WESSLING v FC of T

Members:
BJ McCabe M

Tribunal:
Administrative Appeals Tribunal (sitting as the Small Taxation Claims Tribunal)

MEDIA NEUTRAL CITATION: [2002] AATA 670

Decision date: 9 August 2002

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BJ McCabe (Member)

Introduction

1. The applicant, Wendy Wessling, took special leave from her employment in Australia to accompany her husband to Fiji. Mr Wessling was appointed as principal of the International School in Suva for a period of three years. While she was overseas, Mrs Wessling's Australian employer paid her an amount in respect of accrued long service leave. It was a small amount that would ordinarily fall below the tax free-threshold. But the Commissioner says the threshold is not available to the applicant because she is not a resident of Australia. The applicant has appealed against the respondent's decision to disallow her objection.

The evidence provided to the Tribunal

2. The Tribunal was provided with a copy of the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. It also took oral evidence from the applicant's father, Mr Hallan George, who represented her. Mr George held his daughter's power of attorney. Mr George provided a set of written submissions as well. He agreed on oath that the statements contained in his written submissions were true and correct to the best of his knowledge.

The facts

3. Mrs Wessling is a school teacher. She is employed by the state education authority, Education Queensland. She took special leave from her employer at the end of 1999 so that she could accompany her husband to Fiji. Mr Wessling had been offered a three year contract as headmaster of the International School in Suva. The applicant and her three children moved to Suva with Mr Wessling. The family home in Brisbane was sold and their furniture and effects were put into storage. They rented accommodation in Suva: they have lived in two different houses during their stay there. Mrs Wessling does not work in Fiji, and one of the three children has since returned to Australia for tertiary study.

4. Mr George said the family intends returning to Australia and resuming their life here at the conclusion of Mr Wessling's contract. He gave notice to his employer in March that he did not intend seeking an extension of his term. Mrs Wessling was recently in Australia making arrangements with her employer for her return to work. She stayed for several weeks. Mr George said she had returned to Australia on at least four occasions while the family was in Fiji. On each occasion she was here for several weeks.

5. Although Mrs Wessling commenced her leave during the 1999-2000 financial year, her employer paid her an amount of $1,670.30 during the year ending 30 June 2001. The money was paid in respect of accrued annual leave. It is unclear why Education Queensland paid the money in those circumstances.

6. The applicant's tax return for the year ended 30 June 2001 indicated that the applicant was not a resident for tax purposes. As a non- resident, she was not entitled to take advantage of the tax-free threshold: Part II to Schedule 7 of the Income Tax Rates Act 1986. An assessment notice was issued stating that the applicant was required to pay $172.30 in tax.

7. The applicant, through her father, objected to the notice of assessment. Mr George says the answer to the question about residency in the tax return was wrong. The applicant says she remains an Australian resident and ought to be entitled to the benefit of the tax-free threshold.

8. Mr George said the applicant has not resigned from her job - she has merely taken special leave. She expects to resume work in time for the next school year. Her superannuation is also on hold. She has retained her registration as a teacher and she remains on the electoral roll here. She continues to operate bank accounts in Brisbane and has a life assurance policy on foot in Australia, although

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the family's health insurance has been suspended. Her son Tim has returned to study in Brisbane, and other members of her family remain in Australia.

The relevant law

9. Section 6(1)(a) of the Income Tax Assessment Act 1936 says a resident of Australia is a person whose domicile is in Australia unless the Commissioner is satisfied that his/her permanent place of abode is outside Australia.

10. The Commissioner does not dispute that the applicant's domicile is in Australia. But he contends that her permanent place of abode is Fiji.

11. The test for determining whether or not a taxpayer is resident in Australia was discussed in
FC of T v Applegate 79 ATC 4307. In that case, a solicitor left Australia to open an office for his law firm in Vanuatu. The taxpayer claimed he was a non-resident and that his income was therefore exempt because it was derived from sources outside Australia. The Full Federal Court accepted the taxpayer was no long resident in Australia notwithstanding that he planned to return after a time in Vanuatu.

12. In the course of his judgment, Franki J explained (at 4309):

``... in my opinion the phrase `permanent place of abode outside Australia' is to be read as something less than a permanent place of abode in which the taxpayer intends to live for the rest of his life.''

His Honour went on to explain (at 4309) that the real question was:

``... whether, as a matter of fact the taxpayer's permanent place of abode was outside Australia at the relevant time.''

13. His Honour emphasised (at 4309) that it was appropriate to take into account whether or not the applicant had a permanent job, in the sense that it was ongoing. Northrop J noted (at 4310) that it was intended the taxpayer would remain in Vanuatu indefinitely. He and his employers assumed the establishment period would take at least two years, and it was expected he would remain for some time beyond that date. In the event he returned to Australia early because of illness. Northrop J went on to say (at 4313) that the taxpayer was clearly not a resident of Australia because he had no home here, and he did not carry on any business or work here. He also did not derive any income here. His Honour added (at 4314) that one must ask whether the taxpayer has formed the intention to, and has in fact, established a permanent residence outside Australia during that year of income.

14. Fisher J agreed that the word ``permanent'' did not mean ``everlasting'': at 4317. His Honour went on to say (at 4317-4318):

``... in my opinion the intention of the taxpayer as far as returning to Australia is concerned is just one of the factors for consideration. But it is a factor which I consider has less significance than the taxpayer's intention in relation to his place of abode outside Australia. Intention to return to Australia is a crucial feature in considering whether the taxpayer has retained an Australian domicile. Intention to make his home for the time being in his place of abode outside Australia is an important element in characterising that place of abode as his `permanent' place of abode.''

15. Subsequently, in
FC of T v Jenkins 82 ATC 4098, Sheahan J concluded that a taxpayer who was transferred to work in the New Hebrides for a three year period was a permanent resident of the New Hebrides during the relevant period.

16. The Taxation Board of Review Case, S19,
85 ATC 225 approached the problem by examining whether or not the taxpayer had abandoned his place of residence in Australia, what the taxpayer did about banking and insurance (especially health insurance), whether the taxpayer established a new home overseas, and whether the taxpayer remained on the Australian electoral roll.

Application to the facts

17. The applicant's case bears many of the characteristics of a permanent (if not indefinite) move to Fiji. The applicant's Australian private health insurance has been suspended, although Medicare has not been advised of the move. Mr George says the applicant voted in the last Australian election despite being overseas. She has maintained an insurance policy and bank accounts, but the bank accounts are also intended to assist her son who has returned to Brisbane to study. The family established a

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home in Suva where they lived while Mr Wessling served out his contract.

18. The applicant's intentions are the key in this case. She intends returning to Brisbane in due course, but she did not intend doing that during the year of income. That is not to say that anyone who stays away for a year or more is automatically taken to be a non-resident. But this is a case where the taxpayer has actually made her home overseas, albeit for a limited period of time. To use the language of Franki J in Applegate (at 4309), the taxpayer's ``permanent place of abode was outside Australia at the relevant time''.

19. There is one final matter that may be disposed of shortly. The taxpayer argued that she should have been taxed on the monies she earned in the year they were derived rather than the year they were owned. A similar argument was considered by the Tribunal in
Hannavy v FC of T 2001 ATC 2162; [2001] AATA 370. In that case, Senior Member Muller said [at 2162]:

``Whilst the Tribunal sympathises with the applicant, the taxation legislation has been consistently applied in holding that employees are assessable upon the amounts actually received by them in a particular year of income (irrespective of whether some part could be said to relate to another year of income).''

I agree with Senior Member Muller's approach.

Conclusion

20. The objection decision under review if affirmed.