Case R68

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 20 July 1984.

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K.P. Brady (Chairman), J.E. Stewart and D.J. Trowse (Members)

In this reference, which is concerned with the year of income ended 30 June 1980, the taxpayer was an employee of Telecom and had been so for some 20 years, and had advanced to the position of technical instructor supervising the laying of conduits, cables and such like for telecommunication systems.

2. In July 1979, in response to a newspaper advertisement, he applied for and obtained a position of telecommunications supervisor in Saudi Arabia with a joint venture comprising two of the world-leading companies working in that field. The advertisement advised the salary (presumably the annual salary) to be ``$17,000 tax-free'' and stated that the applicant was ``required for an initial engagement of one year, with possible extension to three years''. Having secured the position, the taxpayer requested Telecom for leave of absence without pay for a period of 12 months, and its permission to work with another employer over that period; both requests were granted. It seems that the taxpayer departed for Saudi Arabia in October 1979, and returned to Australia 12 months later.

3. In assessing the taxpayer on his income returned, $4,169, for the year of income in issue (but which covered a 3½ months period only), the Commissioner increased that figure by $25,000 and, in an adjustment sheet issued to the taxpayer, he advised that the variation stemmed from an ``assessment issued in accordance with the provisions of sec. 167 of the Income Tax Assessment Act 1936''. That section deals with default or arbitrary assessments and, in the situation such as the one before us, that type of assessment is issued where the Commissioner is dissatisfied with the taxpayer's return. The taxpayer duly objected to the Commissioner's action on the assessment and, resulting from correspondence which subsequently ensued, the amount of $25,000 was reduced to $11,400 to accord with the amount of salary actually received by the taxpayer in Saudi Arabia in the year of income in issue; it seems that the balance amount was received in the subsequent year, that ended 30 June 1981.

4. The taxpayer, who conducted his own case before us, made the following submissions:

• (a) first, that he was not a resident of Australia during the year of income in issue, and therefore he was not assessable to Australian tax on his Saudi Arabian salary under sec. 25(1);
• (b) alternatively, whilst he might be prepared to accept that he was an Australian resident during the year of income in issue, his Saudi Arabian salary was derived by him from an ex-Australian source, and because that salary income was not exempt from income tax in Saudi Arabia, sec. 23(q) operated so as to grant him exemption from tax in Australia.

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5. In support of those submissions, he advanced the following arguments:

• (a) In accepting the appointment in Saudi Arabia, his intention was to stay there for an indefinite period. He informed us that upon his arrival in that country he was given a resident's visa for a period of five years, thus allowing him to stay there for that period of time. It was only because there was no work available for his employer company that his contract was not renewed causing him to return to Australia at the end of 12 months. (That contract was said to be in writing but was not tendered in evidence by the taxpayer as it seems that he did not have a copy with all of its terms intact.)
• (b) To support his contention that he sought work on a medium to long term basis out of Australia, he informed us that he subsequently obtained work in Saudi Arabia in May 1982 with the same employer as before, and in fact he then resigned from Telecom in the belief that his overseas appointment would be for approximately five years.
• However, as events turned out, the period actually worked was again 12 months due to political troubles in the region at that time which caused the company to send expatriates back to their own countries; the taxpayer advised us that he had not been back to Saudi Arabia since the 1982/83 visit.
• (c) As a result of obtaining leave of absence from Telecom, his superannuation fund rights were frozen and he made no further contributions whilst he was out of Australia.
• (It is pertinent to note that the taxpayer did not resign from Telecom when going to Saudi Arabia on the first occasion. His thought was that his future employment position in Australia would be better secured by not taking that step; he maintained, however, that his intention in going to Saudi Arabia was to stay for an indefinite period. He sought leave of absence for a 12 months' period only because he considered that he would not have obtained leave for a longer period.)
• (d) Being a widower with his children grown up, he considered that he had no tap roots in Australia and so, liking to travel, he was free to stay overseas for long periods.

6. Before dealing with the substantive issues, it is necessary to examine a preliminary point made by the Commissioner's representative in his submissions, namely, that it was not open to the taxpayer to argue that he was a non-resident in the year of income in issue because it was not included in his grounds of objection. Those grounds were detailed as follows:

``1. That the said amount of $25,000 is not subject to Australian income tax.

2. That income earned in Saudi Arabia is exempt from Australian income tax in terms of sec. 23(q) of the said Act as the income so earned in Saudi Arabia was not exempt from tax in that country.

3. That a copy of a letter from [name of company employer] was enclosed with my 1980 return of income certifying that all social insurance fees, governmental requirements and tax regulations had been complied with.''

7. Section 190(a) states that a taxpayer shall be limited to the grounds stated in the notice of objection, and sec. 185 stipulates that those grounds shall be stated fully and in detail. In
H.R. Lancey Shipping Co. Pty. Ltd. v. F.C. of T. (1951) 9 A.T.D. 267, Williams J. stated at p. 273:

``The grounds of objection need not be stated in legal form, they can be expressed in ordinary language, but they should be sufficiently explicit to direct the attention of the [Commissioner] to the particular respects in which the taxpayer contends that the assessment is erroneous and his reasons for this contention.''

In our view, the Commissioner could not reasonably have been expected to gather from the written objection that he was being required to apply his mind to the matter of non-residency. The sole provision upon which the taxpayer advised he would be contesting the assessment was sec. 23(q), which deals with the situation where income is derived from sources out of Australia and Papua-New Guinea by a resident and is not exempt from income tax in the country where it is so derived. No wider issues are brought into play by that subsection. Accordingly, through the operation of sec. 190(a), we must reject the taxpayer's contentions in regard to his non-residency as incompetent.

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8. However, in case we are wrong in taking the view that we do, and because the taxpayer's arguments can be dealt with in relatively short compass, we turn now to examining the matter of residency. The term ``resident'' or ``resident of Australia'' is defined in sec. 6(1), and, to the extent that it is relevant, 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 his 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 his usual place of abode is outside Australia and that he does not intend to take up residence in Australia; or
• (iii) who is an eligible employee for the purposes of the Superannuation Act 1976 or is the spouse or a child under 16 years of age of such a person; and

(b) a company...''

Hence, as regards individuals, the statutory definition of ``resident'' or ``resident of Australia'' means a person who resides in Australia according to the principles of the general income tax law relating to residence and, in addition, includes a person who satisfies any one of the three specific statutory tests enumerated in (a)(i), (ii) and (iii).

9. Applying general common law notions of ``residence'' to the situation before us, we consider that the taxpayer did not cease to be a resident of Australia through being out of Australia for some 8½ months in the year of income. In the case of
F.C. of T. v. Miller (1946) 8 A.T.D. 146, it was stated by the High Court that whether a taxpayer is a resident or not is ordinarily a question of degree, and therefore one of fact. In examining the matter, the Courts have taken into account a number of considerations regarded as relevant. One such matter is whether a home is maintained by the taxpayer in Australia whilst he is overseas. Linked with this is whether the taxpayer has family or business ties in the overseas country. A prime consideration is obviously whether the taxpayer was physically present in the overseas country during the year of income in issue, and to what extent, and to what purpose.

10. In the instant case, the evidence disclosed that the taxpayer, whilst in Saudi Arabia, lived in quarters rented by his employer and that he had no family nor business ties there. On the other hand, he continued to maintain his erstwhile residence in Australia whilst he was away, and rented out that property on a 12 months' lease. Also he maintained a bank account in Australia to which he remitted money sporadically for investment purposes. Also he had children and grandchildren living in Australia. It is true that he was overseas for the greater part of the year, and whilst it seems that he worked there for the whole of that time, albeit on a one year contract renewable at the option of the employer company, the critical fact remains that at all times whilst he was overseas during the year of income he remained an employee of Telecom Australia with employment secured, and with superannuation fund rights revivable upon his return to Australia.

11. The taxpayer stated that it was his intention to reside outside Australia for an indefinite period, but it would seem that the Courts do not regard purpose or intent as an aspect of any real significance, ref.
Miesegaes v. I.R. Commrs. (1957) 37 T.C. 493, sec also
F.C. of T. v. Applegate 79 ATC 4307 at pp. 4309 and 4317. In the former case, the Court ruled that on the evidence adduced the taxpayer was a resident of the United Kingdom notwithstanding that his own intention and wish was not to live there (he was attending a public school in England for the greater part of the year in issue, with his father living in Switzerland), and cited with approval the dictum of Lord
Buckmaster in Lysaght v. I.R. Commrs. (1927) 13 T.C. 511 at pp. 533-534 that:

``It may be true that the word `reside' or `residence' in other Acts may have special meanings, but in the Income Tax Acts it is, I think, used in its common sense and it is essentially a question of fact whether a man does or does not comply with its meaning.''

That dictum was again cited with approval by Dixon J. (as he then was) in F.C. of T. v. Miller (supra) at p. 151.

12. It is appropriate to mention here that a number of double tax agreements which Australia has with overseas countries contain a definition of ``Australian resident'' which differs from the definition contained in the

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Income Tax Assessment Act. However, since Australia does not have such an agreement with Saudi Arabia (indeed, it seems that Saudi Arabia has no double tax agreements with other countries), we need not here go beyond what the word ``resident'' means in common parlance.

13. We also consider that the taxpayer is a resident under the extension of the definition of ``resident'' contained in para. (a)(i). Bearing in mind that he had been an employee of Telecom Australia for some 20 years, his domicile of choice, in our view, was clearly Australia and, accordingly, he would only cease to be a ``resident'' if the Commissioner (and this Board standing in his place by the operation of sec. 193(1)) could be satisfied that his permanent place of abode was outside Australia. For the reasons set out above, and being mindful that an enquiry as to whether there is or is not a permanent place of abode outside Australia is an objective one (see the Supreme Court of New South Wales' decision in
Applegate v. F.C. of T. 78 ATC 4054 at p. 4057), we consider that the taxpayer's stay in Saudi Arabia could only be considered to be impermanent or temporary. Accordingly, it is our view that his permanent place of abode (according to the meaning that the word ``permanent'' has within the context of para. (a)(i) - see the Federal Court decision in Applegate (supra) at 79 ATC pp. 4313-4314) was, at all times during the year of income in issue, Australia.

14. In any event, apart from any common sense notions of ``residence'', and the operation of para. (a)(i) of the statutory definition of ``resident'', that same definition by way of para. (a)(iii) deems the taxpayer to be a ``resident'' because he is ``an eligible employee for the purposes of the Superannuation Act 1976''. We have seen that the taxpayer had been an employee of Telecom for some 20 years and was so engaged as a permanent employee during the year of income in issue. We have seen too that at all times he was a member of the superannuation fund during the year in issue, although he ceased to make contributions for the period that he was out of Australia.

15. ``Eligible employee'' is defined in sec. 3 of the Superannuation Act to mean, inter alia, ``a person who is a permanent employee''. In its turn, ``permanent employee'' is defined in the same section to mean:

``...

• (a) a person who is an officer for the purposes of the Public Service Act; and
• (b) any other person employed by the Commonwealth or by an approved authority in a permanent capacity,

but does not include a part-time employee who is not an approved part-time employee;.''

An examination of the Telecommunications Act 1975 reveals, vide sec. 97(1), that Telecom is an approved authority for the purposes of the Superannuation Act. Accordingly, the statutory evidence affords incontrovertible proof that the taxpayer is a resident of Australia by the deeming provision of sec. 6(1)(a)(iii).

16. We now turn our attention to the arguments advanced by the taxpayer under sec. 23(q). To the extent that it is relevant, that section is in the following terms:

``income... derived by a resident from sources out of Australia and Papua New Guinea, where that income is not exempt from income tax in the country where it is derived...

Provided that this paragraph shall not apply to exempt any income unless -

• (i) where there is a liability for payment of income tax in the country where that income is derived - the Commissioner is satisfied that the tax has been or will be paid; or
• (ii)...''

It was common ground that the taxpayer's salary earned for services performed in Saudi Arabia was derived from a source out of Australia. Two questions, however, emerge:

• (a) was the salary subject to income tax in Saudi Arabia, and on the basis that it was,
• (b) could the Commissioner (and this Board standing in his place) be satisfied that the tax had been or would be paid?

17. In determining the above questions, the following legal propositions are regarded as relevant:

• 1. As part of the overall burden of proving that the assessment issued to him is excessive (see sec. 190(b)), the taxpayer carries the onus of showing that his salary derived in Saudi Arabia is subject to income tax there.

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• 2. The words ``not exempt from income tax'' do not require the income to be the subject of a specific exemption, but simply mean ``not subject to tax'' (see
  Australian Machinery & Investment Co. Ltd. v. D.F.C. of T. (1945-1946) 8 A.T.D. 81 at p. 100). Also, an item will not be ``exempt'' if, even though it is excluded from the actual taxable amount, the rate of tax on that amount is increased by reference to its existence (
  Mutual Life & Citizens' Assurance Co. Ltd. v. F.C. of T. (1959) 12 A.T.D. 9 at p. 13).
• 3. It is not always necessary for an impost to be called a tax in order to in fact be one. In
  Leake v. C. of T. (W.A.) (1934) 3 A.T.D. 51 at p. 52, the distinguishing features of a tax were stated by the Supreme Court of Western Australia to be as follows:

• ``A compulsory contribution, or an impost, may be none the less a tax, though not so called; the distinguishing feature of a tax being in fact that it is a compulsory contribution, imposed by the sovereign authority on, and required from, the general body of subjects or citizens, as distinguished from isolated levies on individuals.''

• Within the context of sec. 23(q) it might be added that the compulsory contribution imposed by the sovereign authority on the general body of subjects should relate to their incomes.
• 4. It is the income itself and not the person who receives it that is required to be ``not exempt from income tax'' (see
  F.C. of T. v. Ellen Constance Angus (1961) 12 A.T.D. 277 at pp. 285-286). Accordingly, it seems that if tax is deducted at the source by the payer of the income, the income is ``not exempt from income tax''.
• 5. Whether sec. 23(q) can be successfully invoked or not depends very much on the taxpayer's own fact situation. In Australian Machinery & Investment Co. Ltd. v. D.F.C. of T. (supra) at p. 101, Dixon J. (as he then was) stated:

• ``The application of s. 23(q) must be controlled by the precise facts of any given case in which it is invoked. I shall, therefore, proceed to set out what I conceive to be the state of facts relevant to the application of the provision, as I collect them from the materials before us.''

• 6. The provisos to sec. 23(q) should not be narrowly construed. In F.C. of T. v. Ellen Constance Angus (supra), Dixon J. (as he then was), in dealing with the first proviso detailed above, having stated that it should not be construed narrowly, went on to say at p. 282:

• ``The liability for payment of income tax should be understood to include every description of liability which would be sufficient to make it true that the income was not exempt from payment of income tax in the country where the income is derived and the word `payment' should correlatively be construed as covering every kind of discharge of that liability which in that country was accepted as the equivalent of payment. After all what condition (a) [as it was then described in the Income Tax and Social Services Contribution Assessment Act 1936-1955] is aiming at is ensuring that the foreign tax liability relied upon to bring the case within s. 23(q) will be discharged.''

18. We now turn to examining whether the taxpayer's salary derived in Saudi Arabia was subject to income tax in that country. It seems that the Saudi tax system is based on the concept of source, and thus only seeks to tax operations taking place within the country. It seems further that there are two principal taxes, namely:

• (1) An income tax which is levied only on income belonging to foreign corporate entities and individuals that arises or is deemed to arise in Saudi Arabia. However, wages and salaries of individuals are exempt from tax altogether.
• (2) An impost called Zakat, which is a religious Islamic tax on income and property belonging to Saudi corporate entities and Saudi individuals. The rate of tax charged is 2.5% on both income and capital resources not invested in fixed assets. It is payable annually. As it does not affect the taxpayer, no further reference need be made to it other than to say that the income tax and Zakat are alternative imposts; there is a liability to either one or the other, but never to both.

Income tax in Saudi Arabia is governed by the Income Tax Act promulgated in 1950, which has subsequently been supplemented and amended

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by various Royal Decrees, ministerial resolutions and departmental circulars and directives. The lack of codification renders the system markedly complex. The significant matter for our purposes is that, since 15 May 1975, Art. 2 has been repealed. Prior to its repeal it provided that all non-Saudis should pay tax on personal income derived from salaries, wages, fees or compensation for any work done within the country. Presumably in a move to encourage foreign skilled workmen to come to the country to carry out its large-scale development plans, their incomes were made tax-free. Accordingly, all non-Saudis, such as the taxpayer, have been exempted from income tax since the above date.

19. The taxpayer however, in giving evidence, was adamant that income tax had been deducted from his monthly salary payments. He advised us that his employer had an office in the Saudi Arabian city where he was working and that he was paid in cash for which he was required to sign a wages book as a clearance or form of receipt. He stated at p. 21 of the transcript that:

``The income tax was deducted, to my knowledge, before I received that payment.''

Later, he added:

``... a certain percentage is paid by the employer and I think it is 5% is paid by the employee and it is deducted from his salary.''

To support his contention, he referred us to a letter from his Saudi Arabian employer which was in the following terms:

``15/9/1980

TO WHOM IT MAY CONCERN

This is to certify that Mr. [name of taxpayer] of Australian nationality has been/is employed with our company, [name of company], during a period from 15/10/1979 to 30/6/1980. The Company is not incorporated in the Commonwealth of Australia.

According to his employment contract, [name of taxpayer] has been paid his salary in Saudi Arabian currency.

It is hereby further certified that all obligations such as social insurance fees, local tax regulations and other governmental requirements for the above mentioned individual have been complied with during said period of time.

Yours sincerely,

[Sgd.].....

Personal Manager.''

20. Whilst we entertain no doubts as to the taxpayer's sincerity, we believe that the deductions made by his employer from his salary related to social insurance contributions and not to income tax (certainly not the latter as in our view there was no such impost for which he could become liable). It is our belief that the words ``social insurance fees'' used in the last paragraph of the employer's letter detailed above refer in fact to social insurance contributions.

21. Tendered in evidence by the Commissioner's representative was a document of some 30 pages entitled ``Social Insurance Law'' and said to be an English translation of law relating to social insurance in Saudi Arabia. We were referred especially to the following provisions:

``Article 1

1. This Law shall be called `the Social Insurance Law' and shall apply to wage-earning workmen. These shall be provided hereunder with the compensations mentioned herein in case of:

• (a) Industrial injuries, and occupational diseases.
• (b) Disability, old age and death.''

(We were advised by the Commissioner's representative that the matters included in (a) were the responsibility of an Occupational Hazards Branch and that those matters detailed in (b) were the responsibility of an Annuities Branch; such Branches are mentioned in Articles which follow hereunder.)

``Article 4

With due regard to the provisions of Article 5 and 6, the social insurances instituted by virtue of this Law shall be compulsorily applied to all workmen, without discrimination as to nationality, sex or age, who work by virtue of a labour contract for the benefit of one or more employers, regardless of the duration, nature or form of

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the contract, or of the amount or kind of wages paid, provided that their services are performed mainly within the Kingdom of Saudi Arabia.

Article 5

1. Excepted from the social insurances instituted by virtue of this Law are:

• (a)...
• ...
• (h) Foreign workmen whose period of service in the Kingdom of Saudi Arabia is presumed not to exceed one year. This applies to the Annuities Branch only.''

(The Commissioner's representative tendered evidence to show that the above exclusion does not apply if the employer had more than 20 employees performing services principally in Saudi Arabia, as was the position in the instant case.)

``Article 7

Participation of employers and workmen in the insurance is compulsory and shall take effect as of the day on which they fulfil the requisite conditions prescribed in the regulations, the rules in force and the ministerial decisions issued in accordance with the preceding Article.

...

Article 9

1. A General Organisation for the social insurance of workmen shall be established to administer the social insurances instituted by virtue of this law. This General Organisation shall be a legal entity and shall enjoy administrative and financial independence and be guaranteed and controlled by the State.

2....

3....

...

Article 18

1. The contributions for the Occupational Hazards Branch shall be fixed at 2 per cent of the wages of the insured subject to contribution, and the employer shall alone be responsible for its payment. The rate of this contribution may be increased up to double the amount for employers who refuse to abide by the instructions issued by the competent authorities regarding the safety and health of workmen. The procedure for the implementation of this last provision shall be prescribed by rules.

2. The contribution for the Annuities Branch shall be fixed at 13 per cent of the wages, of which 8 per cent shall be borne by the employer and 5 per cent by the insured.

3....

Article 19

1. The contributions prescribed in the preceding Article shall be computed on the basis of the total wages received by the insured and the benefits in kind provided to him.

2....

3....

4. The employer shall be under obligation to pay to the General Organisation the full amount of the contributions due from him and from his insured workman, and he alone shall be responsible towards the General Organisation for the payment of such contributions. In return, the employer may deduct from the wages of the insured the contributions due from him every time he pays him his wages. Should the employer neglect to withhold the workman's contribution upon payment of the wages, he may not withhold such contribution in any from whatsoever at any later date.''

22. Might not the social insurance impost be, however, an income tax although not called by that name? The taxpayer considered that it was, and referred us to Latham C.J.'s dictum in
Matthews v. The Chicory Marketing Board (Victoria) (1938) 60 C.L.R. 263 at p. 276, viz.:

``The levy is, in my opinion, plainly a tax. It is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.''

In that case, the Full High Court examined the nature of a levy made on chicory producers by the Chicory Marketing Board, a body established under the Marketing of Primary Products Act 1935 (Vic.). The majority of the Court (Latham C.J. being in the minority) held that the levy made by the Board constituted the imposition of an excise duty, and as the power to impose duties of customs and excise is

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exclusive to the Commonwealth by virtue of sec. 90 of the Constitution, the levy and the provisions of the Victorian Act authorising it were invalid. Because the Court was concerned with an impost not related to income tax, the relevance of the dictum to the instant case must be considered questionable; indeed, in the context that Latham C.J. used the word ``tax'', he was referring to it as a tax on commodities, not on income.

23. In the New Zealand case of In
re Paterson (Deceased) (1942-1943) 3 A.I.T.R. 1, it was stated by Myers C.J. at p. 17 that there can be various types of charges or taxes on income, but a particular charge need not necessarily be income tax within the ordinary acceptation of that term. There, he was one of the majority of the Court of Appeal in ruling that New Zealand social security contributions, although assessed and collected similarly to income tax, were not, on the true construction of the New Zealand Social Security Act 1938, an income tax.

24. A similar question of construction came before the Supreme Court of New South Wales in
De Romero v. Read and Anor. (1932) 32 S.R. (N.S.W.) 607. There, the issue was whether an unemployment relief tax levied on income and collected as a matter of convenient administration by the Commissioner of Taxation was income tax. The Court held that it was not income tax, and pointed to the fact that the tax in question went to a special fund and was required to be used for a special purpose. Over and above those considerations, however, the Court considered that in normal parlance one would not expect to hear anybody speaking of unemployment relief tax as income tax, and in any event it was not such a tax as was contemplated by the legislature, having regard to the language which it employed in drafting the particular statute, the Prevention and Relief of Unemployment Act 1930. However, on appeal to the High Court (De Romero v. Read and Anor. (1932) 48 C.L.R. 649), Evatt J. took a different view: in his opinion, unemployment tax was simply an additional income tax. In giving his judgment, he stated at p. 675:

``As to the second question, whether the `unemployment relief' tax, imposed by the Prevention and Relief of Unemployment Act 1930, is included in the expression `all State income tax' in the covenant, too much has, I think, been made of the fact that the unemployment tax goes to a special fund and must be used for a special purpose. It seems to me that the judgment of the Privy Council in
Morris Leventhal v. David Jones Ltd. (1930) A.C. 259 gives no countenance to such a distinction. In that case, as was pointed out by Lord Merrivale (at p. 270), the Bridge tax did not extend to land generally throughout New South Wales, but only within a limited area, and the purpose of the tax was to provide funds, not for the common purposes of the State, but for a particular scheme of betterment. None the less, it was held that the impost was `land tax' within the meaning of a certain covenant.''

The learned Judge then went on to draw an analogy between unemployment relief tax and super tax, which was ruled by the English Court of Appeal in In
re Reckitt; Reckitt v. Reckitt (1932) 101 L.J. Ch. 333 to be simply an additional income tax.

25. In the case of In re Paterson (Deceased), supra, the New Zealand Court of Appeal distanced itself from the comments of Evatt J. and was of the view that the decision of the Privy Council in Morris Leventhal v. David Jones Ltd. did not support the proposition that the learned Judge put forward. The Court of Appeal's view was that in determining whether a tax is an income tax or not, one must appreciate that the term ``income tax'' has a well-understood and recognised meaning of its own and, unless the tax in issue meets with that ordinary acceptation, it is not an income tax. Myers C.J. stated at p. 17:

``So far as income tax is concerned, I think that primarily it has a well-defined and well-understood meaning and the expression is generally recognized as applying only to income-tax imposed under the Land and Income Tax Acts, though that would appear to include a sur-tax imposed as an additional income-tax (In re Reckitt; Reckitt v. Reckitt (1932) 2 Ch. 144).''

26. In the light of the above case law, we are of the view that the social insurance impost deducted from the taxpayer's salary cannot be regarded as an income tax; in fact, we doubt whether it was a tax at all. Whilst the contributions of employees were based on their incomes, the scheme, whilst compulsory, encompassed a segment only of the total

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population of Saudi Arabia, namely, wage-earning workmen. Additionally, the funds paid under the scheme were paid into a special bank account, as distinct from the consolidated revenue of the country, and were used for a specific purpose, namely, to pay benefits to a specified and restricted class of persons. It is therefore clear, we consider, that the contributions so made by the taxpayer bear none of the distinguishing features of an income tax.

27. Our finding on the issue remains the same whether one applies the views of the New Zealand Court of Appeal and Supreme Court of Victoria on what constitutes an income tax, or Evatt J.'s broader based test.

28. For the reasons detailed above, we consider that the taxpayer cannot invoke sec. 23(q) so as to render the salary earned by him in Saudi Arabia exempt from Australian income tax. We therefore uphold the Commissioner's action in disallowing the taxpayer's objection, and confirm the assessment.

Claim disallowed