Laura Jaczenko and Commissioner of Taxation
[2015] AATA 125
•6 March 2015
[2015] AATA 125
Division Small Taxation Claims Tribunal File Number(s)
2014/1001
Re
Laura Jaczenko
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
Date 6 March 2015 Place Sydney The decision under review is affirmed.
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Professor R Deutsch, Deputy President
Catchwords
TAXATION – notice of assessment – tax return – resident of Australia – ordinary concepts test – 183 day test – decision affirmed
Legislation
Income Tax Assessment Act 1936 (Cth) s 6(1)Cases
Commissioner of Taxation v Executors of the Estate of Subrahmanyam (2001) 116 FCR 180
Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1R v Braithwaite [1918] 2 KB 819
Secondary Materials
Income Tax Assessment Bill 1930 (Cth) Explanatory Notes
REASONS FOR DECISION
Professor R Deutsch, Deputy President
INTRODUCTION
This is one of three cases heard together but in relation to which I have found it necessary to deliver three separate decisions. All three cases involved backpackers who were foreign nationals each of whom stayed in Australia for more than 183 days in the tax year to 30 June 2013. Beyond those facts, the fact pattern in each case differs materially and consequently requires separate consideration.
Laura Jaczenko (“the Applicant”) seeks review of a decision made by the Commissioner of Taxation (“the Commissioner”) on 12 February 2014 disallowing an objection to a Notice of Assessment issued to the Applicant for the year ended 30 June 2013.
The facts relevant to this proceeding are not in dispute.
THE FACTS
The Applicant was born in Canada on 18 November 1990 and is of Canadian nationality.
On 7 September 2012 the Applicant entered Australia under “working holiday visa” (subclass 417). In the Incoming Passenger Card completed that day, the Applicant described herself as a “visitor or temporary entrant” coming to Australia for the main reason of having a “holiday”. She further nominated that her intended length of stay in Australia would be nine months. The Applicant had no plans to live in Australia on a more enduring basis.
Before traveling to Australia, the Applicant graduated from the University of Waterloo, Ontario with an Honors degree in economics in May 2012. While studying for that degree the Applicant “moved out of the family home” and lived for one year on campus and three years in an apartment she shared.
After graduation, the Applicant sold some of her household belongs and commenced living again with her parents sometime in May 2012. While in Australia the Applicant left her personal possessions with her parents. She had “minimal assets” in Australia and retained a bank account in Canada.
The Stay in Australia
From 7 September 2012 until some date in early October 2012, the Applicant stayed in two different hostels in Sydney.
From October 2012 until January 2013 the Applicant rented a room in a three bedroom apartment. Her length of stay there was 107 days. During roughly the same period, the Applicant was employed as a casual with Tarocash Pty Ltd (“Tarocash”) for whom she worked 25 to 30 hours a week. The Applicant ended her employment with Tarocash because she wanted to see more of Australia and travel to another city. From 15 October 2012 until 30 December 2012, the Applicant was also employed casually by Benchmarque Pty Ltd (“Benchmarque”). Her hours of work varied from 10 to 15 hours a week.
In the TFN declarations completed in respect of the Applicant’s employment with Tarocash and Benchmarque she was identified as a non-resident.
From sometime likely after 10 January 2013 to 31 March 2013, the Applicant stayed in seventeen different hostels and “backpacker” style accommodation around Australia.
Departure and Post-departure Living in Canada
On 1 April 2013, the Applicant departed Australia for Hawaii and returned to Canada. The Applicant booked her return travel to Canada while in Australia on 14 March 2013 having, it would seem, exhausted her savings and wanting to attend the wedding of a close family member back in Canada. The Applicant was in Australia for a total of 205 days.
On her return to Canada the Applicant returned to her parents' home. What was intended by the Applicant to be a “temporary” stay there, turned into more than one and a half years. The Applicant makes a “long commute” from her parents' home to her job on work days.
The Tax Return and Notice of Assessment
Before departing Australia, the Applicant authorised Backpackers Buddy Pty Ltd to, inter alia, lodge a tax return on her behalf. The Applicant did so by a Power of Attorney (Common Law) & Agency Agreement signed on 29 March 2013. In that document, the Applicant is described as being “of” Calypso Hostel, Grafton Street, Australia.
On 9 April 2013, a tax return was lodged on behalf of the Applicant. On 22 July 2013, the Commissioner advised that he had completed a review of the tax return and concluded that the Applicant was not a resident of Australia for the year ended 30 June 2013. On 26 July 2013 the Commissioner issued a Notice of Assessment assessing the Applicant on her income as a non-resident.
On 28 October 2013, Backpackers Buddy on behalf of the Applicant objected to the Notice of Assessment on the grounds that the Applicant was a resident of Australia for the year ended 30 June 2013. On 12 February 2014, the Commissioner disallowed the Applicant’s objection. The Applicant now seeks a review of that decision.
To assist, the attached timeline provides a visual description of how the stay in Australia related to the Applicant’s time overseas.
THE ISSUES
The broad issue involved in these proceedings is whether the Applicant was a “resident of Australia” in the year ended 30 June 2013.
The term resident is defined in section 6(1) of the Income Tax Assessment Act 1936 (Cth) as follows
“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 his permanent place of abode is outside Australia;
(ii)who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii)who is
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990;
(B) an eligible employee for the purposes of the Superannuation Act 1975
(C) the spouse, or child under 16, of a person covered by sub-paragraph (A) or (B).
Using short–hand descriptions, this formulation is often described as giving rise to four different possible bases for determining that a person, being an individual, is a resident of Australia. Thus a person is a resident of Australia if he or she meets
·the ordinary concepts test - the person resides in Australia because of the application of ordinary concepts;
·the domicile test - the person resides in Australia because the person is domiciled in Australia unless permanent place of abode is outside Australia;
·the 183 day test - the person resides in Australia because they are present in Australia for at 183 days in the relevant year if income unless the usual place of abode is outside Australia and no intention to take up residency in Australia;
·the superannuation fund test - the person is a member of certain superannuation funds.
While there are four possible bases of residence, it was agreed between the parties that the Applicant could only be treated as a resident of Australia on the third basis referred to above – i.e. that she was physically present in Australia for more than 183 days in the year of income to 30 June 2013 and that even though she does not intend to take up residence in Australia, the Commissioner could not be satisfied that her usual place of abode was outside Australia.
This is an unusual situation in that the Applicant here is asserting the proposition that she is a resident of Australia and the Respondent is asserting the contrary proposition, namely that the Applicant is not a resident of Australia. More commonly, one finds that opposite sides are taken such that the Applicant seeks to be treated as a foreign resident so as to prevent Australian tax being imposed on foreign sourced income which, as a foreign resident would not be subject to tax in Australia. The unusual positions adopted in this case come about largely because of the rather substantial tax-free threshold that applies to a resident but which does not apply in the case of a foreign resident. The existence of the tax-free threshold in the context of a resident gives rise to a zero rate of tax applying to the first $18,200 of taxable income. This is to be contrasted with a rate of 32.5% which applies to the first $18,200 of taxable income if the taxpayer is treated as a foreign resident.
In these proceedings the resolution of the residence issue comes down to a very narrow question as to whether the Tribunal ought to be satisfied that the Applicant’s usual place of abode was outside Australia. If the Tribunal is so satisfied, the Tribunal must find in favor of the Respondent on the basis that the Applicant was a foreign resident and, by comity of reasoning, if the Tribunal is not so satisfied, the Tribunal must find in favor of the Applicant on the basis that the Applicant was a resident of Australia.
The resolution of this issue raises a number of questions.
KEY QUESTIONS AND RESOLUTION
During what time period must the usual place of abode be tested?
Although not clear from the statutory formulation it seems that the satisfaction of the Commissioner (and in his stead now – this Tribunal) must be during the relevant year of income. Thus, in this case the question to consider is “During the year ended 30 June 2013 is the Commissioner satisfied that the Applicant’s usual place of abode is outside Australia?”
What is a usual place of abode?
A “place of abode” has been described as “the physical surroundings in which a person lives”: Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1 at 16 (Fisher J).
The phrase has often been treated as synonymous with “residence” or “place of residence”: R v Braithwaite [1918] 2 KB 819 at 325.
The phrase has also been defined by way of comparison to somewhat different composite phrase “permanent place of abode”. As Fisher J explained in Applegate (1979) 38 FLR 1 at 17:
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 the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.
All these comments seem to point in the same direction in that the usual place of abode refers one to the place where the person usually or customarily dwells. Thus, a person who lives in Country X and travels to Australia for a 7 month working holiday while retaining a street address in Country X to which he always intends to return to, would clearly have a usual place of abode in Country X
Is it possible not to have a usual place of abode?
Clearly this possibility can arise in circumstances where a person is moving about with no fixed address which the person would retain as his or her usual place of dwelling.
This type of person is rare and has been referred to as a so-called “bird of passage” – such a person may genuinely have no usual place of abode at all.
Is it possible to have more than one usual place of abode?
In my view it is not possible to have two or more usual places of abode at the same time. Where there are two competing places of abode it needs to be assessed based on all the available facts as to which one is “usual”. As Emmett J explained in Commissioner of Taxation v Executors of the Estate of Subrahmanyam (2001) 116 FCR 180, 197-198 at [78]:
When comparing two places of abode of a particular person, in order to determine whether one is the usual place of abode, it is necessary to examine the nature and quality of the use to which the person makes of each particular place of abode. It is then possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the usual place of abode.
It is however possible for there to be two different usual places of abode at different times. Thus, a person can have a usual place of abode in one location for half the tax year and because of changed circumstances that same person can have a different usual place of abode for the other half of the year
What was the Applicant’s usual place of abode during the year ended 30 June 2013?
When one looks at the Timeline, it is clear that the Applicant lived
·in Canada all her life to the point of time at which she left aged 22 to travel to Australia. The first 18 years she lived with her parents, then for 12 months in university accommodation, three years in shared apartment accommodation and for the final few months before leaving for Australia she again lived with her parents (periods one, two, three and four in the attached timeline);
·for some seven months in various locations in Australia (periods five, six and seven); and
·after returning to Canada for the next 18 months - with her parents ( period eight).
In my view this pattern of movement supports the conclusion that during the year ended 30 June 2013 the Applicant’s usual place of abode was her parents' house in Canada.
A number of factors support this conclusion.
First, her parents’ house in Canada was where the Applicant lived both before and after her time in Australia. As much as the Applicant may have wished or intended that her time living in her parent's house was “temporary” upon her return from Australia, her circumstances are such that she has now lived there for more than one and a half years. In my view based on all the available facts the only reasonable conclusion that one can reach is that the Applicant treated her parents’ place as her usual or customary home while she was in Australia.
Secondly, there is no basis on which it could be said that the Applicant had a usual place of abode in Australia. There is no “choice” to be made along the lines of what was suggested by Emmett J in Subrahmanyam. It must be doubted whether the Applicant in this case had a place of abode in Australia at all. It is true that she stayed in an apartment in Sydney for a period of 107 days, but there is no evidence that the Applicant treated that place as if it were “home” and as distinct from any other place where someone may stay for a period of time while on holiday.
Thirdly, there is no room for the suggestion that the Applicant was a “bird of passage” without a usual place of abode at all. The Applicant did not flit from place to place in the year ended 30 June 2013. The Applicant travelled to Australia from Canada and at the conclusion of her Australian adventure she returned to Canada via Hawaii. The pattern of travel described by the Applicant in her evidence is not suggestive of someone who simply wanders from place to place. She returned to Canada at the end of the trip and continued to live at her parent’s house for some considerable period of time thereafter. In other words, she has what one may describe as “settled headquarters” in Canada
The Applicant did indicate in the Power of Attorney which she signed on 29 March 2013 that she was at that stage “of Calypso Hostel, Grafton Street Australia”. However, the quality of this hostel presence needs to be evaluated in the context that as between 10 January and 1 April 2013, the Applicant stayed in 17 hostels in Australia. Quite clearly the Calypso Hostel was a very transitory and temporary form of short term accommodation and could not on any realistic basis be described as her usual place of abode
As already set out, plainly the Applicant had no intention of taking up residence in Australia during the year ended 30 June 2013. It follows that despite the Applicant having spent more than one half of the year in Australia, she is not a resident because the qualification in section 6(1)(a)(ii) is satisfied.
Why was the qualification to the 183 day test enacted?
While the Parliamentary intentions are not always relevant to examine it is worth noting that the various qualifications to the 183 day rule were enacted by Parliament “in order that there may be no danger of treating as residents persons who are purely visitors”: Explanatory Notes on Amendments contained in the Income Tax Assessment Bill 1930 to amend the Income Tax Assessment Act 1922-29, page 11. Thus, overseas visitors on holidays or working in Australia who are in Australia for more than 183 days would not be residents during their stay under this test, as they would usually have a usual place of abode elsewhere and would not have an intention of taking up residence in Australia.
This lends support to the conclusions I have reached. It is only if the Applicant had completely abandoned her usual place of abode overseas in Canada during the year ended 30 June 2013 that the result might be otherwise.
CONCLUSION
Based on all the facts, I am satisfied that the Applicant had a usual place of abode at his parents place in Canada at all relevant times Accordingly, I am of the view that for the year ended 30 June 2013, the Applicant was not a resident of Australia.
The decision under review is affirmed.
46. I certify that the preceding 45 (forty-five) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President.
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Associate
Dated 6 March 2015
Date(s) of hearing 24 November 2014 Date final submissions received 25 November 2014 Counsel for the Applicant Mr I Stanley Advocate for the Applicant Mr P Browne Counsel for the Respondent Mr B Kasep, Mr S Spadijer Solicitors for the Respondent Ms L Zhou, ATO Dispute & Resolution
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