Ellwood and Commissioner of Taxation
[2012] AATA 869
•11 December 2012
[2012] AATA 869
Division TAXATION APPEALS DIVISION File Number(s)
2011/3349
Re
JOHN ELLWOOD
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal Mr Dean Letcher QC, Senior Member
Date 11 December 2012 Place Sydney The decision under review is affirmed.
...........[sgd SM Letcher]......................................
Mr Dean Letcher QC, Senior Member
CATCHWORDS
TAXATION AND REVENUE – income tax – whether resident of Australia for tax purposes – domicile of origin – domicile of choice – meaning of resident – decision under review affirmed
LEGISLATION
Domicile Act 1982 ss 7, 10, 12
Income Tax Assessment Act 1936 s 6
CASES
Commissioners of Inland Revenue v Lysaght [1928] AC 234
Hafza v Director-General of Social Security (1985) 6 FCR 444
Hyland v Hyland (1971) 18 FLR 461
Koitaki Para Rubber Estates Limited v Federal Commissioner of Taxation (1941) 64 CLR 241
Re Iyengar and Commissioner of Taxation [2011] AATA 856
Re Sneddon and Commissioner of Taxation [2012] AATA 516
Re Sully and Commissioner of Taxation [2012] AATA 582
Subrahmanyam v Commissioner of Taxation (2002) 51 ATR 1173
Whicker v Hume (1958) 7 HLC 124; 11 ER 50Winans v Attorney-General [1904] AC 287
SECONDARY MATERIALS
Conflict of Laws in Australia, OUP, 2002
Taxation Ruling IT 2650 Income Tax: Residency Permanent Place of Abode Outside Australia
REASONS FOR DECISION
Mr Dean Letcher QC, Senior Member
11 December 2012
The applicant, John Ellwood, seeks the review of a decision disallowing his objection to the Commissioner’s assessment of his income tax payable for the 2008-2009 tax year. He says that he was not a resident of Australia and was not domiciled in Australia at the relevant time. The Commissioner maintains that he was a “resident” both in its natural meaning and in its extended meaning under s 6(1) of the Income Tax Assessment Act 1936 (“the Act”).
BACKGROUND
The applicant is a 59 year old who was born in New Zealand and has spent his working life mainly as a tradesman and project manager on major industrial and commercial sites outside Australasia. He lived in New Zealand until 1975 when he obtained work in Australia and South Africa before migrating to Canada in July 1976 but retaining New Zealand citizenship. Thereafter he worked in a number of countries but says he rejected managerial positions which would have required him to reside in a place “permanently for some time [sic]”.
He met in 1978 and married in 1981 his wife Linda. He then lived and worked almost continuously in Australia for over 11 years but then from about 1993 to the present a pattern of working overseas on major construction projects has continued. During 1983-1985, and again in 1985-1987, the applicant worked on New Zealand projects. His wife and daughters lived with him in rented houses in New Zealand. He says he tried to persuade his wife and her English-born Australian- resident parents to settle there but they declined. He says that he never lost the attitude and intention to return to live in New Zealand.
Linda and the applicant had purchased a house in Sydney in 1985. They returned to that house in July 1987 and then in 1990 bought a house in Bateau Bay.
In 1997 the applicant and his wife bought another house at Tumbi Umbi, they lived there while the two daughters completed their schooling and the wife, applicant while on leave and the daughters until they left home have lived there ever since. A house at Wyong and a townhouse in Turramurra were bought later for investment purposes. All the properties were in easy travelling distance from the house at Tumbi Umbi. In the relevant 2008-2009 tax year the applicant worked for many months on sites in Indonesia and Qatar and spent his leave time at Tumbi Umbi.
The question in this case is whether the applicant was a “resident” of Australia for the purposes of the Income Tax Assessment Act 1936 in the 2008-2009 tax year. During that year he spent only 99 days in Australia and the balance of the time he was at work, mainly in Qatar, living in construction camp quarters although his wife and daughters lived at all times in Australia where the applicant had his substantial property investments, bank accounts and possessions.
The significance of the different views is that the assessable income of such “resident” includes income from all sources whether in Australia or not but for a non-resident it includes only income from Australian sources. If the applicant was not resident or domiciled in Australia he would not have to pay any income tax on his considerable earnings from work in Qatar.
LEGISLATION
Section 6(1) of the Income Tax Assessment Act 1936 states relevantly:
Resident … means:
(a) a person … 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;
…
Thus for the purposes of the Act, a person is a resident if he falls within the usual meaning of that term but is also considered a resident if he has Australian domicile.
THE ISSUES
The applicant’s case is that Mr Ellwood was not “resident” in Australia because he was seldom here, returned here only to his wife rather than returning to a home and that he ate, slept and did business elsewhere. He maintains that he had always kept his domicile of origin of New Zealand and he had never acquired a domicile of choice in Australia because he never had the required intention to remain indefinitely in Australia.
The respondent’s case is that Mr Ellwood was a “resident” of Australia in that he had an established abode with family home, wife, children and investments here. Further that he was a “resident” in the extended meaning of the Act because he had established a domicile of choice in Australia.
It was necessary to examine what the decided cases say about the meaning to be given to the words “resident” and “domicile”.
RESIDENT
Personal connecting factors identify the law controlling important aspects of the status, liability and legal capacity an individual because the law is assumed to emerge from the shared values of the person’s community. The extent of the person’s connection with that area is a matter of fact and the significance of that degree of connection may vary according to the purpose of a statute and is a matter of law so that “residence” is a mixed question of fact and law.
Wilcox J in Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449-450 stated:
As a general concept, residence includes two elements: physical presence in a particular place and the intention to treat that place as home; at least, for the time being, not necessarily forever. The concept was explained in a taxation case, Koitaki Para Rubber Estates Limited v Commissioner of Taxation (Cth) (1941) 64 CLR 241 at 249, by Williams J:
The place of residence of an individual is determined, not by the situation of some business or property which he is carrying or he owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other place of abode.
Physical presence and intention will coincide for most of the time. But few people are always at home… The test is whether the person has retained a continuity of association with the place … together with an intention to return to that place and an attitude that that place remains ‘home’… residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as “home”,… at least for the time being, not necessarily forever.
In this case, no one suggested that there was a settled abode in Qatar. That was accepted to be only temporary and transient accommodation. A live question was whether the applicant had maintained a “continuity of association”, intention to return and an attitude that it was “home” in relation to New Zealand or Australia.
The frequency and regularity of visits to a place can be important and the fact that the visits are of short duration does not exclude residence there: Commissioners of Inland Revenue vLysaght [1928] AC 234; Re Iyengar and Commissioner of Taxation [2011] AATA 856; Re Sneddon and Commissioner of Taxation [2012] AATA 516.
It is relevant that the particular Act under consideration is a tax law. In Subrahmanyam v Commissioner of Taxation (2002) 51 ATR 1173 (at [43]-[44]) it was said that Parliament intended that the ordinary meaning of “reside” in the Act should be given the widest possible meaning precisely because it was a taxing statute.
DOMICILE
The purpose of assigning a domicile to a person is to connect them, for particular defined legal purposes, to the system of law which applies in their home. At law, a person has one domicile only at a particular time. It is a legal construct.
The primary dictionary definition of “domicile” is “place of residence” (Australian Oxford Concise Dictionary) but in legal use there is a connotation of some degree of permanence. In 1858 an English Law Lord said (Whicker v Hume (1958) 7 HLC 124; 11 ER 50):
By domicile we mean home, the permanent home; and if you do not understand your permanent home, I am afraid that no illustrations drawn from foreign writers or foreign languages will very much help you to it.
Times change and yesterday’s “permanence” has become less fixed today with increased travel and migration.
The meaning to be given to “permanent” and “residence” are each matters of dispute in particular cases including this case. Arguably, all individuals have a “domicile of origin” when they are born but thereafter may acquire a different domicile (or, serially, other domiciles) each known as the “domicile of choice”.
Before the Domicile Act1982 (Cth) it used to be the common law that a domicile of origin, that is, place of birth, was difficult to lose. Lord Macnaghten in Winans v Attorney-General [1904] AC 287 at 290 observed of domicile of origin or birth that “its character is more enduring, its hold stronger and less easily shaken off”. However, that Act and its state equivalents have altered the common law so that it is no more onerous to replace a domicile of origin than to change a domicile of choice (as stated clearly in sections 7, 10 and 12 of the Act).
The intention to make one’s home indefinitely in a particular place and one’s presence in that place are the elements of a domicile of choice to be proved on the balance of probabilities. One may “revert” to the domicile of origin from a domicile of choice but only as a new domicile of choice proved in the same way as any other.
Because domicile was crucial in establishing jurisdiction in divorce and taxation cases for the wealthy there is a wealth of extensive case law and the various maxims arising display the ages in which the disputes occurred. “Ubi uxor, ibi domus” (home is where the wife is) was a 19th century statement regarded as a truism in that time yet in the present case, the applicant’s counsel paradoxically submitted that Mr Ellwood habitually returned to his wife rather than to Australia as such and therefore he should not be said to have a home in Australia and was not a resident.
In this hearing, both parties relied upon a long list of decided cases. However, this mainly served to highlight the position that each case turns upon its facts and frequently the case will involve a large number of factors. In the case of Re Sully and Commissioner of Taxation [2012] AATA 582 the Tribunal found that the taxpayer had a domicile of origin in Australia but he “saw himself as ‘a citizen of the world’ who was prepared to go wherever his work took him”, he had a pattern of living and working on ocean-going ships for long periods, had not established a permanent abode anywhere in particular and while he was not found to be resident in Australia in the natural sense of the word, his domicile remained here. The fact that he owned a house in Australia was “unremarkable”, the fact that his estranged girlfriend continued to live there was “ultimately unpersuasive” as was the existence of an Australian bank account because the taxpayer had a new girlfriend abroad and he had the wrong visa to open a foreign bank account.
In Hyland v Hyland (1971) 18 FLR 461, the person had Australian origin, real estate and a family business here and required an annual certificate of residence to remain in Thailand but was found to have Thai domicile of choice. Every individual situation will contain a whole variety of factors.
APPLICANT’S CASE
The applicant maintains that he has never established a domicile of choice in Australia because he never intended to reside here indefinitely but always intended to live in New Zealand after retirement and always regarded New Zealand as his home. His case was that he had always retained his New Zealand domicile of origin.
The possible indicia of domicile are many and varied. Those factors favouring retention of New Zealand domicile of origin in this case included:
(a)Consistent statement of intention to return to live in New Zealand after retirement - to wife, accountant, brother, brother’s accountant and the Tribunal;
(b)Statements that he regarded New Zealand as his home;
(c)In 1983 and 1987 attempting to persuade wife and parents-in-law to re-settle in New Zealand;
(d)Presence of family members in New Zealand;
(e)Consistent long absences from Australia on work projects abroad (2002-2012) as demonstrated by the table below:
Year ended 30 June Days spent in Australia 2002 192 2003 258 2004 294 2005 282 2006 130 2007 248 2008 212 2009 99 2010 88 2011 128 2012 261
Factors against retention of New Zealand domicile of origin included:
(a)Applicant had spent very little time (a few weeks) in New Zealand since 2006;
(b)After 2006 the applicant’s daughters had left home, his parents-in-law had died and there were no other family constraints on returning to New Zealand;
(c)The applicant has never owned a house or investment properties in New Zealand;
(d)The applicant has never had shares or other financial investments in New Zealand;
(e)The applicant has not chosen a town, region or even which island of New Zealand he would intend as his home;
(f)The applicant has not set some definite time for return to New Zealand;
(g)All the factors favouring a domicile of choice in Australia also count against the maintenance of the domicile of origin. (These are specified below.)
The applicant’s counsel gave a central place in his submissions to the applicant’s “attitude” to New Zealand in addition to an “intention” to reside there. At the beginning of his evidence, when asked his name and address the applicant quite gratuitously added: “My home is New Zealand”. His brother’s affidavit contained reference to a memory from 2002 of the applicant’s wish of spending “more time here at home” (that is, New Zealand). While the affidavit of his erstwhile accountant included a memory of the applicant saying “Home for me is always New Zealand.”
The emphasis on this evidence appeared to be guided by counsel’s reliance on the words of Wilcox J in Hafza concerning attitude to home. There was no doubt that counsel called in aid this evidence of “attitude” in addition to evidence of intention. The applicant’s statements of sentiment in his affidavit and oral evidence were numerous and they assisted his cause not the least because the physical facts and actions were largely contrary to his case. Mr Ellwood was saying words to the effect “I still call New Zealand home” when he had in the last twenty years no investments, bank account, shares, real property leased or owned and no physical presence apart from holiday visits to his family in New Zealand.
The learned authors of Conflict of Laws in Australia (Tilbury, Davis and Opeskin, OUP, 2002 at p 424) quote with some approval the view of Asprey JA in the NSW Court of Appeal in Hyland v Hyland (1971) 18 FLR 461 at 467:
Declarations as to intention are rightly regarded in determining the question of a change of domicile , but they must be examined by considering the person to whom, the purposes for which, and the circumstances in which they are made and they must further be fortified and carried into effect by conduct and action consistent with the declared expression: Ross v Ross [1930] AC 1 at 6-7 per Lord Buckmaster… Where the court finds that at a relevant point of time there is a conflict between the actual conduct of the party concerned and the verbal expression of his intention doubtless the court will in most cases prefer the act to the word – as an ancient proverb puts it: “what you do speaks so loudly that I cannot hear what you say.”
Hyland was a domicile case before the Domicile Act 1982 was enacted involving the “Duck Feather King” of Australian origin living in South East Asia with, as the headnote observes, a “floating intention to return to a native country” but “found by irresistible inference … to have acquired a domicile of choice in Thailand”. Such a “floating intention” or “some sentiment about dying in the land of his or her forebears” (Taxation Ruling IT 2650 at page 4) is not a sufficiently defined intention. This is different to an intention to return “on a clearly foreseen and reasonably anticipated contingency e.g., the end of his or her employment” where “employment” in this context means a particular contract or project – not the indefinite end of working life.
Counsel for the respondent submitted that the lack of actual presence in New Zealand of the applicant for more than trivial periods since 1987 and not at all in the relevant tax year was a fatal flaw in his case. I do not think any single consideration is crucial in these cases and I do not consider presence is essential for proof of domicile or even for proof of residence.
However, one matter very relevant to any acquisition of a new NZ domicile of choice or rebuttal of an Australian domicile of choice was the extent to which the applicant’s intention to return to NZ was a plan defined as to place and time. In his cross-examination the following occurred (at pp 32-33, transcript):
Q: When were you going to move [back to New Zealand]?
A: Well it became difficult because, you know, I tried several times to move. If you look through -
Q: But there was no definite plan. There’s no plan, no date set was there?
A: No, but I had gone over in ’98, I had taken them across in ’98, I had gone across in ’99, I tried in 2002.
Q: Tried? What do you mean, you tried?
A: Well, with Linda discussed, “Listen, let’s move across.” But it was always, “No, I have to look after Mum and Dad.” So -
Q: So for the foreseeable future you were going to be living in Australia whenever you came back to be with your wife, weren’t you?
A: Yes. Over the foreseeable future Linda would be based in Australia while I was working overseas.
Q: So there was no definite time limit – timeframe when you were going to go and move to New Zealand?
A:Well, it changed then from being -
…
Q: So when did you make the decision to do it when you retire?
A: I don’t know. It was just – it was just one of those things that just evolved.
Q: Was it 2000, 2005, 2010, which one?
A: I don’t know. I can’t tell you. I would just be making it up. I don’t know. It was just one of those things that evolved in conversations that husbands and wives have. It was just something that said, “Okay. This is what we will do.” …
As to when he might retire (the applicant being 58 at the hearing) at page 38:
Q: …what age do you plan to retire?
A: Well, in my business you usually only last until you’re about somewhere – 45 to 50... It’s difficult…
… I plan to retire at 65 and if I can go a bit longer than that, that’s what I will do. But I don’t think I’m going to last that long…
…
Q: So there’s no definite date?
A: No definite date but 65 is something to aim for but it just depends on your health and if you can put up with these rough conditions…
… There are some in my industry who are still working are 70. But they live a cosseted life…
Later at page 39 in relation to what he told his accountant about retirement:
Q: … You’ve told him the same thing: no fixed plan, but eventually; is that correct?
A: Yes
RESPONDENT’S CASE
The respondent Commissioner of Taxation relied on the objective facts of Mr Ellwood’s life in Australia and his responses to a questionnaire.
The indicia pointing to an acquired domicile in Australia in this matter include:
(a)Joint ownership with wife of a Central Coast residential property since 1997 and on which they are currently spending $160,000 for renovations and additions.
(b)Wife and daughters have, except when the applicant was engaged on New Zealand projects in the 1980s, always lived in Australia. Daughters now both live in Queensland, one with a young grandchild.
(c)Applicant has been a director and shareholder of Elljay Cavaliers Pty Ltd the vehicle for the wife’s Cavalier dog-breeding business carried on from the property and for which much of the addition was planned.
(d)Joint ownership with wife of a succession of investment properties in New South Wales culminating in two residential rental properties (one occupied temporarily by the applicant’s wife’s sister) close to the Central Coast area but managed by real estate agents.
(e)All bank accounts in Australia (except for a recently opened account in Qatar).
(f)Applicant returned to Central Coast property in leave periods (with rare exceptions).
(g)No established permanent abode outside Australia (temporary and transient accommodation at work sites abroad).
(h)Several siblings resident in Australia (and several in NZ).
(i)Australian permanent resident status visa (although retaining NZ citizenship).
(j)Declaration of permanent residence in Australia consistently on Australian Immigration Incoming passenger cards.
(k)Consistent and repeated personal responses on 21 July 2010 to an Australian Tax Office questionnaire. In answer to the question: “Have you formed an intention to make your home indefinitely outside of Australia?” his answer was “No. My home is in Australia and my wife and children reside in Australia”. In answer to other questions which assumed an Australian residence he responded:
29. Plan to reside in my family home at Tumbi Umbi, NSW on my return to Australia.
and
30. In between projects or when I am on R&R I reside at my family home at Tumbi Umbi, NSW.
In later responses he refers repeatedly to his “family home”.
In cross-examination, the applicant was asked whether he would have changed those answers if he had known he had a tax problem and he said “No” but I was left with the distinct impression that Mr Ellwood regretted that his long-time accountant had not remained in practice to claim non-resident status and “vet” the answers. This was the first tax year in which Australian resident status was noted on his return. These responses are at stark variance with several assertions made by the applicant in his evidence.
FINDINGS AND CONCLUSIONS
There has been no physical, legal or political barrier to the applicant returning to his birthplace and working abroad with New Zealand as his base. He could have done so since 1993 and certainly in the tax year 2008-2009. The fact is that his wife and her parents opposed the idea in 1983, 1985 and thereafter. Whether the applicant’s wife would ever willingly leave her established home and Cavalier business, her daughters and grandchild remains doubtful although she has expressed a willingness to go with her husband. I believe it is fair to say that Mr Ellwood has expressed the wish to return to the land of his forebears but for 20 years he has done little or nothing about it. He has no definite plans to cease work at any particular time, no chosen house, town or locality in New Zealand, no New Zealand investments and no other apparent preparation for retirement life there. By contrast, in Australia after 20 years he has a well-established home property on which a substantial amount has been spent recently, considerable other real estate investments, wife and immediate family and a long history of returning to this situation when not working. There are many “personal connecting factors” and I infer an “intention to treat that place as home at least for the time being not necessarily for ever” in the words from Koitaki and Hafza. I find that the applicant was a resident of Australia within the natural meaning of “resident” in the 2008-2009 tax year.
My opinion is that Mr Ellwood acquired a domicile of choice in Australia well before the 2008-2009 tax year and that has remained unchanged. The circumstances and purpose for which the applicant’s various declarations of attitude and intention were made deserve close attention. His responses to the questionnaire in 2010 without the effective protective screen of his long-time adviser are consistent with his conduct and action in the last 20 years in forming a secure and settled base in New South Wales. I do not believe that he has retained his New Zealand domicile of origin nor acquired a new domicile of choice in New Zealand. I believe that the tax implications of this decision have coloured his evidence and that while he has an attachment of sentiment to his birth country, he has made a home in Australia for the foreseeable future and falls within the extended meaning of “resident” under s 6(1) of the Act because his domicile is in Australia.
DECISION
The decision under review is affirmed.
I certify that the preceding 43 (forty three) paragraphs are a true copy of the reasons for the decision herein of ........[sgd].............................................
Associate
Dated 11 December 2012
Date of hearing 17 September 2012 Counsel for the Applicant Mr D Barlin Solicitors for the Applicant Andrew L Ford Lawyers Counsel for the Respondent Mr H Miller Solicitors for the Respondent Australian Taxation Office
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