his then girlfriend. Pursuant to section 417 of Schedule 2 of the Migration Regulations 1994 (Cth), Mr Schiele would only have been granted a Working Holiday visa on the basis that the Minister was satisfied that Mr Schiele was seeking to enter and remain in Australia as a "genuine visitor whose principal purpose" was to "spend a holiday in Australia".

42. There is no persuasive evidence that Mr Schiele intended to dwell permanently or for a considerable time in Australia. The mere fact that he was in Australia for 7 months does not on its own make him a "resident".

43. Mr Schiele spent most of his time in Australia travelling or holidaying. Although he spent six months using the Aubrey Fowler property as his base, he still travelled during that period. There is no evidence that Mr Schiele considered the farm to be his home, usual place or abode. There is no indication that Mr Schiele had any intention of any permanent placement with Aubrey Fowler. This would not have been permitted under his visa conditions in any event. Mr Schiele always intended to return home to Germany. Mr Schiele has no enduring connection with Australia, no family in Australia, and no assets in Australia, other than one bank account. His stay here was only ever intended to be temporary as he indicated in his residency questionnaire. Mr Schiele was in Australia for less than twelve months. As the Commissioner pointed out, Mr Schiele has not returned to Australia since his departure in July 2016 nor sought a further visa to return to Australia.

44. The Tribunal finds that Mr Schiele was not a resident according to ordinary concepts in the 2016 financial year.

Mr Schiele was not domiciled in Australia and did not have a permanent place of abode in Australia

45. Mr Schiele usually lives in Germany.

46. In this matter there is no clear statement of intention on Mr Schiele's part to reside in Australia. In fact, he admits that his intention was to stay in Australia by way of working holiday for no longer than twelve months, and he was unsure of whether he would remain here after that. As it turns out, Mr Schiele decided to leave earlier than he would have been otherwise entitled to stay under his Working Holiday Visa. Mr Schiele was in Australia for less than eight months. His original intention was to visit his girlfriend, do some work, visit friends and "see some of the country", and that is in fact what Mr Schiele did. There was no firm commitment to remain in Australia and the work Mr Schiele engaged in was only of a temporary nature. During his time in Australia he either stayed with friends or rent free at his Australian employers which he used as a base in order to travel. These factors do not point in favour of Mr Schiele having a permanent place of abode within Australia. It can hardly be said that the temporary accommodation offered by Aubrey Fowler was Mr Schiele's "settled or usual abode":
Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation (1941) 64 CLR 241, 249.

47. While Mr Schiele lived rent-free at the Aubrey Fowler property between 1 December 2015 and 5 June 2016, he has provided no details of where he stayed between 30 October 2015 and 30 November 2015 or 5 June 2016 and 18 July 2016.

48. In relation to the domicile test, the matter under consideration is the location of the person's permanent place of abode.

49. For the reasons already outlined, Mr Schiele's domicile is not in Australia. Mr Schiele was here on a working holiday for less than 12 months. There is no evidence of any intention of Mr Schiele to become domiciled in Australia.

50. Mr Schiele's usual place of abode is in Germany with his parents. Mr Schiele lived in Germany with his parents before travelling to Australia on holiday, and he returned there after leaving Australia.

51. Mr Schiele declared in his Residency Questionnaire that Germany was the country he usually lives in.

52. The Tribunal finds there is no basis for determining that Mr Schiele's domicile is in Australia.

The '183 Day' Test

53. There was concern by Mr Schiele that the Department of Immigration had incorrectly counted the number of days he stayed in Australia. The Commissioner does not dispute that Mr Schiele was physically present in Australia for more than 183 days during the 2016 income year. This, however, does not allow him to satisfy the 183 day test.

54. While Mr Schiele may have resided in Australia for more than 183 days, he cannot be regarded a resident unless his usual place of abode is in Australia, or he intends to take up residency in Australia. For the reasons already outlined Mr Schiele cannot satisfy this test either.

55. As already discussed, the Tribunal has found that Mr Schiele's usual place of abode was Germany and not Australia, and there is no evidence that Mr Schiele intended to take up residency in Australia. As a result, Mr Schiele does not satisfy the 183 day residency test.

56. Mr Schiele stated in submissions lodged for the purpose of this application that he intended to apply for another visa, but those plans changed when his relationship ended. This is not consistent with his earlier statements in his Residency Questionnaire that he had intended to stay in Australia for nine months. The Tribunal considers that little weight can be given to this new statement. It is also not consistent with the fact that his belongings remained in Germany. There is no evidence to corroborate the statement.

CONCLUSION

57. For the reasons set out above, the Tribunal is not satisfied that Mr Schiele was a "resident" in the 2016 income tax year and is therefore not entitled to claim a tax free threshold. No other grounds have been raised by Mr Schiele to support his contention that his notice of income tax assessment was excessive.

58. The decision under review should be affirmed.

DECISION

59. The decision under review is affirmed.