Case P82

Judges: MB Hogan Ch

P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 22 September 1982.

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Dr. P. Gerber (Member)

The taxpayer in this reference was at all relevant times a

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deckhand on a prawn fishing boat who claimed an amount of $216 as a tax rebate, asserting that she was a ``resident'' in Zone A as prescribed in sec. 79A.

2. The case was heard on agreed facts and in the absence of the taxpayer:

• (1) The taxpayer was employed for the full tax year ended 30 June 1979 as a deckhand on a prawn fishing boat.
• (2) The boat operated solely out of Groote Eylandt during the year in issue and was moored in that port when not fishing.
• (3) The taxpayer did not own, rent or maintain a house or other form of residence on the mainland, or islands, during the year.
• (4) Throughout the year taxpayer lived on board the boat on which she worked.
• (5) Taxpayer was not physically present on the mainland, or islands, for more than one-half of the year of income.

In addition, we were informed by the Commissioner's representative (without objection) that the taxpayer ``spent more than one-half of the relevant year at sea''. It was common ground that Groote Eylandt is in Zone A.

3. The relevant provisions are as follows:

``Section 79A(1) For the purpose of granting to residents of the prescribed area an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial climatic conditions, isolation and high cost of living in Zone A and, to a lesser extent, in Zone B, in comparison with parts of Australia not included in the prescribed area, a taxpayer who is a resident of the prescribed area in the year of income is entitled, in his assessment in respect of income of that year of income, to a rebate of tax ascertained in accordance with this section.

(2) Subject to sub-section 79B(4), the rebate allowable under this section in the assessment of a taxpayer in respect of income of the year of income is -

• (a) in the case of a resident of Zone A - an amount equal to the sum of -
  • (i) $216; and
  • ...
• (b) in the case of a resident of Zone B who has not resided or actually been in Zone A during any part of the year of income - an amount equal to the sum of -
  • (i) $36; and
  • ...
• (c) in any other case - such amount as, in the opinion of the Commissioner, is reasonable in the circumstances, being an amount not greater than the amount of the rebate to which the taxpayer would have been entitled under this section if paragraph (a) had applied to him in respect of the year of income and not less than the amount of the rebate to which he would have been so entitled if paragraph (b) had so applied to him.

...

(4) In this section -

• `resident', in relation to any area, means a person (other than a company or a trustee) -
  • (a) who resides in that area for more than one-half of the year of income;
  • (b) who has actually been in that area, whether continuously or not, during more than one-half of the year of income; or
  • ...
• `the prescribed area' means the area comprised in Zone A and Zone B;
• `Zone A' means the area described in Part I of Schedule 2;
• `Zone B' means the area described in Part II of Schedule 2.''

What constitutes Zone A is set out in the Schedule as follows:

``1. All that portion of the mainland of Australia lying north of a line commencing at the westernmost point at which the 26th parallel of south latitude intersects the western coastline thence east to the 141st meridian of east longitude thence north to the south-eastern

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boundary of the Shire of Boulia thence generally north-easterly by the boundaries dividing the Shires of Winton Flinders Dalrymple and Herberton from the Shires of Boulia, Cloncurry, McKinlay Richmond Etheridge and Mareeba to the 145th meridian of east longitude thence north to the northern boundary of the Shire of Mareeba thence by that boundary and the boundary dividing the Shires of Douglas and Cook to the eastern coastline.

2. All the islands forming part of Australia lying adjacent to the coastline of the portion of Australia described in paragraph 1.

3. Macquarie Island.

4. Norfolk Island.

5. The Territory of Heard Island and McDonald Islands.

6. The Australian antarctic Territory.

7. The Territory of Cocos (Keeling) Islands.''

4. Reference to ``all that portion of the mainland'' would suggest that the territorial sea and coastal waters adjacent to the mainland are excluded from the relevant zones for purposes of the rebate allowable under sec. 79A. This was the conclusion reached by this Board on two occasions ( Case A47,
69 ATC 278 and Case B10,
70 ATC 45 ), a conclusion which I respectfully adopt as clearly correct. On the other hand, a fisherman, residing permanently on his boat whilst fishing in Australian territorial waters, is undoubtedly a ``resident of Australia'' for purposes of sec. 6 of the Tax Act and liable to pay tax in this country (cf. F.C. of T. v. Miller (1946) 73 C.L.R. 93 and
N.S.W. v. The Commonwealth (1975) 135 C.L.R. 337 ). In the first of the above Board cases, the taxpayer, a seaman employed on a vessel trading between Cairns and Thursday Island, made the round trip every fourteen days. It was found that the taxpayer had a place of residence in Cairns, where he resided when the ship was in Cairns loading and unloading. He was at sea north of Cooktown for ten days out of every fourteen (Cooktown is in Zone A). The taxpayer claimed to be entitled to a Zone A rebate, the Commissioner treated him as a resident of Zone B on the basis of his Cairns residence. This decision was unanimously upheld on the basis that ``mainland'' does not comprehend coastal waters. The issue whether or not the taxpayer was entitled to the Zone B allowance was therefore not before the Board. This notwithstanding, the Chairman (Mr. Dubout) made the following obiter observation at p. 279:

``In allowing the taxpayer the deduction appropriate to a resident of Zone B, the Commissioner has apparently regarded him as a person, in relation to that zone, who falls within the description contained in para. (a) of the definition. To say that this taxpayer `resides' in his home port for more than one-half of the year of income is to discount his absences therefrom on seafaring duties, and to emphasise rather the permanency of his place of dwelling there, the continuing presence of his housekeeper in that place, and the fact that it is his home when the vessel is berthed at his home port. To found residence upon such domestic considerations is, to my mind, entirely reasonable.''

In the second of the above decisions, the taxpayer was a seaman on a ship plying between a capital city and points of the Australian coastline in Zones A and B for a total of some 29 weeks of that year. Taxpayer's claim for a Zone A allowance was disallowed on a finding that ``through-out the relevant year the taxpayer's residential address was in a suburb of a capital city and port located outside the boundaries of the prescribed area referred to in sec. 79A''. These cases assume that the mere retention of a residence in a prescribed zone is sufficient to make the owner a ``resident'' without the further requirement of living there for the required period. So be it. The matter is not relevant to the outcome of this appeal.

5. The first thing to observe is that the Act draws a distinction between ``resident'' for tax purposes and ``resident'' for the purposes of the zone allowance. Indeed, it may well be that this taxpayer is not subject to Australian tax. Mere continuous presence in an Australian Fishing Zone does not make such a person a ``resident of Australia'' in the absence of an Australian domicile. The only issue in this reference is whether the

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taxpayer has established that she was a ``resident'' for purposes of sec. 79A in the relevant period.

6. I am aware of a long line of cases that every man must have a residence on land. Thus, in Re Young (1875) 1 T.C. 57 the Lord President held that the appellant, the master of a trading vessel, had a residence in Glasgow, notwithstanding the finding that he sailed to and fro between Glasgow and the Mediterranean for a large number of days in the year:

``Now, that he has, in the ordinary and plain meaning of the words, a residence in Glasgow is, in these circumstances, I think, clear beyond all doubt, and it is equally clear upon the facts stated that he has no residence anywhere else, unless a ship can be called a residence, which I rather think it never has. A residence, according to the ordinary meaning of the word must be a residence on shore, a dwelling in a house. A residence is a dwelling-place on land, and the only dwelling-place on land which this Appellant has is in Glasgow, where, as I said before, he dwells when at home, and where his wife and children dwell when he is at sea.''

In an earlier case - Brown v. M'Callum (1845) 7 D. 423 - Lord Mackenzie stated:

``Every sailor has a residence on land. We have no persons who are born and live and die on the water.''

Lord Jeffrey put it with more pathos:

``There are many men whose business is peripatetic. They are less in the bosom of their families than more fortunate men, but they have a residence.''

This view was reaffirmed in Rogers v. I.R. Commrs. (1879) 1 T.C. 225.

7. I am not persuaded that these cases have any relevance to this reference. They seem to turn on the somewhat quaint notion that the essence of residence involves the concept of a fixed abode, i.e. a structure that cannot be moved. If that is so, people living permanently in caravans will be surprised to learn that they have no residence anywhere. The contrary view has some judicial support. In Bayard Brown v. Burt (1911) 5 T.C. 667, Young's case (infra) received the following gloss:

``... the argument was boldly put forward: `I am not residing at Glasgow because I am residing on board a ship sailing between Glasgow and the Mediter-ranean.' The answer to that obviously was, as I should have thought, that in a case like that a man cannot be fairly said for the purposes of Income Tax to be residing elsewhere than in Glasgow because he is during a portion of the year going backwards and forwards in a ship between Glasgow and the Mediterranean.''

In Brown's case, a man who lived aboard his yacht anchored in the River Colne for some 20 years within the port of Colchester in the County of Essex was held to be residing on his yacht and yet liable to income tax as a person residing in the United Kingdom.

8. I am not persuaded that Brown's case, I.R. Commrs. v. Lysaght or Levene v. I.R. Commrs. both reported in (1928) A.C. have much relevance to this reference. Each of the latter two cases decided only that there was evidence on which the Special Commissioners could find residence as a matter of fact. Much of the speeches is strictly obiter, albeit obiter of the highest persuasion. Neither case has the remotest relevance to the facts in this reference other than the suggestion that whatever finding we might make on ``residence'' is unappellable.

9. To the question: ``Did this taxpayer have at and during the relevant time a `residence' on Groote Eylandt?'' the answer must be an unequivocal ``no''. Again, if one asks whether the taxpayer was physically present on Groote Eylandt for the requisite period, one can only conclude that the evidence falls far short of establishing this. True, the taxpayer was at all relevant times in the territorial sea and coastal waters adjacent to the island. But that is not the test the section postulates. This taxpayer resides on a prawn trawler; she does not reside on Groote Eylandt merely because the trawler is anchored there ``when not fishing''. Nor does one acquire a ``residence'' for purposes of sec. 79A by some form of reductio ad absurdum which goes something like this:

• (i) no one can reside on a boat;
• (ii) everyone must have a residence on land;

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• (iii) this taxpayer has no residence anywhere else;
• (iv) therefore she resides on Groote Eylandt.

10. Taking the view of the law as I do, I am reluctantly compelled to uphold the Commissioner's decision on objection. Nevertheless, I am satisfied that my decision defeats the remedial purpose of the section, which was designed to grant a concession (albeit a modest one) to taxpayers who spend more than half the year in uncongenial climatic conditions, endure the pangs of isolation and put their hands deep into their pockets to meet the higher cost of living. I would have thought it would not be beyond the wit of parliamentary drafting to give effect to that intent.