CASE 2/98

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 22 January 1998

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KL Beddoe (Senior Member)

The applicant seeks review of objection decisions made by the respondent in relation to the years of income ended 30 June 1995 (``1995 year'') and 30 June 1996 (``1996 year''). In both years the question

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at issue is whether the applicant was a resident in Australia for income tax purposes.

2. Section 6(1) of the Income Tax Assessment Act 1936 (``the Act'') defines ``resident or resident of Australia'' to mean a person (other than a company) who resides in Australia and includes a person whose domicile is in Australia, unless this Tribunal (s 43 Administrative Appeals Tribunal Act 1975) is satisfied that the person's permanent place of abode is outside Australia. In objection decisions notified on 24 January 1997 and 22 July 1997 the respondent had decided that the applicant was not a ``resident'' as defined. Those notices of decision did not give any explanation for the decisions (T4) but it was not suggested to me that any other part of the definition of ``resident'' was relevant in this case.

3. At the hearing the applicant was represented by her father and the respondent was represented by an officer of the Australian Taxation Office. Documents filed in the Tribunal in relation to the 1995 year in accordance with s 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal as the T documents. No documents were filed in relation to the 1996 year and the documents for that year are not before the Tribunal, the application for review having been lodged in the Tribunal on the day of hearing.

4. Oral evidence was given by the applicant. I am satisfied that she is a witness of truth and I have accepted her evidence.

5. The applicant's income tax return for the 1995 year, lodged by her father as power of attorney, disclosed a Queensland postal address and a home address different to the postal address located in Canada. Main occupation was described as ``physiotherapist''.

6. The evidence establishes, and I so find, that the applicant travelled overseas from Australia in 1992 for the purpose of seeing as much of the world as she could while also gaining experience as a physiotherapist. She commenced by travelling to Barcelona for the Olympic Games in mid-1992. She then travelled in Africa and Europe including Britain, where she was employed, until she returned to Australia and obtained a Canadian work visa before returning to Britain.

7. The applicant then travelled to Canada arriving on 5 July 1994 on a working holiday visa originally for 8.5 months but subsequently extended to 12 months. She had understood that she would only be allowed to work in Canada for the 12 months. However, her employer was able to sponsor her so as to allow her to remain in Canada for a further 18 months. In the result the applicant was required to leave Canada on 1 November 1996.

8. Throughout this period the applicant worked as a locum physiotherapist, mainly for a particular practice, but also undertook sightseeing and travel.

9. During this time the applicant returned to Australia for approximately six weeks for the purpose of attending a wedding. She arrived in Australia on 1 April 1994 and left for the return to Britain on 25 May 1994. She was in Britain until going to Canada on 5 July 1994 and returned to Australia again in December 1995 for four weeks. She returned to Canada on 3 January 1996.

10. The applicant finally left Canada on 10 November 1996 and travelled to South America where she travelled as a tourist until her return to Australia on 25 July 1997.

11. In summary the applicant left Australia mid-1992 and returned to Australia mid-1997. During that time she returned to Australia in April 1994 for a period of six weeks and again in December 1995 for four weeks. She spent the major part of that time in Canada from July 1994 to November 1996 (less four weeks in Australia and also a period in Alaska - June/ July 1995).

12. Except for the period of over two years employment in Canada the applicant was essentially an Australian tourist abroad no different to many Australians who travel to see the world. The respondent accepted that the applicant was a resident of Australia up to 30 June 1994.

13. Throughout the time the applicant was overseas she retained Australian investments and an Australian bank account. Her parents also maintained her chattels and accommodation in the family home. She also maintained registration with Medicare. She did have bank accounts at overseas banks but these were closed at the time of leaving the country.

14. The parties referred the Tribunal to a number of authorities which they submitted

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would assist in deciding what is essentially a question of fact.

15. During the 1995 year and the 1996 year the applicant resided in Australia for a total of four weeks (December 1995-January 1996). As a matter of fact she resided outside Australia for the remaining 100 of the 104 weeks in those two years, and I so find.

16. I also find that the applicant was domiciled in Australia at all relevant times. It was not contended otherwise before me and there is nothing in the evidence which suggests to me that the applicant has formed an intention to abandon her domicile of origin and acquire a domicile of choice. The evidence is to the contrary.

17. I turn now to consider the authorities. In
Robertson v FC of T (1937) 4 ATD 355 at 366; (1937) 57 CLR 147 at 163 and
Gregory v DFC of T (WA) (1937) 4 ATD 397 at 399; (1937) 57 CLR 774 at 777 Dixon J noted that it was well settled that a person may be resident in two or more countries during a year of income. In Gregory the issue was as to whether the taxpayer was a resident of Darwin and thereby, because he was a primary producer, exempt from income tax. The taxpayer carried on business in Broome and Darwin but was only entitled to the exemption if he was a resident in the Northern Territory. Dixon J found that the taxpayer was a long time resident of Broome but that he had acquired the concurrent character of a resident of the Northern Territory and was therefore entitled to a declaration that his income from pearl fishing derived in the Northern Territory was exempt income.

18. Dixon J at ATD p 379; CLR p 778 referred to English authorities to support the proposition that events which occurred before and after a given period may be considered as throwing light on and disclosing the significance of habits and conduct within the relevant period.

19. The decision of the High Court in
FC of T v Miller (1946) 8 ATD 146; (1946) 73 CLR 93 to refuse jurisdiction is not relevant for present purposes. However, in a dissenting judgment Latham CJ dealt with the merits of the appeal. The Chief Justice at ATD pp 148-149; CLR p 99 said:

``I should have thought that there was no doubt that a man resided where he lived, and I do not think that there is any interpretation of the word `reside' by the courts which makes it impossible to apply the ordinary meaning of the word `reside' in the present case.''

and at ATD page 149; CLR page 100, after considering English authorities his Honour said:

``... 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.''

The Chief Justice therefore agreed with the decision of the Board of Review that the taxpayer was a resident of Papua and New Guinea for the relevant period and entitled to an exemption for income derived as such.

20. The decision of the Supreme Court of New South Wales (Waddell J) in
FC of T v Pechey 75 ATC 4083 is authority for the proposition that a stay in the Territory of Cocos (Keeling) Islands for a certain period of four weeks was of a short and temporary nature and the taxpayer was not therefore a resident of the islands for those four weeks.

21. In the present case the applicant spent the greater proportion of each year of income working and living in Canada. During those two years she made a four week trip to Australia and a trip of similar duration to Alaska. In my view neither of those trips away from Canada alters the fact that she resided in Canada and was a resident of Canada.

22. This is not a case such as Gregory where the taxpayer moved between two places of residence during the year according to the dictates of his business. In the present case there was only one period of four weeks in 104 weeks where the applicant was in Australia and at the end of those four weeks she returned to Canada.

23. I am satisfied that for the 1995 and 1996 years the applicant did not reside in Australia, and I so find.

24. The applicant has not done anything to abandon her domicile of origin which is Australia, there being no evidence that she has sought to acquire a domicile of choice or that there has been a change of domicile by law. I find that the applicant's domicile was in Australia at all relevant times. It seems clear

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that such a finding is open even though the applicant does not reside in Australia. The construction of the definition is such that it must be construed as inclusive of persons whose domicile is in Australia unless the qualification is satisfied.

25. Should I be satisfied that the applicant's permanent place of abode was outside Australia in the 1995 and 1996 years? The qualification in sub-paragraph 6(1)(a)(i) depends for its operation on the meaning of ``permanent place of abode''.

26. While the test as to a person's domicile is a subjective one the Federal Court made it clear in
FC of T v Applegate 79 ATC 4307 the enquiry as to whether the taxpayer has a permanent place of abode outside Australia is an objective test (Franki J at 4309 and Fisher J at 4316).

27. The Federal Court also made it clear in Applegate that although the question to be answered was an objective test one of the factors to be taken into account is the subjective intention of the taxpayer.

28. In Applegate the Federal Court dismissed an appeal from a decision of the Supreme Court of New South Wales. In doing so the Court held that the taxpayer had established a permanent place of abode in New Hebrides notwithstanding an intention to return to Australia on his own behalf and also on behalf of his employer at some time in the future which had not been determined.

29. Fisher J explained the operation of the test to determine whether a permanent place of abode had been established outside Australia at page 4317 as follows:

``... it is in my view proper to pay greater regard to the nature and quality of the use which a taxpayer makes of a particular place of abode for the purpose of determining whether it qualifies as his permanent place of abode. His intentions with respect to the duration of his residence is just one of the factors which has relevance. Obviously if his stay is purely temporary and he intends to move on or return to Australia at some definite point of time this denies the place of abode an essential characteristic of a home, namely durability. Moreover it seems appropriate to view objectively the nature and quality of the use which the taxpayer makes of the place of abode to determine whether it has the characteristics of his fixed place of abode, his home. It is to my mind perfectly consistent with the establishing of a home in a particular place that the taxpayer is aware that the duration of his enjoyment of the home, although indefinite in length, will be only for a limited period. The knowledge that eventually he will return to the country of his domicile does not in my opinion deny him a capacity to make his home outside of his country domicile. Such a conclusion is particularly open in the present circumstances where the taxpayer was not a completely free agent in the choice of when to return, it being a matter for negotiation between him and his employers.

To my mind the proper construction to place upon the phrase `permanent place of abode' is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.''

30. See also
FC of T v Jenkins 82 ATC 4098 where the Supreme Court of Queensland (Sheehan J) essentially followed the decision of the Federal Court in Applegate.

31. The present case differs from Applegate and Jenkins because of a number of factors. In essence the applicant went overseas to see the world and get experience as a physiotherapist. As it transpired she was able to stay in Canada longer than she first expected because her employer sponsored her for an extended visa. She was, however, a free agent in the sense that she was not obligated to stay in Canada at the direction of her employer. Further she maintained her touring activities satisfying me that she never lost the essential characteristic of a tourist. She was, in my view, a typical young Australian tourist seeing the world and obtaining work experience. She maintained this characteristic by leaving Canada in November 1996 and then travelling to and in South America until mid-1997.

32. I am satisfied that the applicant's place of abode in Canada was not a permanent place of

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abode outside Australia as explained by the Federal Court in Applegate. At all times she remained an Australian abroad intending to return to Australia when she completed her travels to other countries - a decision she could and did make for herself.

33. For these reasons the objection decisions under review will be set aside and the matters will be remitted to the Commissioner with directions to the effect that the applicant was a resident of Australia for the 1995 and 1996 years of income.

34. I will certify that these proceedings have terminated in a manner favourable to the applicant (Administrative Appeals Tribunal Regulations reg 19(7)).