Maximillian Clemens and Commissioner of Taxation
[2015] AATA 124
•6 March 2015
[2015] AATA 124
Division Small Taxation Claims Tribunal File Number(s)
2014/0940
Re
Maximillian Clemens
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.
.....................................................................
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.
Maximillian Clemens (“the Applicant”), seeks review of a decision made by the Commissioner of Taxation (“the Respondent”) on 14 February 2014 (and re-issued in a more complete form on 26 February 2014) disallowing an objection to a Notice of Assessment issued to the Applicant for the year ended 30 June 2013.
THE FACTS
The facts relevant to this proceeding are not in dispute.
The Applicant was born in Germany on 25 September 1992 and is a German national.
Before traveling to Australia, the Applicant had just finished secondary school in Germany. From the time of his birth up until his overseas departure the Applicant lived with his parents at the domestic residence owned by the parents. It seems that it was one continuing residence located in Grosheilm, Germany.
On 3 October 2012 the Applicant entered Australia under “working holiday visa” (subclass 417).
In the Incoming Passenger Card completed that day, the Applicant described himself as a “visitor or temporary entrant” coming to Australia for the main reason of having a holiday.
He nominated that his intended length of stay in Australia would be five months.
The Applicant had booked return flights before leaving Germany.
While in Australia the Applicant left his personal belongings at his parents’ house.
The Applicant had virtually no assets’ in Australia other than the possessions he carried with him and whatever money he had in his bank accounts.
The Stay in Australia
From 3 October 2012 until 17 November 2012, a period of some 45 days, the Applicant “stayed” in fourteen different hostels, largely located in coastal areas of New South Wales and Queensland.
From 18 November 2012 to 18 February 2013, a period of some 92 days the Applicant shared a bedroom with a “travel friend” in a Sydney apartment. There were a total of seven people staying in the same apartment. During roughly the same period the Applicant also worked as a casual factory hand for Warringah Plastics Pty Ltd.
From 19 February 2013 until 5 April 2013, the Applicant once again stayed in 12 hostels located throughout Australia and on 6 April 2013, he departed Australia for Fiji where he spent eight days on an “island hopping” trip. The Applicant re-entered Australia again on 14 April 2013.
Departure and Post-departure Living in Germany
On 15 April 2013, the Applicant departed Australia for New Zealand and returned to Germany.
The Applicant was in Australia for a total of 186 days.
On his return to Germany, the Applicant “lived” with his parents for about two weeks before moving to the campus of Universitat Koblenz-Landau. Mr Clemens has since transferred to Johannes Gutenberg Universitat Mainz where he lives, presumably, close by in some form of rented accommodation. University correspondence dated 5 June 2013 however identifies Mr Clemens' address as that of his parents’ house.
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 his behalf. The Applicant did so by a Power of Attorney (Common Law) & Agency Agreement signed on 20 March 2013. In that document the Applicant is described as being “of” Naherrechstrasse 6 Grosheilm, Germany 55459; that is, the Applicant gave his address as his parents' house.
On 2 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 his income as a non-resident.
On 15 October 2013, Backpackers Buddy on behalf of the Applicant objected to the Notice of Assessment on the grounds that he was a resident of Australia for the year ended 30 June 2013. On 14 February 2014, the Commissioner disallowed the objection. The Applicant now seeks a review of that decision.
To assist, the attached timeline provides a visual depiction of how the stay in Australia related to the Applicant’s time overseas.
THE ISSUE
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 shorthand 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 he was physically present in Australia for more than 183 days in the year of income to 30 June 2013 and that even though he does not intend to take up residence in Australia, the Commissioner could not be satisfied that his usual place of abode was outside Australia.
This is an unusual situation in that the Applicant here is asserting the proposition that he 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 favour of the Respondent, on the basis that the Applicant was a foreign resident. By comity of reasoning, if the Tribunal is not so satisfied, the Tribunal must find in favour 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 should the Commissioner be 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 the 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 at a place in Country X and travels to Australia for a seven 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 to the attached timeline in the Appendix, it is apparent that in the whole of the period before he came to Australia, the Applicant lived at his parent’s home in Germany and he returned there, albeit briefly, after returning to Germany from Australia. He then moved out to University living quarters. His exact intention in moving to University accommodation is not clear and it may well be that at some point he would no longer treat his parents place as his usual place of abode.
Nonetheless this Tribunal concludes that during the whole of the year ended 30 June 2013, the Applicants’ usual place of abode was his parents' house in Germany.
There are a number of facts which support this conclusion.
First, as can be readily seen from the Timeline his parents' house in Germany was where the Applicant lived both before and immediately after his time in Australia.
Secondly, the Applicant gave that address as his address in the Power of Attorney (Common Law) & Agency Agreement he signed on 20 March 2013. Providing that address would appear to have been given on the basis that that was where he could most readily and most customarily be found.
Thirdly, although not strictly the test, there is no basis on which it could be said that the Applicant has or had a usual place of abode in Australia. It is very doubtful that the Applicant had a place of abode in Australia at all. It is true that he stayed in an apartment in Sydney for a period of 93 days, but there is no evidence that he treated that place as if it were “home” as distinct from any other place where someone might stay for a period of time while on holiday.
Fourthly, there would appear to be 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 Germany and returned to Germany. The pattern of travel described by the Applicant in his evidence is not suggestive of someone who simply wonders from place to place. He returned to Germany at the end of his Australian adventure and remains there. In other words, he would appear to have “settled headquarters” in Germany.
Fifthly, the fact that the Applicant moved from his parents’ home shortly after arriving back from Australia to attend university does not necessarily mean that his parent’s home thereupon ceases to be his usual place of abode. This will depend on the quality of his new accommodation and whether it can be said that that new accommodation has such a quality about it as to suggest that it has become his usual place of abode. In my view the university accommodation is unlikely to have such a quality about it and is better viewed as further temporary accommodation during which time the usual place of abode remains the parent’s home.
Sixthly, university correspondence dated 5 June 2013 is addressed to the Applicant at his parents’ house. By that time he was already living in university accommodation but importantly still listed his parents place as his address. This again suggests that the new university accommodation was viewed by the Applicant as temporary and would not have the quality of a usual place of abode.
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 his usual place of abode overseas in Germany 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 Germany 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.
52. I certify that the preceding 51 (fifty-one) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President.
.......................[sgd]...............................................
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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