Duff v FC of T

Members:
Ehrlich KC SM

Tribunal:
Administrative Appeals Tribunal, Melbourne

MEDIA NEUTRAL CITATION: [2022] AATA 3675

Decision date: 2 November 2022

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Ehrlich KC (Senior Member)

INTRODUCTION AND BACKGROUND

1. The Applicant, Mr Duff, is a chef of over 20 years' experience. He was born in Australia in June 1980, is an Australian citizen, and has held, at all material times, an Australian passport.

2. During his working life Mr Duff has worked both in Australia and overseas. In respect of the years^[1] References to years are references to income years. For example, a reference to 2016 is a reference to the period commencing 1 July 2015 and ending 30 June 2016. 2014, 2015, 2017, 2018 and 2019, Mr Duff declared himself to be an Australian resident for taxation purposes and lodged taxation returns.

3. This proceeding concerns 2016, in respect of which Mr Duff did not lodge a return. In this proceeding, Mr Duff submits that he was not required to do so because he was not a resident of Australia for taxation purposes in 2016.^[2] In paragraph 5 of his witness statement dated 18 May 2022 ( Witness Statement ), which was adopted in evidence, Mr Duff gave evidence that he did not declare Australian residency for taxation purposes in the years 2002 to 2013 (inclusive). Neither party submitted that such was relevant to the issues to be decided in respect of 2016 and I proceed on that basis.

4. On or about 29 May 2015 Mr Duff accepted overseas employment with Viking Ocean Cruises Ltd ( Viking Ocean Cruises ), with employment to commence on 3 August 2015. The place of incorporation of Viking Ocean Cruises was not sought to be established at hearing, but the letter of offer^[3] A copy of the letter of offer, as counter signed by Mr Duff by way of acceptance, is included in the Supplementary T-Documents, page 15. gave its address as being in Hamilton, Bermuda.

5. The letter of offer did not specify a period of employment but stated, amongst other things, that a "contract of employment" would be drawn up for both parties to sign. Despite a request for production by the Australian Tax Office during the taxation objection procedure^[4] Further Supplementary T-Documents, page 1. , no such contract of employment was seemingly produced by Mr Duff and no such contract is included in the T-Documents.

6. By his Witness Statement Mr Duff deposed that he "completed 4 contracts with Viking which are of 4 months in length followed by 6 weeks leave" and that Viking Ocean Cruises paid for "flights to and from the vessel". The relevant evidence was as follows^[5] Witness Statement, paragraphs 2 and 3. :

During the year 2015/2016 I completed 4 contracts with Viking which are of 4 months

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in length followed by 6 weeks leave. As a seafarer I am contracted for 11 hours of work per day totalling 77 hours per week. This contract is for 120 days with 50 days leave, all monies are paid during my time on board including vacation pay, during the course of the contract the company provides all lodging requirements including food, laundry, accommodation, flights to and from the vessel.^[6] Given that Mr Duff commenced employment on 3 August 2015, only two of these contracts could have been performed, as to whole or as to part, during 2016.

During the above mentioned contracts I sailed across the world from [the] Mediterranean Sea, through the Baltic Sea, across the Atlantic and through the Caribbean Sea, stopping at most of the major ports along the way with the vessel. During my leave from the vessel I returned to Australia to visit family to celebrate Xmas and birthdays at the end of 2015 before leaving Australia to join the vessel.

7. Conversely, there were submissions made on behalf of Mr Duff that perhaps suggest that Mr Duff was employed under a single contract of employment. For example, in further information provided to the Australian Tax Office during the objection procedure in 2020, it was submitted on behalf of Mr Duff that "[h]e was contracted for the full year and had to spend 4 months on board and 2 months on onshore and another 4 months on board and 2 months onshore" and "[h]e was contracted to work full year on the Viking."^[7] T-Document 14, page 82. Similarly, in his Statement of Facts, Issues and Contentions filed 13 May 2022 ( SFIC ), it was said that "[u]under the terms of his employment contract with the cruise liner company, he was entitled to 2 months holiday after working on board for 4 months"^[8] SFIC, page 1. and "[t]axpayer never intended to return to Australia but was forced to in November 2016 after his contract had expired."^[9] SFIC, page 2.

8. Any uncertainty as to this contract issue arises only because Mr Duff has not produced any written contract(s) of employment. Ultimately, however, my findings as to residency, specifically domicile, are not affected. They are the same irrespective of whether or not there were four separate contracts governing Mr Duff's deployment on board or whether his deployments were governed by one longer term contract. Nevertheless, in case I am wrong about that, I find that Mr Duff provided his services to Viking Ocean Cruises pursuant to four separate contracts. In making this finding, I have given effect to Mr Duff's evidence on the issue and also had regard to the principle in
Blatch v Archer (1774) 1 Cowp 63; 98 ER 969 - that evidence is to be weighed according to the capacity of the party to adduce it.

9. It is not in dispute that Mr Duff spent only 86 days in Australia during 2016 - 33 days between 1 July 2015 and 2 August 2015 (being the period prior to Mr Duff leaving Australia to commence employment) and 53 days between 23 December 2015 and 13 February 2016 (being the period during which Mr Duff was visiting his family between deployments).

10. Mr Duff's Seaman's Discharge Book^[10] T-Document 9, pages 65-72. relevantly records the following in respect of 2016 (none of which is in dispute):

• (a) between 3 August 2015 and 21 December 2015 (141 days) Mr Duff worked, and for that purpose lived, aboard the Viking Star, a Norwegian flagged cruise liner^[11] These Reasons for Decision interchangeably use the phrases ‘cruise liner’ and ‘ship’. ; and
• (b) between 14 February 2016 and 30 June 2016 (138 days) Mr Duff worked, and for that purpose lived, aboard the Viking Sea, also a Norwegian flagged cruise liner.^[12] This deployment extended into 2017.

11. It follows that Mr Duff was aboard the Viking Star and the Viking Sea for, collectively, 279 days during 2016.

12. It is also not in dispute that during his time aboard, the ships cruised through international waters to a large number of countries and ports, including at least the following:

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13. Between 31 August 2015 and 28 June 2016 Mr Duff received 10 payments totalling $81,072.00 from Viking Ocean Cruises or associated entities.

14. On 22 September 2017^[13] T-Document 4. This letter contained the heading “ You may have an overdue income tax return ”. a Deputy Commissioner wrote to Mr Duff suggesting he may need to lodge an income tax return for the 2016 income year. The Deputy Commissioner identified the amount of $81,072.00 as apparent "foreign source income". The payments were set out in the following schedule attached to the letter:

15. Mr Duff did not lodge a return.

16. Subsequently, on 26 October 2017,^[14] T-Document 5. This letter contained the heading “ Lodge early to avoid penalties ”. the Deputy Commissioner again wrote to Mr Duff. That letter informed Mr Duff that if he did "not lodge a return or contact us by the due date [24 November 2017], we will send you a default assessment". The letter further stated that "[i]f we have to send you a default assessment we may charge you an administrative penalty of 75% of any tax you owe". The letter estimated the tax liability as $19,609.00 and the penalty as $14,706.00.

17. Again, Mr Duff did not lodge a return.

18. On 1 February 2018 a default notice of assessment was issued for the 2016 income year in the amount of $19,608.35 based on taxable income of $81,183.00.^[15] T-Document 7. On the same date, a notice of penalty assessment was issued in respect of the 2016 income year, imposing a penalty of $14,706.00.^[16] T-Document 8.

19. On 24 January 2020 the Applicant lodged an objection against the assessment of primary tax on the basis that he was not, in 2016, a resident of Australia for taxation purposes.^[17] T-Document 9 ( taxation objection ). Mr Duff did not object to the assessment on any other basis including on the basis that the assessment was excessive or incorrect because of the availability of a foreign income tax offset. Presumably, this was because Mr Duff did not pay any foreign tax on his foreign sourced income.

20. The objection was not allowed and Mr Duff was so advised by letter dated 28 April 2020.^[18] T-Document 16. On 9 December 2020 Mr Duff applied to the Tribunal for review of the objection decision.

21. Because Mr Duff did not object to the penalty assessment, that assessment is not the subject of review in the Tribunal. It will necessarily stand unless Mr Duff is successful in this proceeding.

THE ISSUE FOR DETERMINATION

22. The issue for determination ( issue for determination ) is as follows: Was Mr Duff, during 2016, a "resident of Australia" within the meaning of that term in s 6(1) of the Income Tax Assessment Act 1936 (Cth) ( ITAA 1936 )?

23. Section 6(1) is relevantly in the following terms:

"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

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  • …

24. In most cases, a determination of residency requires close and detailed attention to a number of factual issues. In this proceeding, however, the issues are appreciably narrowed because the Commissioner relies only upon the 'domicile' test, as set out in sub-paragraph (a)(i).^[19] On the facts, such was a sensible and proper approach for the Commissioner to take.

25. It follows that Mr Duff will succeed in this proceeding if he can:

• (a) show that he had changed his domicile to a place outside of Australia during 2016^[20] In closing submissions, Mr Duff conceded that prior to 2016 his domicile was Australia. ; or
• (b) satisfy the Tribunal (standing in the shoes of the Commissioner) that he had a permanent place of abode outside of Australia during 2016.^[21] Pursuant to s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth) ( TAA 1953 ), Mr Duff has the burden of proving that the assessment is excessive or otherwise incorrect.

MR DUFF'S EVIDENCE AND CROSS-EXAMINATION

26. At hearing, Mr Duff adopted his Witness Statement, which consists of seven operative paragraphs, and was very briefly cross-examined.^[22] No other witness was called on behalf of Mr Duff. No witness was called by the Commissioner. The pertinent cross-examination was not directed to the content of his Witness Statement, but to an answer that Mr Duff had given in his earlier residency questionnaire^[23] Residency questionnaire signed 1 June 2021 ( residency questionnaire ). :

Question 7: Did you reside in a permanent place outside of Australia in the 2016 year? If so, what was the address and for what period(s) did you reside in the place?

Response: Basel Switzerland, Schaferweg 20 from 1^stJan 2016 until 26 November 2016.

27. In cross-examination, Mr Duff confirmed, and thereby admitted, that he was never in Switzerland during 2016 and I proceed on that basis,^[24] Transcript page 9 lines 32 and 33. Mr Duff’s explanation for his answer was that such was the address he used for mail forwarding during his employment, Transcript page 9 lines 15 to 20 and 25 to 30. noting, in any event, that Mr Duff did not submit at hearing that he had resided in Switzerland during 2016, either permanently or otherwise.

28. Mr Duff was not otherwise cross-examined as to issues of residence and Mr Duff's reliability and credit is not put in issue by the Commissioner. This is, in each case, understandable as there are no material facts in dispute between the parties, just their proper characterisation having regard to relevant legal principle. I comment further on Mr Duff's evidence below.

DOMICILE

29. By his Addendum to Previous Submissions filed 22 August 2022 ( Addendum ), Mr Duff submitted that "[h]e did not have a domicile in Australia".^[25] Addendum, paragraph 1. In closing submissions, that position was narrowed, and it was conceded that prior to 2016 his domicile was Australia.^[26] Transcript page 15 lines 13 to 27 and Transcript page 17, 21 to 24. On the facts, such was a sensible and proper concession for Mr Duff to make.

30. In respect of 2016, Mr Duff submitted at hearing that a person who works, and for that purpose lives, on a cruise liner becomes a domicile of the flag state - in this case, Norway.^[27] Transcript page 20 lines 27 to 31. It follows that Mr Duff submits that Norway was a domicile of choice that replaced his pre-existing Australian domicile.^[28] I observe, in this regard, that in his taxation objection it was only submitted that “ [i]n fact, he definitely abandoned Australia to try and live and work on a cruise ship. ” His objection did not specify any new country that Mr Duff intended to indefinitely make his home in – i.e. it did not specify a new domicile of choice . It appears to have only been in the Tribunal that Norway was specified as such a domicile of choice . The Commissioner did not, at hearing, raise any objection to this submission under s 14ZZK(a) of the TAA 1953.

31. It necessarily follows from this submission that it is the position of Mr Duff that he resided in Norway whilst he was aboard ship outside the territorial waters of Norway. This is necessary because whilst he was aboard the ships, they spent little time in the territorial waters of Norway. As observed above, Mr Duff's evidence was that "[d]uring the above mentioned contracts I sailed across the world from [the] Mediterranean Sea, through the Baltic Sea, across the Atlantic and through the Caribbean Sea, stopping at most of the major ports along the way with the vessel."^[29] Witness Statement, paragraph 3.

32. For the reasons that follow, I reject Mr Duff's submissions on domicile.

33. In Handsley and Commissioner of Taxation [2019] ( Handsley ) AATA 917, Deputy President O'Loughlin said the following at paragraphs [12] to [18] (including footnotes):

• 12 A person's domicile is the product of the combination of common law principles and the operation of the Domicile Act.^[30] Domicile Act 1982 (Cth). Domicile is a legal concept as opposed to residence which is a question of fact. ^[31] Australasian Temperance & General Mutual Life Assurance Society Ltd v Howe [1922] HCA 50 ; (1922) 31 CLR 290 at 335 per Higgins J. A person's domicile is a legal concept that is attributed to a person by applying those common law principles, as affected by the Domicile Act, to a person's personal living circumstances and his or her intentions in relation to those circumstances.
• 13 The concept of a person's domicile, has been expressed as:

  …. that legal relationship between [the person] and a territory subject to a

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  distinctive legal system which invokes the system as the [individual's] personal law …which arises either … from the [person] … being or having been resident in such territorial area with the intention of making it his permanent home or, … from there being or having been such a relationship on the part of some other person on whom the [person] … is for this purpose legally dependent. …^[32] Henderson v Henderson (1965) 1 All ER 179 at 180–181 , Sir Jocelyn Simon P (as his Lordship then was). See also Shekleton v Shekleton [1972] 2 NSWLR 675 at 682 , Jenkyn J.

• 14 Everyone must have a domicile, but it is not necessary for co-existent or contemporaneous residence - a person who might have no place of residence always has a domicile.^[33] Australasian Temperance & General Mutual Life Assurance Society Ltd v Howe [1922] HCA 50 ; (1922) 31 CLR 290 at 335 per Higgins J referring to Udny v Udny (1869) L.R. 1 H.L. (Sc.) 441 at 457 . Domicile is not lost by abandonment without replacement. Until a new domicile is inferred by the law from the combination of actions and intentions as to residence, a person's pre-existing domicile survives. ^[34] See Domicile Act s 7. Historically, on abandonment of domicile of choice, domicile of origin revived – Fremlin v Fremlin [1913] Argus Law Rp 43 ; (1913) 16 CLR 212 at 232 per Isaacs J referring to what Lord Westbury said in Udny v Udny (1869) L.R. 1 H.L. (Sc.) 441 at 457–458 . Section 7 of the Domicile Act altered the common law presumption but did not produce a result that a person could not have any domicile upon an abandonment of an earlier place of residence that coupled with intentions, constituted a domicile. See also Billington v Secretary, Dept of Families, Housing, Community Services and Indigenous Affairs [2013] FCA 480 at [42] per Logan J.
• 15 Subject to some not presently relevant modifications of common law principles made by the Domicile Act, a person can have a domicile of origin and a domicile of choice. Domicile of choice is:

  … a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. This is a description of the circumstances which create or constitute a domicil, and not a definition of the term. There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation.^[35] Fremlin v Fremlin [1913] Argus Law Rp 43 ; (1913) 16 CLR 212 at 233 per Barton J referring to what Lord Westbury said in Udny v Udny (1869) L.R. 1 H.L. (Sc.) 441 at 458 .

• 16 The difficulties as to its change have been noted in the following terms:

  … Though the principles which govern a change in domicil are well established, they are often difficult of application, ….It is often difficult to determine whether [a person has] … settled in their new place of residence with the intention of making it [his/her] … permanent home; or whether [she/he intends] … to return at some time to live permanently in [his/her] … country of origin; or whether, thirdly, the residence is quite indeterminate in character, no clear intention as to ultimate permanent residence being formed.^[36] Henderson v Henderson (1965) 1 All ER 179 at 180–181 , Sir Jocelyn Simon P (as his Lordship then was). See also Shekleton v Shekleton [1972] 2 NSWLR 675 at 682 , Jenkyn J.

• 17 For a person to change his or her domicile it is necessary both to change the fact of residence in a place, i.e. become a resident of the new place, and intend that that new place of residence be indefinite - actions and intentions must co-exist.
• 18 To the extent the decisions in Applegate suggest that intention to return to Australia is relevant to whether a new domicile has been chosen, those suggestions need to be viewed in the context of the pre-Domicile Act law. Post the Domicile Act, attention needs to be directed to intentions concerning making a home indefinitely in a country. Accordingly, the effect of s 10 of the Domicile Act is that a person who has changed domicile and has a place of abode in that new place of domicile, will have a permanent place of abode there.

34. This survey of relevant law, which I adopt and apply, creates an immediate difficulty for Mr Duff because it is settled law that until a new domicile of choice is inferred by the law from the combination of actions and intentions as to residence, a person's pre-existing domicile survives.^[37] See Domicile Act s 7. Historically, on abandonment of domicile of choice, domicile of origin revived – Fremlin v Fremlin [1913] Argus Law Rp 43 ; (1913) 16 CLR 212 at 232 per Isaacs J referring to what Lord Westbury said in Udny v Udny (1869) L.R. 1 H.L. (Sc.) 441 at 457–458 . Section 7 of the Domicile Act altered the common law presumption but did not produce a result that a person could not have any domicile upon an abandonment of an earlier place of residence that coupled with intention, constituted a domicile. See also Billington v Secretary, Dept of Families, Housing, Community Services and Indigenous Affairs [2013] FCA 480 at [42] per Logan J. For a person to change his or her domicile it is necessary both to change the fact of residence in a place, i.e. become a resident of the new place, and intend that that new place of residence be indefinite - actions and intentions must co-exist. On the question of intent, see also s 10 of the Domicile Act 1982 (Cth) ( Domicile Act ), "[t]he 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". This definition of "intention for domicile of choice" in s 10 also makes clear that the new place of residence must be a country.

35. The difficulty for Mr Duff arises because there is simply no evidence from which it can be established that Mr Duff, in 2016, intended to give up his Australian domicile and, instead,

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become a domicile of Norway. This is so even assuming, for present purposes, that Mr Duff can be said to have been residing in Norway whilst he was aboard the ships outside the territorial waters of Norway (to which question I return below).

36. Such an intent cannot be established from the mere fact that Mr Duff left Australia to work, and for that purpose live, on cruise liners that sailed under the flag of Norway. A finding on that basis alone would not be in conformity with established principle dealing with the determination of a change in domicile. Nor would it be in conformity with s 10 of the Domicile Act.

37. To establish an intent to change domicile, residence in the new country cannot be fixed for a limited period or for a particular purpose and must be general and indefinite in its future contemplation. In Mr Duff's case, there was nothing at all general and indefinite about his deployment on the cruise liners. This is so whether he was employed pursuant to separate contracts (as Mr Duff deposed to and as I have found) or pursuant to one longer term contract that governed his two deployments aboard ship in 2016.

38. To the contrary, his time aboard the ships was in each case fixed as to duration (4 months), limited as to particular purpose (duties of employment only) and self-evidently other than indefinite in its future contemplation (ongoing employment/deployment on any ship, of whatever flag, was not guaranteed).

39. As Isaacs J (as he then was) relevantly said in Fremlin v Fremlin at 232-233:

Then arises the further inquiry: What evidence is necessary to establish the intention of such relinquishment and the substitution of a domicil of choice? Lord Westbury's words are - "an intention of continuing to reside there for an unlimited time." That is sometimes described as the animus manendi. But the argument here has shown how easily words are mistaken. It has been contended that to intend to remain until the accomplishment of an object which may occupy an indeterminate period, satisfies Lord Westbury's expression "unlimited time." That, however, is an error. In such a case the duration of residence is limited by the time required for the attainment of the desired object, which it is assumed will at some definite point of time be accomplished. The words of Lord Selborne in Lauderdale Peerage Case are again unmistakably clear. He speaks of "an intention to settle there permanently, sine animo revertendi". He then enumerates circumstances which, he says, "appear to me to be altogether opposed to the notion that he had any idea of settling permanently in the province of New York, or of relinquishing his domicil of origin." And, further on, he observes:-"It is not because a critical state of health may oblige a man to go, or to remain with the prospect of dying, abroad, that he can be held to have abandoned, either animo or facto, his domicil of origin." It is manifest that a severe disease may be as unlimited in point of time as the making of a fortune; but if a man said he would return when completely cured, that could scarcely establish an intention to forsake his domicil of origin. In Doucet v Geoghegan Jessel MR treats an intention to return when a fortune has been acquired as opposed to an intention of permanent residence. In Winans v Attorney-General Lord Macnaghten indicates the tenacity of a domicil of origin as compared with any other. He says:-"Its character is more enduring, its hold stronger, and less easily shaken off." The intention requisite to shake it off must be "a fixed and settled purpose," "a determination," "a final and deliberate intention"-to do what? Why, to "abandon" the domicil of origin and to "settle" in the other. The term animus manendi may fail to receive its full connotation unless we bear in mind Lord Selborne's words, that the settlement must be sine animo revertendi.

40. Put simply, Mr Duff's acceptance of employment and his deployment on Norwegian flagged cruise liners on that basis cannot, by itself, evince "a fixed and settled purpose", "a determination", or "a final and deliberate intention" to "abandon the domicil of origin" and to "settle in" Norway indefinitely.^[38] Again assuming, for present purposes, that Mr Duff can be said to have been residing in Norway whilst he was aboard the ships outside the territorial waters of Norway. Specifically, Mr Duff's duration of residence on the ships was, in each case, limited by the time required for the attainment of the desired object

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- being, in each case, the conclusion of a 4 month deployment.

41. Further, there is no evidence before the Tribunal that 'flag' had anything to do with Mr Duff's acceptance of employment with Viking Ocean Cruises, let alone that he intended by his service to make his home indefinitely in Norway. To the contrary, on the evidence it is equally open to infer that Mr Duff would have accepted and performed his contracts of employment irrespective of what flag the ships sailed under.

42. Most relevantly, Mr Duff himself gave no evidence of any intention to settle indefinitely in any country, let alone Norway, and there is no other evidence of any such intent. The only evidence of intention that Mr Duff gave was that "[a]t no time during the tax year of 2015/2016 did I have any intention of returning to Australia for work purposes or residency".^[39] Witness Statement, paragraph 3. Leaving aside the fact that such statement of intent is ambiguous, in that it might be said to only apply in respect of 2015/2016, it does not address the key question of what country Mr Duff intended to indefinitely make his home in.^[40] This no doubt explains why the Commissioner did not cross-examine on that evidence. Mr Duff gave no evidence addressing that issue and an intent to indefinitely reside in Norway cannot, as I have said, be established from the mere fact that he worked, and for that purpose lived, on cruise liners that were Norwegian flagged. That fact (action) does not permit of a finding that he thereby intended to indefinitely make his home in Norway.

43. It should be observed that Mr Duff points to no other fact or action from which any such intent could be inferred or established - either by itself or in combination with his service on the ships. To the contrary, and most tellingly, it is admitted that Mr Duff did not apply for citizenship or any right of permanent residency in Norway during 2016.^[41] By his answer to Question 30 in the residency questionnaire, Mr Duff declared, and thereby admitted, that he did not hold or apply for citizenship, or hold or apply for rights of permanent residency, in any overseas country during 2016 including, it follows, Norway. Nor, apparently, did he have any form of Norwegian visa or apply for any such visa.^[42] Addendum, paragraph 6: “… his Seafarer’s proof of identity was sufficient as a travel document should he enter Norway. He did not need a visa to work on board the ship if it was docked in one of the Norwegian ports. ” Mr Duff did not list any Norwegian Visa application in his answer to Question 30 of the residency questionnaire. Nor is there any evidence that Mr Duff sought to find long term accommodation in Norway or that he opened any local bank account in Norway. Nor did he even reside in Norway between his deployments on the Viking Star and the Viking Sea. Instead, he returned to Australia.

44. Whilst in his SFIC it was contended that Mr Duff "never intended to return to Australia"^[43] SFIC, page 2. , that contention was not supported by any evidence from Mr Duff, and it otherwise finds no support in the evidence. Further, it is contradicted by a subsequent contention that he did not cancel his Medicare card because "cancelling his Medicare card would be inconvenient since he intended to come back to Australia after working overseas."^[44] SFIC, page 3.

45. In summary, there is no basis in the evidence upon which it cannot be found that, during 2016, Mr Duff ever intended to abandon Australia and indefinitely make his home in Norway. Mr Duff's temporary residence on the ships was only ever, by itself, an incidence of employment. It was not indefinite and it could not and did not, by itself, constitute a change of domicile.^[45] Again assuming, for present purposes, that Mr Duff can be said to have been residing in Norway whilst he was aboard the ships outside the territorial waters of Norway.

46. Although the above analysis is sufficient to determine the question of domicile adversely to Mr Duff, who bears the burden of proving that the assessment is excessive or otherwise incorrect^[46] Section 14ZZK(b)(i) of the TAA 1953. , I will also address the question of whether or not a person working, and for that purpose living, on a cruise liner can be said to be residing in the country under which flag that ship sails (whilst it is outside territorial waters). Determination of this question is also relevant to whether Mr Duff had a permanent place of abode outside Australia during 2016 (which is addressed below).

47. Whilst it is true that ships have in the past been described as "floating islands" and as such been notionally regarded as extensions of the territory of the flag state, this picturesque metaphor is not well founded in legal principle and was never more than analogy or illustration adopted for the purpose of describing the application of flag jurisdiction over ships at sea: see
R v Gordon-Finlayson; Ex parte an Officer (R v Gordon-Finlayson) [1941] 1 KB 171;
Chung Chi-Cheung v The King (Chung Chi-Cheung) [1939] AC 160 (PC) and
Oteri v Queen (Oteri) (1976) 51 ALJR 122 (PC).^[47] Such authorities “ reject, as a rather mischievous fiction, the doctrine that a ship is constructively a floating part of the flag state, but apply the law of the flag on the pragmatic basis that there must be some law on shipboard, that it cannot change at every change of waters, and no experience shows a better rule than that of the state that owns her ”: Lauritzen v Larsen 345 U.S. 571, 585 (1953).

48. The floating island concept principally arises from the reasons of Blackburn and Byles JJ in
R v Anderson (R v Anderson) (1868) LR 1 CCR 161, at 163 and 168.^[48] The term appears to have been first used by Holroyd J in Forbes v Cochrane (1824) 2 B & C 448 at 464; 107 ER 450 at 456 : “ In this case, indeed, the fugitives did not escape to any island belonging to England, but they went on board an English ship (which for this purpose may be considered a floating island), and in that ship they became subject to the English laws alone. ”

49. In that case, Mr Anderson was an American citizen who was indicted at the

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Central Criminal Court (Old Bailey) for murder committed on board a vessel registered in London and sailing under the British flag. The alleged murder was committed in the river Garonne, within French territory, at a place below bridges where the tide ebbed and flowed and great ships went.^[49] The Admiralty jurisdiction of England extends over British vessels, not only when they are sailing on the high seas, but also when they are in the rivers of a foreign territory at a place below bridges, where the tide ebbs and flows, and where great ships go.

50. It was objected for Mr Anderson, that the offence having been committed within the empire of France, the vessel being a colonial vessel, and the prisoner an American citizen, the Court had no jurisdiction to try him.

51. The trial judge (Byles J) expressed an opinion unfavourable to the objection, but agreed to grant a case for opinion. The prisoner was convicted of manslaughter. The conviction was confirmed on the hearing of the case.

52. Blackburn J relevantly said:

It has been decided by a vast number of cases that a ship on the high seas, carrying a national flag, is part of the territory of that nation whose flag it carries, and all persons on board her are to be considered as subject to the jurisdiction of the laws of that nation as much so as if they had been on land within that territory.

53. Byles J concurred, adding at 168:

I retain the opinion I expressed at the trial. I told the jury that the ship being a British ship, was, under the circumstances, a floating island, where the British law prevailed; that the prisoner, though an alien, enjoyed the protection of the British law, and was as much subject to its sanctions, as if he had been in the Isle of Wight.

54. In R v Gordon-Finlayson an army officer was charged before a court martial with having committed a murder on a British ship in international waters. The accused applied for an order of prohibition, including on the ground that the court martial had no jurisdiction to try him, relying on a proviso in the Army Act 1881 (UK) to the effect that "[a] person subject to military law shall not be tried by court martial for … murder … committed in the United Kingdom." Thus, the relevant issue was whether the alleged crime was committed in the United Kingdom. Counsel for the applicant principally relied upon R v Anderson.

55. The Court of Appeal of England and Wales rejected the floating island concept and held that the alleged crime was not committed in the United Kingdom because a British ship in international waters was not part of the United Kingdom. The leading judgment was given by Humphreys J, with whom Tucker and Oliver JJ agreed (also adding their own observations).

56. At 178-179 Humphreys J dismissed the floating island concept as a non sequitur and almost a contradiction in terms:

The argument of Mr Carter really involves two propositions, the first of which is undisputed, the second of which is disputed. Mr Carter said, and there can be no doubt of the correctness of his argument, that for very many years it has been contended by the Crown that the jurisdiction of British Courts not only applies in England but applies to persons on a British ship, so long as that ship is on the high seas. That doctrine was accepted by the Courts very many years ago and is now beyond any question. It has been adopted by Parliament and there are, various statutes which deal with the method of trial of persons who have committed offences on board a British ship on the high seas. It follows that the law of this country being that a person on board a British ship on the high seas is liable to the jurisdiction of our Courts, that he has the corresponding rights and privileges against other persons which are given to persons who are within the jurisdiction of our Courts. Mr Carter says that it follows from that doctrine, which is undisputed, that a person who commits a crime on a British ship on the high seas has committed a crime in the United Kingdom.

The learned Solicitor-General, who appeared in this case on behalf of the Crown, accepts the first part of that argument. He says, however, as to the second part, that it is a complete non sequitur. In my opinion, the argument of the learned Solicitor-General is right. For my own part, I think that not only is the second part of that argument a non sequitur upon the first, but it is almost a contradiction of it, for the doctrine is only needed because one starts with the assumption that a crime is

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ATC 10788

alleged to have been committed by some person who was not in England; and it is because it is necessary for some Court to have jurisdiction over a crime committed on a British ship that it was held, and has always been the law for a great many years, that there is jurisdiction in those circumstances, although the person has not committed the crime in England, to try him in the same way as if he had committed the crime in England, for the reason that he is alleged to have committed a crime upon a British ship, where all persons are under the aegis of the British flag, which carries with it the rights and privileges of a British subject and the liability to the British law.

57. At 182 Humphreys J said, addressing the decision in R v Anderson:

The only other case which was referred to is the very well known case of Reg v Anderson. In that case, I think, all the judges accepted, merely as an illustration, the notion of a ship being somewhat analogous to an island, and no doubt that is a convenient way of looking at the matter. It is when one comes to the judgments, however, that one finds, in my opinion, that no assistance is there given to the argument which has been addressed to this Court.

58. At 184 Humphreys J said, specifically addressing the judgment of Blackburn J in R v Anderson:

When one comes to the judgment of Blackburn J one finds that the learned judge deals with the matter much more particularly and, perhaps, if I may say so without impropriety, more accurately. He says: "There are a vast number of cases which decide that when a ship is sailing on the high seas, and bearing the flag of a particular nation, the ship forms a part of that nation's country, and all persons on board of her may be considered as within the jurisdiction of that nation whose flag is flying on the ship, in the same manner as if they were within the territory of that nation." If I am right in my understanding of the English language, the meaning of that passage is that persons on board a British ship are within the jurisdiction of the British Courts, although they are not within the territory of Great Britain.

59. At 189-190 Oliver J said:

The whole backbone of [counsel's] argument proceeded upon the proposition that it had been laid down by judges in passages which have been quoted, that a British ship on the high seas was part of the United Kingdom. I do not think, for the reasons that have been given, that those judges intended to lay down any such proposition. I think what they said was only meant as a picturesque illustration of the principle that the jurisdiction of our courts does apply to British ships on the high seas. In this connection it might be just as well to refer to an opinion of the great Lord Stowell, which is quoted in a foot-note on page 304 of Hall's International Law, 8 ed, cited to us by the Solicitor-General, in which these words occur: 'the great and fundamental principle of British maritime jurisprudence is, that ships upon the high seas compose no part of the territory of state. The surrender of this principle would be a virtual surrender of the belligerent rights of this country.'

I need not go into the question whether principles of international law march side by side with those of the criminal law, but that certainly is a very striking statement from one of the greatest men who ever declared the law in this country, and does not encourage one in the view that any judge has ever intended to lay down that a British ship on the high seas was a piece of England.

60. In Chung Chi-Cheung the appellant, a cabin boy on board the Cheung Keng, an armed customs cruiser in the service of the republic of China, shot and killed the captain of the cruiser, seriously wounded the chief officer, and finally shot and wounded himself. Both the murdered man and the appellant were British nationals in the service of the Chinese government, and, at the time the crime was committed, the vessel was in Hong Kong territorial waters. The appellant was arrested by the Hong Kong water police, who came aboard the Cheung Keng in response to a signal from that ship. Extradition proceedings instituted by the Chinese

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ATC 10789

government failed on the ground that the appellant was a British national and he was subsequently rearrested by Hong Kong authorities and charged with murder "in the waters of this colony." At the trial in the Supreme Court of Hong Kong it was contended on behalf of the appellant that, as the murder took place on an armed public vessel of a foreign government, the British court had no jurisdiction in the matter. That contention was rejected and the appellant was convicted and sentenced to death.

61. The Privy Council affirmed the conviction and held that a ship in foreign waters is not, and is not treated as, territory of her own nation. At 167 the Board^[50] Constituted by Lord Atkin, Lord Macmillan, Lord Porter, Sir Lancelot Sanderson and Sir George Rankin. said:

On the question of jurisdiction, two theories have found favour with persons professing a knowledge of the principles of international law. One is that a public ship of a nation for all purposes either is, or is to be treated by other nations as, part of the territory of the nation to which she belongs. By this conception will be guided the domestic law of any country in whose territorial waters the ship finds herself. There will, therefore, be no jurisdiction in fact in any court where jurisdiction depends upon the act in question or the party to the proceedings being done or found or resident in the local territory. The other theory is that a public ship in foreign waters is not, and is not treated as, territory of her own nation. The domestic courts, in accordance with principles of international law, will accord to the ship and its crew and its contents certain immunities, some of which are well-settled, though others are in dispute. In this view, the immunities do not depend upon an objective exterritoriality, but on implication of the domestic law. They are conditional, and can, in any case, be waived by the nation to which the public ship belongs.

Their Lordships entertain no doubt that the latter is the correct conclusion. …

62. Subsequently, at 174 the Board said:

Their Lordships have no hesitation in rejecting the doctrine … which regards the public ship "as a floating portion of the flag state." However the doctrine of exterritoriality is expressed, it is a fiction, and legal fictions have a tendency to pass beyond their appointed bounds and to harden into dangerous facts.

63. In Oteri, a case involving theft on the high seas, the Privy Council again rejected the floating island concept in nevertheless finding that the criminal law of England extended to British ships on the high seas.^[51] In this case the Western Australia courts of criminal justice were empowered to try all offences committed within the jurisdiction of the Admiralty upon the high seas ( Admiralty Offences (Colonial) Act 1849 (UK) s 1 (empowering provision) and Courts (Colonial) Jurisdiction Act 1874 (UK) (supplementary provision as to punishment)). At 146-147 the Board^[52] Constituted by Lord Diplock, Viscount Dilhorne, Lord Hailsham of St Marylebone, Lord Edmund-Davies and Lord Fraser of Tullybelton. said:

Again it is trite and ancient law that the criminal law of England extends to British ships upon the "high seas" - an expression which in the context of Admiralty jurisdiction includes in addition to the open sea all waters below low-water mark where great ships can go (see
R v Liverpool Justices; Ex parte Molyneux [1972] 2 QB 384; [1972] 2 All ER 471, and the cases there cited. The explanation sometimes given of this extension of the applicability of English law that "an English ship may be considered as a floating island" (see
Forbes v Cochrane (1824) 2 B & C 448 at 464, per Holroyd J) should, however, be understood metaphorically rather than literally. A British ship is not accurately described in law as part of the United Kingdom (
R v Gordon-Finlayson [1941] 1 KB 171 at 178-9). A more acceptable rationalization juristically is that at common law a British ship fell under the protection of the sovereign; those on board her were within the King's peace and subject to the criminal law by which the King's peace was preserved.

64. R v Gordon-Finlayson and Oteri were applied by the Tribunal in
Re Chaudhri and FCT (1998) 39 ATR 1023. In that case the applicant, an Australian resident, was at all relevant times employed as an officer on two ships flying the Panamanian flag. In seeking exemption from Australian tax he relevantly claimed that he was "engaged in foreign service for a continuous period of not less than 91 days" such that his foreign earnings were exempt pursuant to s 23AG of the ITAA 1936. The definition section (s 23AG(7)) provided that "foreign service means service in a foreign country … in the capacity of an employee."^[53] On appeal to a Full Court the s 23AG argument was not pressed. See Chaudhri v Commissioner of Taxation [2001] FCA 554 at [4] and [5] .

65. Mr Chaudhri submitted that a person can be considered to be in the country of a

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ship's nationality when in international waters. Deputy President Gerber applied R v Gordon-Finlayson and Oteri in rejecting that submission saying (at [22]) that "I do not accept that service on board a ship predominantly in international waters can be construed as foreign service in a 'foreign country'." In result, he concluded (at [23]) that the applicant's service in the relevant period did not fall within "foreign service" as defined in s 23AG(7).

66. I have arrived at like consequences in this proceeding applying the decisions in R v Gordon-Finlayson, Chung Chi-Cheung and Oteri. Applying those decisions it cannot be said that a ship is part of the territory of the nation under whose flag it sails whilst it is outside that nation's territorial waters. This extends to the Viking Star and the Viking Sea.

67. In my view, the floating island concept was never any more than a convenient metaphor or illustration used to explain the application of jurisdiction to ships outside the territorial waters of their flag. Even if it was ever more substantive than that, it has not survived the decisions in R v Gordon-Finlayson, Chung Chi-Cheung and Oteri.

68. It follows that Mr Duff was not residing in Norway whilst he was aboard the Viking Star and the Viking Sea and they were outside Norwegian territorial waters. It is not submitted (and nor could it sensibly be submitted) that Mr Duff's presence upon the ships whilst they were within the territorial waters of Norway is relevant to the domicile issue. What limited evidence there is suggests that whilst he was aboard the ships, they spent little time in the territorial waters of Norway or docked at Norwegian ports.^[54] The chart below paragraph 12 above is the only evidence of the ships being in Norwegian territorial waters and ports whilst Mr Duff was aboard.

69. Finally, I should add that nothing in the Domicile Act is to the contrary, noting that the definition of "country" in s 4, albeit not exclusive, is also against any finding that a person working and, for that purpose living, on a cruise ship is residing in the flag state: "country includes any state, province or other territory that is one of 2 or more territories that together form a country". Ships cannot be said to "form a country".

Conclusion as to domicile

70. For the above reasons, Mr Duff has failed to establish that he did not continue to be a domicile of Australia during 2016.

71. It follows that Mr Duff can only succeed in this proceeding if the Tribunal (standing in the shoes of the Commissioner) is satisfied that he had a permanent place of abode outside Australia during 2016.

HAS MR DUFF SATISFIED THE TRIBUNAL (STANDING IN THE SHOES OF THE COMMISSIONER) THAT HE HAD A PERMANENT PLACE OF ABODE OUTSIDE AUSTRALIA DURING 2016?

72. The answer to this question is no.

73. Mr Duff's position was that his permanent place of abode during 2016 were the ship cabins which he occupied during his employment.

74. In his SFIC, Mr Duff contended that "[t]he ship cabin was his fixed and habitual place of abode. It was his home".^[55] SFIC, page 2. In closing submissions it was submitted that "[h]e was domiciled in Australia but his permanent place of abode was in - was aboard the ship",^[56] Transcript page 16 lines 4 to 5. I did not rely upon the statement as an admission of domicile because submissions to the contrary were otherwise made at Transcript page 20, lines 27 to 34. and that "his permanent place of abode was aboard the ship. He stayed there. He ate there. You know".^[57] Transcript page 16 lines 24 to 25. In his objection to assessment, it was submitted that "[t]he cruise ship was his place of abode and he lived and worked on it …"^[58] T-Document 9, page 54.

75. The problem with these submissions is that it is established that the phrase permanent place of abode requires the identification of a single country in which the taxpayer is living/residing permanently. This was established in
Harding v Federal Commissioner of Taxation [2019] FCAFC 29 at [40] per Davies and Steward JJ:

In the context of the legislative history, in our view, the phrase "place of abode" is not a reference, as one might have thought, only to a person's specific house or flat or other dwelling. If that had been Parliament's intention it would have used the phrase "permanent abode" rather than "permanent place of abode". The word "place" in the context of the phrase "outside Australia" in subpara (i) invites a consideration of the town or country in which a person is physically

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ATC 10791

residing "permanently". So long as the taxpayer has "definitely abandoned" his or her residence in Australia, it does not serve the function or purpose of the exception to subpara (i) to require that the taxpayer be permanently located at a particular house or flat in a particular town within a foreign country. Nor, indeed, does it serve the functional purpose of the exception to require the person to live in one particular town, suburb or village within a given country. In our view, drawing a distinction between someone who buys a singular flat in a foreign country as against someone who lives in a series of temporary flats in that same country does not promote the rationale of the exception in subpara (i). That rationale is that a person domiciled in Australia is not to be made subject to federal income tax when they have abandoned in a permanent way their Australian residence . For the promotion of that rationale, it is unnecessary for the taxpayer to live outside of Australia in any particular way . It follows that the word " place " should accordingly be read as including a reference to a country or state . Having said that, we do not favour the proposition that it does not matter if the taxpayer is not permanently in one country, but moves between foreign countries . In our vie w, the words " permanent place " require the identification of a country in which the taxpayer is living permanently . We shall return to the concept of permanence. (underlining added)

76. Whether relevantly described as ratio or seriously considered obiter, that analysis binds me in the determination of this proceeding, and it is plainly correct in any event.

77. As Deputy President O'Loughlin said in Handsley at [21]:

The effect of their Honours' reasoning is that the legislative scheme is intended to exclude from the Australian tax system foreign sourced earnings of people who have retained their Australian identity as reflected in their retained Australian domicile who have definitely abandoned their residence in Australia as demonstrated by establishing a place of permanent abode in a single foreign country . While there may be multiple ways of demonstrating abandonment of Australian residence in a general sense for purposes other than Australian income tax assessment, for Australian income tax purposes, that abandonment needs to be demonstrated by meeting the words of the statutory test and that requires, at a minimum, a series of temporary places of abode in a single country intended to be the place where the person lives . (underlining added)

78. In this proceeding, it cannot be found that Mr Duff was permanently living in any country after he left Australia on 2 August 2015 (and, in this regard, Mr Duff himself admits that during the proceeding income years of 2014 and 2015 he "was in Australia for tax purposes and residency"^[59] Witness Statement, paragraph 5. ). In saying this I repeat what I have said above in rejecting the proposition that Mr Duff was residing in Norway whilst he was aboard the Viking Star and the Viking Sea and they were outside Norwegian territorial waters - that analysis also being applicable to the question and determination of permanent place of abode. Specifically, and again applying the decisions in R v Gordon-Finlayson, Chung Chi-Cheung and Oteri, Mr Duff was not living/residing in Norway whilst he was aboard the Viking Star and the Viking Sea and those ships were outside Norwegian territorial waters.

79. Nor does the evidence establish any other foreign country that Mr Duff can be said to have been permanently living after 2 August 2015. Indeed, there is an implicit admission to that effect in Mr Duff's taxation objection where it was submitted that "[h]is permanent place of abode is on the cruise ship which is not fixed as the ship sails from one country to another."^[60] T-Document 9, page 55. This is, of course, consistent with Mr Duff's evidence that "[d]uring the above mentioned contracts I sailed across the world from [the] Mediterranean Sea, through the Baltic Sea, across the Atlantic and through the Caribbean Sea, stopping at most of the major ports along the way with the vessel."^[61] Witness Statement, paragraph 3.

80. It follows that it cannot be found that Mr Duff was permanently living/residing in Norway, or any other foreign country, after 2 August 2015 (when he left Australia to commence employment) and prior to the end of

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ATC 10792

30 June 2016 (when the 2016 income year ended). This means that Mr Duff did not, during that time, have a permanent place of abode outside Australia within the meaning of sub-paragraph (a)(i) of the definition of "resident or resident of Australia" in s 6(1) of the ITAA 1936.

81. As the Commissioner correctly submitted^[62] Commissioner’s Outline of Submissions filed 19 August 2022, paragraph [23]. , Mr Duff's situation has some similarity with the position of the taxpayer in Handsley. In that case, the taxpayer's work required him to travel and remain on site in several different countries including Vietnam, China, Singapore and Malaysia. In consequence, the Tribunal found that as the taxpayer shifted between a number of foreign countries, he did not have a permanent place of abode in any of them.

82. On the question of permanent place of abode, Mr Duff sought to rely upon the decision of the High Court in
Commissioner of Taxation v Miller (1946) 73 CLR 93 ( Miller ). In that case, Mr Miller had worked and lived on a boat, in that case pursuant to, first, an oral agreement, and, subsequently, two short-term written agreements relating to six-monthly periods.

83. In the Board of Review it was found that Mr Miller had been a resident of the then Commonwealth Territories of Papua and New Guinea during his employment. The Board therefore ruled that the ITAA 1936 (in its then form) did not apply to income derived by him during that period from sources within those Territories. However, this finding of residence was made on the basis that the boat that Mr Miller worked and lived on had never left the territorial waters of Papua and New Guinea. In result, Mr Miller was found not to be subject to taxation because, by s 7(1) of the then form of the ITAA 1936, the Act did not apply to any income derived by a resident of Papua, Norfolk Island and New Guinea that was derived from sources within those Territories.^[63] It was not in dispute that Mr Miller’s relevant income had been derived from a source in the Territories.

84. As Dixon J (as he then was) relevantly observed at 102-103:

Under the terms of his agreement of employment, the Small Ships Section engaged to furnish him free of charge with quarters and subsistence aboard the ship to which he was assigned. In fact he lived on the craft during the whole period of the agreement. His wife continued to live at Cairns, which was described as his home port, and there she enjoyed an allotment of part of his salary. From 12th December 1942 until he left the service in October 1943, the craft was based at Milne Bay, Papua, and, with the exception of a run north-east up to Oro Bay and another to Normanby and Ferguson Islands, she worked in Milne Bay. She was engaged in carrying supplies and plying between ships at anchor and the shore. During that period the taxpayer did not go ashore and at no time, it is said, did his vessel go outside the three mile limit. His only absence was during a short period of leave which he spent in Queensland. (underlining added)

85. Rich and Dixon JJ both determined that no appeal lay as the determination in the Board of Review had been one of fact. On that basis they both dismissed the appeal (although Dixon J also stated (at 103) that he did not think that, had he been in the Board's place, he should have regarded the facts as leading to the conclusion that the taxpayer was a resident of Papua).

86. Latham CJ dissented on the point of jurisdiction and would have dismissed the appeal on the basis that the decision of the Board of Review was right. Mr Duff seeks support from the following statement by Latham CJ at 100:

An individual person can eat and sleep as well as keep house and do business. In the present case, Papua and New Guinea were the places where the respondent, during the relevant period, ate and slept and worked. In my opinion there is not yet any decision which requires the Board of Review or this court to hold that he did not reside at the place where he lived for a period of over nine months.

87. That statement, however, was based upon the earlier statement (at 97) that Mr Miller had discharged his duties in the territorial waters of Papua and New Guinea:

He discharged his duties in the territorial waters of Papua and New Guinea. Except during a period of 27 days' leave which he spent in Queensland, from 12th December 1942 until 1st October 1943, he

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ATC 10793

did not land. It has not been disputed that the money which he earned as his pay was derived from a source within the Territories.

88. In this case it is also true that Mr Duff ate and slept and worked on ships during the period of his contracts. But unlike the situation in Miller, the ships that Mr Duff ate, slept and worked on were not within the territorial waters of any one country (in Miller, Territories). The whole foundation of the decision of the Board of Review and the reasoning of Latham CJ was that Mr Miller's boat never left the territorial waters of Papua and New Guinea.

89. For this reason, the decision in Miller is of no assistance to Mr Duff. In Miller, Papua and New Guinea were the places where the Respondent ate and slept and worked and therefore resided. The same cannot be said of Mr Duff in respect of any one country. Miller must be distinguished on that basis. It offers no support for the contentions and submissions of Mr Duff because Mr Duff did not, whilst living aboard, have a permanent place of abode in any one country.

Conclusion as to permanent place of abode outside Australia

90. For the above reasons, I am not satisfied (standing in the shoes of the Commissioner) that Mr Duff had a permanent place of abode outside Australia during 2016 (within the meaning of sub-paragraph (a)(i) of the definition of "resident or resident of Australia" in s 6(1) of the ITAA 1936).

OTHER SUBMISSIONS

91. Finally, it is necessary to address a number of other written submissions made on behalf of Mr Duff on the question of domicile and residence.

92. It was submitted on behalf of Mr Duff that:

Though he may be an Australian resident under the Domicile test he does not have attachment to his native land notwithstanding that he has parents and unique child here. Also, the nature of him working on an island resort barred him from having social contacts with his friends and family. He had not got a house to live in nor rent or lease one when he came back here. The fact that he came to stay at his parents' place did not vitiate his overseas residency status …^[64] SFIC, page 3.

Duff satisfied the above test as he was away for more than 183 days. He left Australia in August 2015 and did not come back until November 2016. His absence lasted more than 183 days and he should not be considered a resident of Australia pursuant to section 6(a)(1)(iii) [sic] of ITAA 1936 (as amended). He was not in Australia continuously or intermittently during more than one half-year of income ending 30th June 2016.^[65] Ibid.

He satisfied the Commissioner that his domicile was the ship where he ate, slept, and worked. He worked on board the cruise liner for more than 183 days and he should be considered a non-resident for that period. Section 6(1)(a) deems a person to be a non-resident of Australia if he spends more than 183 days outside Australia and he had done that and continues to do it. His domicile was not in Australia in the year under review.^[66] Addendum, paragraph 3.

93. These submissions were misconceived. I say this for the following reasons.

94. First, once a person satisfies the domicile test in any year of income, that person is liable to taxation unless the Commissioner is satisfied that the person had a permanent place of abode outside Australia during the relevant income year. Overseas residency per se is not the test.

95. Secondly, sub-paragraph (a)(ii) of the definition of "resident or resident of Australia" in s 6(1) of the ITAA 1936 is irrelevant to issues for determination in this proceeding because the Commissioner relies only upon the domicile test. Further and in any event, sub-paragraph (a)(ii) is not a provision that deems a person to be a non-resident if that person spends more than 183 days outside Australia in any one year of income. It operates conversely to deem a person to be a resident if the person spends more than one-half of the year of income in Australia (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 submission that "[s]ection 6(1)(a) deems a person to be a non-resident of Australia if he spends more than 183 days outside Australia" is simply wrong.

96.

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ATC 10794

Thirdly, a ship cannot be a domicile in the relevant sense being addressed. A ship may be a home or a place of residence, but it cannot be a domicile - only countries can be a place of domicile. In that regard, and as I have found above, Mr Duff has failed to establish any intent to make his home indefinitely in any other country during 2016.

97. Fourthly, the fact that Mr Duff worked, and for that purpose lived, on Norwegian flagged ships during his deployments does not mean that he became, as explained above, a domicile or a resident of Norway.

98. It was also submitted on behalf of Mr Duff that "[h]e could not be considered an Australian citizen given that criminal laws applicable to Australian citizens would not apply to him as he was a member of the crew of the cruise liner".^[67] Addendum, paragraph 4. That submission, which was based upon s 6(2) the Crimes at Sea Act 2000 (Cth), was not cogently addressed or expanded upon in closing submissions and is misconceived. Section 6(2) does not have any consequence for citizenship or domicile. It certainly does not operate to render Australian crew members on foreign ships non-citizens and, in the case of Mr Duff, stateless.

99. Section 6(2) merely acts upon the fact of citizenship. The result that the substantive criminal law does not, in certain circumstances, apply to an Australian citizen who is a member of crew on a foreign ship is entirely irrelevant to questions of domicile under the ITAA 1936. Further, the reasons for exclusions of that kind are well understood in international law.^[68] See Charteris, “ The Legal Position of Merchantmen in Foreign Ports and National Waters ,” [1920-1921] 1 Brit. Yb. Intl. L. 45, 73, quoting in part from Hall, International Law 212 (7th ed., 1917): “ that the crew form part of an organized body of men, governed internally in conformity with the laws of the state, enrolled under its control and subordinated to an officer who is recognised by the public authority, and that the exercise of local jurisdiction over them may involve detention of the ship, and even the loss of skilled assistance not always easy to replace. ” And compare s 6(3) which would, by contrast, apply the criminal law to such a crew member in the circumstances there prescribed.

100. It was also submitted on behalf of Mr Duff that because his employment was regulated by the Norwegian Ship Labour Act^[69] Act of 21 June 2013 No. 102 relating to employment protection etc. for employees on board ships (Ship Labour Act) ( Ship Labour Act ). , his "employment on the Norwegian ship was completely outside the jurisdiction of Australia".^[70] Addendum, paragraph 5. That submission was also not cogently addressed or expanded upon in closing submissions and is also misconceived. Nothing in the Ship Labour Act relevantly operates to affect the determination of domicile or residence under the ITAA 1936 let alone so as to remove the jurisdiction of the Commonwealth of Australia (whatever was meant by that sweeping statement).

101. Specifically, the Ship Labour Act does not grant rights of residence in Norway to foreign employees working, and for that purpose living, on Norwegian flagged ships. Indeed, it operates on the basis that a Norwegian flagged ship is not an employee's "place of residence". In this regard, Section 4-6 (headed 'Right to repatriation') provides that "[u]pon termination of the employment relationship by the employer, the employer shall arrange for repatriation of the employee to the employee's place of residence and shall bear the costs for the repatriation including necessary maintenance" (emphasis added). This is consistent with Mr Duff's evidence that Viking Ocean Cruises paid for "flights to and from the vessel".^[71] Witness Statement, paragraph 2.

102. In his Addendum, Mr Duff also relied upon a judgment of the Supreme Court of Norway concerning the Ship Labour Act.^[72] Judgment dated 14 June 2016, HR-2016-1251-A (case no. 2015/2368). It concerned the application of the Act to a Norwegian seaman (citizen) who worked on board a ship that was registered in Antigua and chartered by a Norwegian company under a time charter. The Court held that the seaman's employment was not covered by the Act as a matter of proper construction and choice of law rules. That judgment has no relevance to the issue for determination in this proceeding.

DECISION

103. For the above reasons, the issue for determination is answered adversely to Mr Duff. Mr Duff was, during 2016, a "resident of Australia" within the meaning of that term in s 6(1) of the ITAA 1936. This is because he:

• (a) concedes that Australia was his place of domicile prior to 2016;
• (b) has not shown that he had changed his domicile to a place outside of Australia during 2016; and
• (c) has not satisfied the Tribunal (standing in the shoes of the Commissioner) that he had a permanent place of abode outside Australia during 2016.

104. The Tribunal therefore affirms the decision under review.

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ATC 10795