Michael Shord and Commissioner of Taxation
[2015] AATA 355
•21 May 2015
[2015] AATA 355
Division TAXATION APPEALS DIVISION File Number(s)
2014/0629-0633 and 2014/2398
Re
Michael Shord
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Senior Member CR Walsh
Date 21 May 2015 Place Perth The Tribunal affirms the decision under review.
...................[sgd].....................................................
Senior Member CR Walsh
CATCHWORDS
INCOME TAX – whether taxpayer “resident of Australia” – employment overseas as oilfield diver and supervisor – income derived from foreign sources – whether taxpayer “resides” in Australia – “domicile” of taxpayer - whether taxpayer’s “permanent place of abode” outside Australia – whether “foreign source income” of taxpayer exempt – whether taxpayer entitled to foreign tax offsets – whether shortfall interest charge and shortfall penalties should wholly or partly be remitted - objection decision affirmed
LEGISLATION
Domicile Act 1982 – s 7 – s 10
Income Tax Assessment Act 1936 – s 6(1) – s 6(1)(a) – s 23AG - s 23AG(1) – s23AG(2)(c) – s 23AG(2)(d) - s 23AG(6) – s 23AG(7)
Income Tax Assessment Act 1997 – s 6-5(2) - s 995-1(1)
Taxation Administration Act 1953 – s 14ZZK(b)(ii) – s 280-160 - s 284-90(1) –s 298-20 - s 770-10(1)
CASES
Applegate v Federal Commissioner of Taxation [1978] NSWLR 126
Dempsey v Commissioner of Taxation [2014] AATA 335
Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614.
Federal Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93
Gregory v Deputy Federal Commissioner of Taxation (1937) 57 CLR 774
Hafza v Director-General of Social Security (1985) 6 FCR 444
Jones v Dunkel (1959) 101 CLR 298
Levene v Inland Revenue Commissioners [1928] AC 217
Norman v Norman (1969) 16 FLR 231
Re Optimise Group Pty Ltd and Federal Commissioner of Taxation [2010] AATA 782
Terrassin v Terrassin [1968] 3 NSWR 600
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
REASONS FOR DECISION
Senior Member CR Walsh
21 May 2015
INTRODUCTION
During the income years ended 30 June 2006 to 30 June 2011 (Relevant Period), Mr Shord worked overseas as an oilfield diver or supervisor (on offshore platforms, barges and other vessels) and derived income from foreign sources for that work.
This application concerns whether Mr Shord was a “resident of Australia”, as defined in s 6(1) of the Income Tax Assessment Act 1936 (ITAA 1936) (and, it follows, an “Australian resident”, as defined in s 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997)) in the Relevant Period such that he is liable to Australian tax on income derived from all sources, whether in or out of Australia, in the Relevant Period.
Mr Shord’s position is that he was not a “resident of Australia” in the Relevant Period. In contrast, the Commissioner’s position is that he was.
BACKGROUND
From 1999 to August 2010, Mr Shord worked as a saturation diver, diving supervisor and diving superintendent for various foreign companies overseas. More specifically, from 1999 until May 2008, Mr Shord worked overseas for Fraser Diving International, who subsequently became Cal Dive International. From June 2008 until October 2009, Mr Shord worked overseas for Global Industries. In July and August 2010, Mr Shord completed a short (5 week) contract overseas for Cal Dive International.
On 27 July 1999, Mr Shord lodged his income tax return for the year ended 30 June 1999 in which he identified himself as a “non-resident” and reported net rental income of $360. On 9 August 1999, the Commissioner issued Mr Shord with a notice of assessment for the year ended 30 June 1999 (1999 Assessment), notifying a taxable income of $4,916 and a credit of $3,815.55, which contained the following statement (Statement):
You have been deemed to be a non-resident of Australia for income tax purposes – no tax free threshold is available to non-residents. If your residency status has changed, please read the information in residency in the TaxPack. [Emphasis added]
Mr Shord did not lodge income tax returns for the years ended 30 June 2000 to 30 June 2011.
In about August 2010, Mr Shord decided to take an extended break from working overseas to live with his wife, Mrs Cynthia Jean Shord (Mrs Shord), in Australia.
Commencing July 2011, Mr Shord worked in Western Australia for several months for the Australian company Cal Dive International (Aust) Pty Ltd.
In July 2011, Mr Shord completed an Australian Taxation Office (ATO) “Tax File Number Declaration” form, declaring himself as a “resident” and quoting his tax file number.
On 3 November 2011, the Commissioner issued Mr Shord with a “Notice of Lodgement reminder: Income Tax Returns”, selecting the years ended 30 June 2000 to 30 June 2011 for review.
On 13 December 2011, the Commissioner issued Mr Shord with a document titled “ATO – Transactions Questionnaire” (ATO Questionnaire) for his completion.
On 22 February 2012, Mr Shord responded to the ATO Questionnaire (Response to ATO Questionnaire). The Response to the ATO Questionnaire contained the following:
Questions 8
Do you consider that you are not an Australian resident for tax purposes?
The 1999 Notice of Assessment issued by the Deputy Commissioner states as “additional Information”,
“You have been deemed to be a non-resident of Australia for income tax purposes – no tax-free threshold is available to non-residents.
If your residency status has changed, please read the information on residency in TaxPack.”
I do not consider my circumstances have changed over the years, so I have relied upon this written advice from the Deputy Commissioner that says I’ve been deemed to a non-resident. This advice provided is in addition to the assessment notice. As written advice by the Deputy Commissioner it is contended I may rely upon it, and that is what I have done.
During the period I have spent less than 183 days in Australian (sic.) in any year. The majority of the time I spent outside of Australia.
During the period I have not worked in Australia.
During the period I have not received nor entitled to any superannuation guarantee from any Australian company.
My domicile is England, where I was born and my parents were born.
During the period I have resided outside Australia.
I have worked outside of Australia in all of the years as a professional oil field diver or supervisor/superintendent, for principally Global Diving Services and Fraser/Cal Dive. My lifestyle is travelling in different places of the world and being employed by these companies for various periods. I make my “home” at that place/location within the world where I may be working or at recreation, sometimes that place of recreation is in Australia. My personal possessions are with me, at locations I work and travel to. In those years, I did not reside at one place, or principally at one place, I travelled and lived in numerous locations. This is a function of both my work and lifestyle.
While the lifestyle is not unusual, it occurred after my separation and estrangement from my children 12/13 years ago.
I am not on the Western Australian or Australian electoral roles.
I do not own a car or other motor vehicle in Australia of any commercial value, neither a boat or any other type of vehicle.
In Australia I jointly own a home that my spouse lives in and house that is rented. I have chosen to keep these assets in Australia as an investment because Australia is a country that I am able to own property (as opposed to the many countries lived in), Australia is politically secure and economically secure (as very well evidenced in recent times, if I had property invested in UK, Europe or US those properties would be significantly devalued)……
I do not own any shares or trusts or other types of investments in Australia.
I have adult children but am estranged from them and not seen them for some 12/13 years.
I regularly visit my family in England. [Emphasis added]
On 25 July 2012, Mr Shord lodged an income tax return for the year ended 30 June 2012 declaring himself as a “resident”.
On 19 October 2012, the Commissioner requested that Ms Shord lodge income tax returns for the years ended 30 June 2006 to 30 June 2011 (i.e. for the Relevant Period).
On 8 November 2012, Mr Shord lodged his income tax returns for the years ended 30 June 2006 to 30 June 2011 (i.e. for the Relevant Period) with the ATO.
On 22 May 2012, the Commissioner issued Mr Shord with a “Notice of Income Tax Audit”.
On 19 October 2012, the Commissioner issued Mr Shord with an “Audit Position Paper”.
On 20 March 2013, the Commissioner issued Mr Shord with a further “Audit Position Paper”.
On 6 May 2013, the Commissioner issued Mr Shord with an “Audit Completion” notice.
On 15 May 2013, the Commissioner issued Mr Shord with notices of amended assessment for the years ended 30 June 2006 to 30 June 2011 (i.e. for the Relevant Period), with an amended taxable income for each of those years, as follows:
· $38,572 (from $1,936) for the year ended 30 June 2006;
· $101,302 (from $1,616) for the year ended 30 June 2007;
· $170,602 (from $172), for the year ended 30 June 2008;
· $44,370 (from $674) for the year ended 30 June 2009;
· $91,851 (from $3,084) for the year ended 30 June 2010; and
· $29,990 (from $0) for the year ended 30 June 2011
(Amended Assessments).
By the Amended Assessments, the amount of income tax payable by Mr Shord for the Relevant Period was increased by a total of $149,967.75 (i.e. to include payments received by Mr Shord for his work overseas for various foreign companies in the Relevant Period), as follows:
· $11,786.55 for the year ended 30 June 2006;
· $34,748.95 for the year ended 30 June 2007;
· $61,628.85 for the year ended 30 June 2008;
· $16,420.30 for the year ended 30 June 2009;
· $22,836.75 for the year ended 30 June 2010; and
· $2,548.35 for the year ended 30 June 2011.
By the Amended Assessments, the Commissioner imposed shortfall interest charges (SIC) on Mr Shord for the Relevant Period, totalling $58,947.53, as follows:
· $8,010.45 for the year ended 30 June 2006;
· $18,379.40 for the year ended 30 June 2007;
· $23,222.91 for the year ended 30 June 2008;
· $4,652.89 for the year ended 30 June 2009;
· $4,420.67 for the year ended 30 June 2010; and
· $261.21 for the year ended 30 June 2011.
Also on 15 May 2013, the Commissioner imposed shortfall penalties (Administrative Penalties) on Mr Shord for the Relevant Period totalling $74,984.75, as follows:
· $5,893.25 for the year ended 30 June 2006;
· $17,374.45 for the year ended 30 June 2007;
· $30,814.40 for the year ended 30 June 2008;
· $8,210.15 for the year ended 30 June 2009;
· $11,418.35 for the year ended 30 June 2010; and
· $1,274.15 for the year ended 30 June 2011.
On 4 July 2013, Mr Shord objected to the Amended Assessments, the SIC and the Administrative Penalties (Objection).
On 18 December 2013, the Commissioner disallowed the Objection (Objection Decision).
On 16 January 2014, Mr Shord applied to the Tribunal for a review of the Objection Decision[1].
[1] Mr Shord bears the onus of proving, on the balance of probabilities, that the Amended Assessments are excessive or otherwise incorrect, and what the Amended Assessments should have been: s 14ZZK(b) of the Taxation Administration Act 1953.
ISSUES
The relevant issues for determination by the Tribunal are:
(i)Was Mr Shord a “resident of Australia” within the meaning of s 6(1) of the ITAA 1996 (and, it follows, an “Australian resident” within the meaning of s 995-1(1) of the ITAA 1997) in each of the income years in the Relevant Period?;
To determine this, the Tribunal must answer the question: did Mr Shord “reside” in Australia in each of the income years in the Relevant Period?
If the answer to this question is “no”, the Tribunal must then consider:
· Was Mr Shord’s “domicile” was in Australia?; and
· Was Mr Shord’s “permanent place of abode” outside Australia; and
(ii)If Mr Shord was a “resident of Australia” in each of the income years in the Relevant Period:
·was Mr Shord’s income derived from services in foreign countries (i.e. “foreign source income”), or any part thereof, exempt from income tax pursuant to s 23AG of the ITAA 1936, for the years ended 30 June 2006 to 30 June 2009?; and
·was Mr Shord entitled to foreign tax offsets pursuant to s 770-10(1) of the ITAA 1997, for the years ended 30 June 2006 to 30 June 2011, and if so, the relevant amount of foreign tax offsets?; and
(iii)Should the Commissioner remit, wholly or partly:
· the Administrative Penalty; or
· the SIC;
imposed on Mr Shord in relation to the Relevant Period.
EVIDENCE
On 9 February 2015, Mr Shord filed a bundle of documents, titled “Applicant’s Evidence”, together with a “Statement of Facts, Issues and Contentions” (Mr Shord’s SFIC) and a “Witness Statement” (Witness Statement). On 25 February 2015, Mr Shord filed a further bundle of documents, titled “Applicant’s Supplementary Evidence”. Mr Shord also gave oral evidence at the hearing.
Mr Shord’s personal background and circumstances in the Relevant Period
Mr Shord was born in the United Kingdom on 29 July 1950.
In 1967, Mr Shord joined the UK armed forces as an Air-Corps Aircraft Technician.
In 1974, Mr Shord left the UK armed forces and became an off-shore diver, initially working mainly in the United Kingdom but later in the Middle East.
Mr Shord first came to Australia on a holiday in 1977.
Mr Shord married an Australian in August 1977 and started living in Australia in December 1978. This marriage produced one child (a daughter) and it ended in 1990 in divorce. Mr Shord subsequently became, and continues to be, estranged from his daughter from his first marriage.
On 11 November 1992, Mr Shord married Mrs Shord. Mrs Shord is an Australian citizen. Mr Shord and Mrs Shord have no children together.
All of the surviving members of Mr Shord’s family (namely 3 older sisters) have, at all material times, lived in the United Kingdom.
Mr Shord is an Australian citizen on 15 October 2004. Mr Shord has held an Australian passport since at least 15 October 2004 and a British passport since at least 22 January 2010. There is no documentary evidence that Mr Shord held a British passport before this date.
Mr Shord and Mrs Shord have been the registered proprietors, as joint tenants, of a property in Kelmscott, Western Australia since 19 December 1991 (Kelmscott Property). At all material times, the Kelmscott Property has been rented out (i.e. it is an investment property).
Since 22 January 1999, Mr Shord and Mrs Shord have been the registered proprietors, as joint tenants, of a property in Roleystone, Western Australia (Roleystone Property).
At all material times, Mrs Shord has lived at the Roleystone Property.
At all material times, Mr Shord has lived with Mrs Shord at the Roleystone Property when in Australia.
In his Witness Statement, Mr Shord describes various aspects of his personal background and circumstances, as follows:
24.My lifestyle is a nomadic lifestyle. I call the world my home. The barge that I work on is my home. The more established places are bases. These are used to store things that you may not be able to put on your back. My home in the UK is an established base to live and ravel from, also my contact place for work as well as a meeting place for friends and family living in the United Kingdom. My life style also relies on trust between my wife, who is reluctant to leave Australia to take up living in some foreign country. I am privileged in my position to be able to get my wife to join me in some countries where I may be, if the circumstances allow it. Even if it is only a few days while they move a barge or vessel to a new location.
………….
29.As advised by the Tax Office in 1999, I removed myself from all Electoral rolls in Australia. These included the Federal, State and Local. I am enrolled in the United Kingdom.
30.Under the advice of the Tax Office I withdrew all my Superannuation in about 1999 and closed the various accounts. Since then I have only received Superannuation contributions while working for a short time in Australia from July 2011.
31.As a requirement put to me by the Tax Office in 1999, I sold any assets that I had except for my share of the house I stay at while I am visiting Perth. I don’t own a car or any other motorised vehicle in Australia. I have no personal assets here in Australia, those I did have in 1999 have been disposed with.
32.The only investment that I have within Australia is a part share in a house that my wife and I purchased as her home here in Western Australia. I did own a part share in another house that was rented, but that has since been sold to allow me to pay out various debts that had been accumulating here in Australia and abroad.
33.I have no Australian shares or any other listed or unlisted investments in Australia.
34.I do not belong to any club, sporting or otherwise in Australia. I was a past member of the RSL in New South Wales but ceased many years ago.
35.Due to my occupation, I have medical insurance to cover me world wide. In the United kingdom I have a national insurance number which covers me throughout the European Community.
36.My wife lives most of the time in Australia. Cyn is a fully qualified nurse and midwife. She has always worked to keep herself, she is a very independent woman, and has recently retired, being 64 years old.
37. I have no other family in Australia.
Residence in the United Kingdom in the Relevant Period
Mr Shord says that during the period between 1999 to August 2010,[2] he had a residence in the United Kingdom for his exclusive use with “belongings attributable to himself” in that residence.[3]
[2] Mr Shord’s SFIC, at [31].
[3] Mr Shord’s SFIC at [31].
In his Witness Statement, Mr Shord states the following in relation to his alleged “home” in the United Kingdom (between 1999 and August 2010):
27.Owning a house outside Australia is extremely difficult. First the cost involved. Houses within Australia are extremely cheap in comparison to the United Kingdom. My address(s) in the United Kingdom have been in buildings with associated persons (friend or family), having separate independent living areas. It is very common in the United Kingdom for a street address to hold more than one independent living areas.
28.My home in the United Kingdom contains furniture, electric items, clothing, BBQ and some tools. I have my own exclusive sleeping, living and bathroom areas. I don’t own a car in the UK due to the cost factor of keeping one that is only used when I am on holiday from work. Instead I hire a car, this way the insurance/road tax and compulsory servicing of the car is always covered. When I am travelling either on holiday or to work, I take my electronic “toys” and clothing. I purchase books at the various airports before boarding the barge. Like everyone else, I am restricted by weight especially when going offshore. [Emphasis added]
Mr Shord produced the following documents which are addressed to him at Pulsack Manor, Treeve Lane, Connor Downs, Hayle, Cornwall, in the United Kingdom (Pulsack Manor Address Documents):
· Two documents dated 17 April and 11 September 2014 relating to a bank account held by the Applicant with Lloyds Bank;
· A letter from the UK National Health Service (NHS) dated 23 April 2014 acknowledging that the Applicant had joined the NHS Organ Donor Register;
· A letter from the NHS dated 24 October 2014 dated 24 October 2014 concerning an eye screening test;
· A letter from Dr C.A.Jones of Hayle Cornwall addressed to the Applicant, postmarked 19 August 2014;
· An undated letter from Heathrow Rewards to the Applicant;
· An undated document entitled “Airpoints”; and
· A letter from English Heritage dated 9 December 2014 to the Applicant and his wife.
Time spent in and outside Australia in the Relevant Period
Table A, below, sets out the number of days that Mr Shord spent in Australia and outside of Australia in the income years ended 30 June 2000 to 30 June 2011 (which period encompasses the Relevant Period). Table A is based on information obtained from the Department of Immigration and Citizenship (Immigration Department) and, in particular, from Mr Shord’s incoming (arrival) and outgoing (departure) passenger cards.
TABLE A
Year ended 30 June
Number of days outside Australia
Number of days in Australia
2000
128
238
2001
136
229
2002
12
353
2003
123
242
2004
181
185
2005
205
160
2006
239
126
2007
276
89
2008
193
173
2009
217
148
2010
60
305
2011
34
311
At all material times, Mr Shord stated:
· on his outgoing (departure) passenger cards, that he was an Australian resident departing temporarily; and
· on his incoming (arrival) passenger cards, that he was a resident returning to Australia and that his intended address in Australia was the Roleystone Property.
In his Witness Statement, Mr Shord states the following in relation to his incoming and outgoing passenger cards:
38.Immigration card entry of Australia have caused a problem in the past due to [the] (sic.) fact I come into Australia on my Australian passport and declare myself a resident of the UK. I have been denied entry on my British passport because I was denied a visa because I held an Australian passport. The immigration card is a tick box card with no room for explanation, I complete it to satisfy the Immigration requirements to make my entry easier.
39.When entering or leaving the United kingdom I use my British Passport, this makes entry and exit far easier and quicker, it does mean that my British passport is not stamped so I do not have any record of my entry into the United Kingdom. Also most times I travel back to the United Kingdom will be organised by my employer, so again I will not have other records of the travel.
40.During the years in dispute with the Tax Office, I stayed on average of over 200 days per year outside Australia.
Mr Shord’s overseas employment in the Relevant Period
Table B, below, evidences transfers of funds from foreign sources into Mr Shord’s Australian Commonwealth Bank account[4], and travel to and from Australia during the Relevant Period. Table B is based on information obtained from AUSTRAC and from the Immigration Department.
[4] Income for periods of not less than 91 days, referred to in Table B, have been excluded from the calculation of Mr Shord’s taxable income for the relevant income years, except for the income earned by Mr Shord whilst working in Brunei from 14 June 2006 to 2 November 2006.
TABLE B
Location Dates out of Australia Number of days outside Australia Transferor Amount transferred Date of transfers Year ended 30/06/2006 Vietnam 19/6/2005-6/10/2005 109 Fraser Diving Int’l Ltd (Cl) $61,210 15/07/2005
15/08/2005
15/09/2005
17/10/2005
17/11/2006Singapore 12/10/2005 – 15/12/2005 64 Fraser Diving Int’l Ltd (Cl) $19,519 19/12/2005
17/01/2006Singapore 15/1/2006 – 25/1/2—6 10 Fraser Diving Int’l Ltd (Cl) $4,580 17/02/2006 Thailand 17/4/2006 – 13/4/2006 26 MCON $12,537 17/05/2006
15/06/2006Brunei 13/6/2006 – 2/11/2006 18 Fraser Diving Int’l Ltd Cl / Cal Dive Far East $0 Year ended 30/06/2007 Brunei 13/6/2006 – 2/11/2006 124 Fraser Diving Int’l Ltd Cl / Cal Dive Far East $86,609 17/07/2006
18/08/2006
19/09/2006
18/10/2006
16/11/2006Egypt 6/1/2007 – 8/4/2007 92 Cal Dive International PL $66,157 15/02/2007
15/03/2007
17/04/2007
11/05/2007Thailand 19/5/2007 – 17/8/2007 43 Cal Dive International PL $13,077 18/6/2007 Year ended 30/06/2008 Thailand 19/5/2007 – 17.8.2007 47 Cal Dive International PL $51,285 16/07/2007
15/08/2007
17/09/2007Brunei 24/9/2007 – 12/12/2007 79 Subtec Middle East $75,284 09/10/2007
12/11/2007
11/12/2007
09/01/2008Malaysia 8/3/2008 – 16/4/2008 39 Cal Dive International $43,861 14/04/2008
13/05/2008Vietnam 18/6/2008 – 17/9/2008 13 Global Industries Asia Pacific / MS Global Industries Asia Pacific $26,579 6/6/2008 Year ended 30/06/2009 Vietnam 18/6/2008 – 17/9/2008 78 Global Industries Asia Pacific / MS Global Industries Asia Pacific $123,893 09/07/2008
11/08/2008
05/09/2008
09/10/2008India 18/1/2009 – 19/4/2009 91 Global Industries Asia-Pacific Pte Ltd $132,682 11/02/2009
12/03/2009
13/04/2009
14/05/2009Indonesia 27/4/2009 – 14/6/2009 48 PT global Industries Asia-Pacific $43,696 12/05/2009
12/06/2009Year ended 30/06/2010 Indonesia 27/4/2009 –14/6/2009 0[5] PT Global Industries Asia-Pacific $17,559 07/07/2009 Thailand 12/7/2009 – 10/9/2009 60 Global Industries Offshore Thailand Ltd $71,208 14/08/2009
09/09/2009
06/10/2009Year ended 30/06/2011 Georgia 1/7/2010 – 4/8/2010 34 Cal Dive International $31,041 16/08/2010
14/09/2010[5] Income received in following income year.
In his Witness Statement, Mr Shord describes his overseas employment in the period from 1999 to August 2010, as follows:
13.For the period from 1999 to August 2010 all the employment was outside of Australia for companies outside of Australia. I was paid in US dollars, to my mortgage account for the Australian property. For the period from 999 to August 2010 I did not work for any other company, only Fraser Diving/Cal Dive, and Global…….My working and living arrangements did not change through this period.
14.I was always paid in US dollars directly to my mortgage account for the Australian property…...
15.My industry relies very strongly on trust……...A telephone call is all that is required to let you know the location of the barge and what the task is……
16.The industry outside Australia is very different. There is no superannuation, or Long Service leave. There are no public holidays and this included Christmas and Easter holidays. There are no Unions to argue safety matters. Everything is kept “in house”. Depending on the task that the barge or boat has been given to complete, could also mean that your “status” could change, eg. Saturation diver to Supervisor…..
17.The employment arrangements are similarly based on trust. When Fraser/Cal Dive or Global wanted me on a site they would phone me with the details of the job, confirming I am fit and able for the job, then phone later with details of my flight and travel arrangements. They would attend to and pay all travel requirements regardless of where I am including any visa or regulatory requirements. They would have advised of pay rates for the site and site conditions. The conditions and documentation is not in any way comparable to the expectations of working in Australia for an Australian company.
18.Because my employment arrangements and terms do no specifically include payments of superannuation, workers compensation, recreation leave, long services leave, other special leave; my rate of pay is inclusive of all such items that might be expected in Australian employment arrangements. The periods of not being on site is recreation leave, or leave required for external requirements of safety, or moving barges or the like, or foreign visa/permit requirements.
……….
21.In all the countries I have worked no matter where, local employment taxes have been paid either directly or on my behalf by the employer. Those are the conditions Fraser/Cal Dive and Global attended to. It was always a standard understanding they took care of any of those obligations, and to my knowledge always have.
22.While working for Fraser/Cal Dive, I only worked for them. It may be on different company barges or ships but Frasers/Cal Dive would have won the contract to provide services. The same for when I was working for Global, except Global have their own barges.
23.My employment with Fraser/Cal Dive and Global for the whole period from 1999 to August 2010 was only with them. Any periods of return to Australia in that time were part of my employment arrangements with them. Any periods of return to Australia or other places was; my leave, like a person would have for holiday; was a period I was required to be out of a certain country for their law requirements, a period they wanted me at call close to work, Australia being closer access than the United Kingdom.
My employment conditions with these companies are not the usual Australian employment conditions, the Tax Office seeking to apply Australian employment rules to my arrangements overseas in a specialised field is simply inaccurate.
I did not stop and start employment with these two companies, I was continuously employed by them. If I had stopped working then I would have been unemployed and sought work with another company, that did not occur in this time period.
………..
25.The employer while at site obviously provides all accommodation and immediate living amenities because of the locations and conditions. When I do need spending money for living I use a debit card, either from the country I am at, or my Lloyds Bank International Platinum debit case, this card being from the United Kingdom. [Emphasis added]
The evidence concerning Mr Shord’s overseas employment during the Relevant Period (including Mr Shord’s oral evidence) establishes that, on each occasion, Mr Shord attended an offshore oil rig for an installation or repair work assignment for a foreign company (Job), he was first informed, by telephone (or, occasionally, by email), of the details of the Job including travel details and rate of pay.
There is no evidence that Mr Shord ever entered into a written employment contract with any of these foreign companies in respect of his overseas work in the Relevant Period as the employment arrangements in his particular industry are “based on trust”. In his Witness Statement, Mr Shord notes:
20.At the request of the Tax Office I have written to various past employers to confirm what I have been saying. But as I explained during the audit, companies do not like being involved with any Taxation Department, especially ones who they don’t have to talk to and would be reluctant to be involved in even the most simple of requests. Out of all the letters sent out to the companies concerned, only one person replied and he was no longer with the company that I wrote too (sic.).
When at work on a Job, Mr Shord would generally work 18 hours a day (if not be “on call” 24 hours a day), 7 days a week for the length of time it took to complete the Job or for a minimum of 60 days, whichever was the shorter period.
For each Job Mr Shord did not receive superannuation payments and was not covered by workers’ compensation insurance. He did not receive sick leave, holiday leave, long service leave or the like.
At the completion of a Job, Mr Shord would wait to be assigned another Job, wherever that might be.
Apart from Brunei, the laws of all countries in which Mr Shord worked during the Relevant Period provided for the imposition of personal income tax. In his Witness Statement (at [21]: see paragraph 49 above) Mr Shord states that his income tax for his overseas work in the Relevant Period was paid directly or on his behalf by his overseas employer. However, there is no evidence of this. Further, there is no evidence that Mr Shord himself paid personal income tax in any of the foreign countries in which he worked during the Relevant Period.
LAW & ANALYSIS
Legislation
Section 6-5(2) of the ITAA 1997 provides that the assessable income of an “Australian resident” includes ordinary income derived from all sources, whether in or out of Australia, during the income year.
“Australian resident” is defined in s 995-1 of the ITAA 1997 to mean:
a person who is a resident of Australia for the purposes of the ITAA 1936. [Emphasis added]
“Resident” and “resident of Australia” are defined in s 6(1) of the ITAA 1936 to mean:
(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; [Emphasis added]
Did Mr Shord “reside” in Australia in the Relevant Period?
The term “resides” is not defined for the purposes of s 6(1) of the ITAA 1997 and consequently takes its ordinary English meaning, namely to “dwell permanently, or for a considerable time, to have ones settled or usual abode, to live in or at a particular place”: Federal Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93 at 99 per Latham CJ (citing Levene v Inland Revenue Commissioners [1928] AC 217, with approval) and at 101 per Rich J.
The authorities on the meaning of “resides” for income tax purposes support the following propositions:
· Whether a person “resides” in Australia is a question of fact and degree and there is no one rule which will determine the issue in every case: Federal Commissioner of Taxation v Miller 73 CLR 93 at 101 per Rich J and at 103 and 104 per Dixon J.
· That question must accordingly be determined on the basis of a consideration of the whole of the relevant evidence in an individual case: Dempsey v Commissioner of Taxation [2014] AATA 335 at [97] per Logan J, DP Hack SC and SM Kenny.
· Given the question of residence is one of fact and degree, caution should be exercised in relying on precedent in the determination of this question: Dempsey v Commissioner of Taxation at [97] and [122] per Logan J, DP Hack SC and SM Kenny.
· A place may be a person’s residence even though that person is away from that place for periods of time. The test is whether the person has retained a “continuity of association” with the place, coupled with an intention to return to that place, and an attitude that the place remains “home”: Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449 per Wilcox J, citing Levene v Inland Revenue Commissioners at 225 per Viscount Cave LC and Lord Warrington and Norman v Norman (1969) 16 FLR 231.
· A person can reside in two places concurrently: Federal Commissioner of Taxation v Miller 73 CLR 93 at 99 per Latham CJ and at 103 and 104 per Dixon J and Dempsey v Commissioner of Taxation at [95] per Logan J, DP Hack SC and SM Kenny.
· Factors that are relevant in reaching a conclusion on where a person “resides” include the persons intentions (Dempsey v Commissioner of Taxation at [96] per Logan J, DP Hack SC and SM Kenny) and the maintenance, or severing, of connections with a place: Gregory v Deputy Federal Commissioner of Taxation (1937) 57 CLR 774 at 777 and 778 per Dixon J; and
· Events occurring before and after the relevant period may be relevant as throwing light on, and disclosing the significance, of conduct within the relevant period: Gregory v Deputy Federal Commissioner of Taxation at 778 per Dixon J.
The Tribunal finds that Mr Shord has not established, on the balance of probabilities, that he did not “reside” in Australia during the Relevant Period for the purposes of s 6(1) of the ITAA 1997 and, it follows, s 995-1(1) of the ITAA 1997. Further, there is no objective evidence that Mr Shord “resided” in the United Kingdom or in any other country, other than Australia, in the Relevant Period. The reasons for this are as follows.
At best, the Pulsack Manor Address Documents (referred to in paragraph 44 above) are relevant to the question of whether Mr Shord had established a residence in the United Kingdom during the income years ended 30 June 2013 and 2014, which income years are outside the Relevant Period. However, there is no objective evidence that Mr Shord “resided” in the United Kingdom in the Relevant Period.
Although Mr Shord claims to have “let go” of Australia in 1999, the contents of Table A (referred to in paragraph 45 above) indicates otherwise. The content of Table establishes that:
· in the period from 1 July 2005 to 30 June 2009, Mr Shord spent significant amounts of time living with his wife, Mrs Shord, in the Roleystone Property, being the home they have jointly owned since 1991; and
· in the period from 1 July 2009 to 30 June 2011, Mr Shord spent almost all his time in Australia, living in Australia with his wife, Mrs Shord, in the Roleystone Property, being the home they have jointly owned since 1991.
In his Witness Statement, Mr Shord states that he was always paid by his foreign employers in US dollars “directly into his mortgage account for the Australian property”: see paragraph 49 (at [14]) above. It is not in dispute that Mr Shord transferred all of his overseas earnings into his Australian Commonwealth Bank account in the Relevant Period. It follows that Mr Shord retained none of his foreign source income whilst he was working overseas in the Relevant Period. This evidence supports both a finding that Mr Shord “resided” in Australia the Relevant Period and that he did not maintain a residence (i.e. “reside”) in any other place other than Australia in the Relevant Period.
Further, in his Witness Statement, Mr Shord states that when working overseas his employer would provide all accommodation and immediate living immediate amenities but where he needed to cover “personal costs” he obtained a debit card for the country he was in, or used his Lloyds Bank (United Kingdom) International Debit Card: refer to paragraph 49 (at [25]) above. However, Mr Shord has produced no evidence of these debit cards, or the countries in which he alleges that they were obtained or used. Further, there is no evidence of Mr Shord holding a Lloyds Bank account before April 2014.
In the Response to the ATO Questionnaire, Mr Shord’s SFIC and in his Witness Statement, Mr Shord refers to the fact that he withdrew all of his Australian superannuation in about 1999. However, Mr Shord has not provided documentary evidence of this or any evidence of how any purportedly withdrawn funds were subsequently dealt with. As the Commissioner points out[6], given that Mr Shord was an Australian resident of about 48 or 49 years of age in 1999, it is unclear how he was lawfully able to access his superannuation funds[7]. Further, the receipt of superannuation funds was not reported in Mr Shord’s income tax return for the year ended 30 June 1999.
[6] Respondent’s Closing Submissions at [44].
[7] Broadly, a person can only lawfully access his or her superannuation when: (i) he or she reaches “preservation age” (which depends upon when the person was born) and retires; (ii)he or she reaches “preservation age” and has begun a “transition to retirement” income stream; or (iii) is 65 years old (even if he or she has not retired).
In his outgoing passenger cards, dated between 18 June 2005 and 1 July 2010, Mr Shord stated that he was a resident of Australia departing temporarily, in outgoing passenger immigration cards and in his incoming passenger cards, dated between 6 October 2005 and 4 August 2010 (being the first and last occasions on which Mr Shord arrived in Australia during the Relevant Period), Mr Shord stated that he was a resident returning to Australia: refer to paragraphs 45 and 46 above.
Further, Mr Shord identified the purpose of his travel to the United Kingdom, on outgoing passenger cards dated 17 February 2005, 23 April 2007, 7 May 2008 and 2 June 2012, as either for “holiday”, or visiting friends or relatives. This is inconsistent with Mr Shord’s claim that he “resided” in the United Kingdom in that period. Neither does that evidence indicate that Mr Shord spent any length of time in the United Kingdom in that period, as the evidence shows that these visits were 1 month, 1 week, 2 weeks and 1 month respectively.
In the following correspondence between Mr Shord and the ATO, Mr Shord did not assert that he was a resident of the United Kingdom in the Relevant Period:
· in the Response to ATO Questionnaire, Mr Shord states, in response to question 8 (concerning his foreign source income in the period from 15 July 2005 to 14 September 2010), that his “domicile” was the United Kingdom, where he was born. Mr Shord did not refer to his “residence” being in the United Kingdom, but said that he regularly visited his family in Australia and that:
During the period I have resided outside Australia…My lifestyle is travelling in different places of the world and being employed by these companies for various periods. I make my ‘home’ at that place/location within the world where I may be working or at recreation, sometimes that place of recreation is Australia. My personal possessions are with me, at locations I work at and travel to. In those years I did not reside in any one place, or principally in one place, I travelled and lived in numerous locations. This is a function of both my work and lifestyle. [Emphasis added];
· in an email to the ATO, dated 30 January 2013, Mr Shord’s tax agent/advisor (Mr Richard Wytkin of C. Pope & Associates Pty Ltd) (Mr Wytkin) stated that Mr Shord’s work arrangements were so itinerant and the time frames so unpredictable that Mr Shord “is unable to establish a permanent residence in the usual sense.” In that email, Mr Wytkin also referred to Mr Shord’s limited ability or inability to establish a usual residence in countries in Asia and the Middle East;
· in a letter to the ATO, dated 15 February 2013, Mr Wytkin stated that Mr Shord continued to maintain that he was properly non-resident but did not allege residence in any other place; and
· in a letter to the ATO, dated 16 September 2013, Mr Wytkin stated the following in relation to Mr Shord’s overseas work in the Relevant Period:
The lifestyle does not allow the establishment of a home in the usual sense. Mr Shord’s ‘home’ is where he is at that point in time working or at recreation, and that is sometimes inside Australia, but mostly outside Australia, including the UK.
In the Response to the ATO Questionnaire, Mr Shord states that he had no assets, investments or accounts overseas: refer to paragraph 12 above. There is no evidence that Mr Shord owned personal property of any kind during the relevant period in any place other than Australia, save for the personal possessions Mr Shord states, in the Response to the ATO Questionnaire, that he takes with him from place to place.: refer to paragraph 12 above. In his Witness Statement, Mr Shord refers to the fact that his “home in the United Kingdom contains furniture, electric items, clothing, BBQ and some tools”: refer to paragraph 34 (at [28]) above. However, this reference is not specific, either as to where these various items are kept, or when they were acquired. In Mr Shord’s SFIC, Mr Shord states (at [32]) that he has belongings “attributable to himself” in his United Kingdom residence. However, it is not entirely clear what is meant by the phrase “attributable to himself”. In his oral evidence before the Tribunal, Mr Shord said that he kept a barbeque, chain saw and some clothes at his United Kingdom residence (namely his sister’s home) during the Relevant Period, but he has provided no objective evidence of this. However, even if this were true (i.e. that Mr Shord kept various personal possessions in the United Kingdom) that does not, by itself, mean that Mr Shord “resided” in the United Kingdom in the Relevant Period and must viewed juxtaposed against the significant assets Mr Shord held in Australia during the Relevant Period (including, in particular, the Roleystone Property).
It might be expected that Mr Shord could readily produce independent evidence of the places he alleges to have resided in during the Relevant Period and the precise nature of his living arrangements (for example, by producing evidence from one of his three sisters in the United Kingdom). It might also be expected that Mr Shord would give some detailed evidence of those living arrangements, how long he actually spent in the United Kingdom, and what he did while he was there. That evidence has not, however, been produced. It is open to the Tribunal to draw an inference from Mr Shord’s failure to produce or call such evidence, without reasonable explanation, that such evidence would not have assisted Mr Shord’s case, and to more readily draw an inference adverse to Mr Shord’s case on the basis of the evidence before it: Jones v Dunkel (1959) 101 CLR 298 and Re Optimise Group Pty Ltd and Federal Commissioner of Taxation [2010] AATA 782.
Mr Shord maintained health insurance cover in Australia, in the names of both himself and his wife, during the Relevant Period. Mr Shord states that he has national health insurance in the United Kingdom: refer to paragraph 41 (at [35]) above. However, there is no documentary evidence that Mr Shord had health insurance in the United Kingdom in the Relevant Period.
Mr Shord claims to be enrolled to vote in the United Kingdom: refer to paragraph 41 (at [29]) above. There is, however, no documentary evidence of this enrolment or when it occurred.
It is clear from Mr Shord’s evidence that his physical, emotional and financial ties to Australia throughout the Relevant Period were significant. Mr Shord said in evidence that he shared a “deep emotional connection” with his wife, including during the time he spent apart from her, working overseas, in the Relevant Period. Whilst Mr Shord had family in the UK, his emotional ties to his wife in Australia (to whom he has now been married for 23 years) are clearly the most significant in his life. Whilst it is not in dispute that Mrs Shord is, as Mr Shord describes, a very “independent woman” and that she contributed to the household expenses, by reason of her work as a nurse/midwife, that does not, by itself, prove that Mr Shord did not “reside” in Australia during the Relevant Period.
Considering all of the relevant evidence, the Tribunal considers that Mr Shord maintained a “continuity of association” with Australia throughout the Relevant Period (primarily through his wife and the Roleystone Property) and although Mr Shord claims to have “let go” of Australia in 1999, the relevant facts and evidence prove otherwise: Hafza v Director-General of Social Security and Levene v inland Revenue Commissioners.
What was Mr Shord’s “domicile” during the Relevant Period?
Mr Shord’s “domicile of origin” was the United Kingdom, being the place where he was born and his parents lived.
As the Commissioner contends, Mr Shord acquired Australia as his “domicile of choice”, in place of his “domicile of origin”, by forming the intention to make Australia his home indefinitely. At the earliest, this was in December 1978, when Mr Shord says he came to Australia to live with his wife, Mrs Shord and, at the latest, this was 15 October 2004, when he became an Australian citizen: refer to paragraph 33 above, s 10 of the Domicile Act 1982 (Domicile Act) and Terrassin v Terrassin [1968] 3 NSWR 600.
Mr Shord’s “domicile of choice” (i.e. Australia) remains his “domicile” until that domicile is abandoned and Mr Shord acquires, by choice, another domicile. Mr Shord’s domicile will not, however, revert to his “domicile of origin” (i.e. the United Kingdom) upon him forming an intention to abandon Australia as a “domicile of choice”: s 7 and s 10 of the Domicile Act.[8]
[8] The onus is on Mr Shord to demonstrate that his “domicile of choice” (i.e. Australia) has changed.
The evidence before the Tribunal supports the finding that Australia was Mr Shord’s “domicile of choice” throughout the Relevant Period. Mr Shord has not proved that any other domicile replaced Australia as his “domicile of choice” at any time in the Relevant Period.
Was Mr Shord’s “permanent place of abode” outside Australia in the Relevant Period?
The determination of whether a taxpayer has a “permanent place of abode” outside Australia for the purposes of s 6(1) of the ITAA 1936 is to be made objectively, in light of all the facts, including the taxpayer’s intentions to abandon any residence of place of abode in Australia, and to reside in a place outside Australia, and, in fact, so residing: Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1 at 12 per Northrop J.
The word “permanent”, in s 6(1) of the ITAA 1936, does not mean “everlasting” or for the rest of one’s life. However, the word “permanent” means more than “temporary” or “transient”: Federal Commissioner of Taxation v Applegate at 5 per Franki J, at 11 per Northrop J and 16 per Fisher J; Applegate v Federal Commissioner of Taxation [1978] NSWLR 126 at 134 per Sheppard J.
Mr Shord has not established, on the balance of probabilities, that the United Kingdom, or any other place outside Australia, was his “permanent place of abode” in the Relevant Period: refer to paragraphs 62, 69, 70 and 71 above.
The evidence concerning Mr Shord’s “residence” in Australia also supports a finding that Mr Shord did not have a “permanent place of abode” outside Australia in the Relevant Period: refer to paragraphs 62, 69, 70 and 71 above.
There is no evidence of the nature and duration of Mr Shord’s residence in the United Kingdom in the Relevant Period or of any physical or financial ties to the United Kingdom during the Relevant Period.
Although there is some evidence of emotional ties with England, given Mr Shord was born there, lived there until he was a young adult and his surviving siblings (namely three older sisters) live there, that evidence alone is insufficient to establish that the United Kingdom was Mr Shord’s “permanent place of abode” in the Relevant Period.
Conclusions – “resident of Australia”
For the above reasons, the Tribunal considers that throughout the Relevant Period Mr Shord was a “resident of Australia” within the meaning of s 6(1) of the ITAA 1936 (and, it follows, an “Australian resident” for the purposes of s 995-1(1) of the ITAA 1997) throughout the Relevant Period.
More specifically, based on the evidence the Tribunal considers that in each of the income years in the Relevant Period:
· Mr Shord was a “resident of Australia” within the ordinary meaning of that term; and, alternatively
· Mr Shord’s “domicile” was in Australia and Mr Shord had no “permanent place of abode” outside Australia (including, in particular, in the United Kingdom).
Exemption under s 23AG of the ITAA 1936 – years ended 30 June 2006 to 30 June 2009
Section 23AG (1) of the ITAA 1936, which section applies to the years ended 30 June 2006 to 30 June 2009, provides:
(1)Where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by that person from that foreign service is exempt from tax.
……..
(2)An amount of foreign earnings derived in a foreign country is not exempt from tax under this section if the amount is exempt from income tax in the foreign country only because of any of the following;
………
(c)provisions of a law of the foreign country under which income covered by any of the following categories is generally exempt from income tax:
(i) income derived in the capacity of an employee;
(ii) income from personal services;
(iii) similar income;
(d)the law of the foreign country does not provide for the imposition of income tax on one or more of the categories of income mentioned in paragraph (c);
………
(6)For the purposes of this section, a period during which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service:
(a) absent on recreation leave, other than:
(i) ……
(iii) leave without pay or on reduced pay; or
(b) absent from work because of accident or illness.
………
(7) In this section:
………
foreign service means service in a foreign country as the holder of an office or in the capacity of an employee.
The exemption of foreign earnings derived from foreign service (foreign source income), in s 23AG(1) of the ITAA 1936, does not apply in respect of the income earned in Brunei because the laws of Brunei do not provide for imposition of income tax. Such foreign source income, therefore, falls within the exception to the exemption in s 23AG(2)(c) and (d) of the ITAA 1936.
In respect of foreign source income derived from foreign service in countries other than Brunei, where that foreign service is not apparently for a period of more than 91 days, Mr Shord has not established that he was engaged in foreign service for a continuous period of more than 91 days within the extended meaning of the term “engaged in foreign service” in s 23AG(6) of the ITAA 1936.
In order for income derived from foreign service for periods of less than 91 days to be exempt, Mr Shord would have to satisfy the Tribunal that the periods of time between two or more periods of employment of less than 91 days were temporary absences within the meaning of s 23AG(6) of the ITAA 1936 and, in particular, that he was temporarily “absent from work on recreation leave” or “absent from work because of accident or illness”.
The evidence does not support a finding that Mr Shord was ever “absent from work on recreation leave” for the purposes of s 23AG(6) of the ITAA 1936, other than leave without pay, between assignments during the Relevant Period. In particular, based on the evidence, Mr Shord:
· had no entitlement to paid leave, but made his own decisions about the time he took off work between assignments, subject to the agreement of his employer at the time; and
· was engaged on each assignment on an individual basis, with apparently individual requirements as to the required work and individual arrangements as to travel and pay: refer to paragraphs 49 to 54 above.
Further, there is no evidence that Mr Shord was ever absent from work by reason of accident or illness for the purposes of s 23AG(6) of the ITAA 1936.
Finally, Mr Shord’s description of the terms of his engagement by the relevant foreign companies indicates that, at all material times, he was not engaged in service as the holder of an office or in the capacity of an employee within the meaning of “foreign service” in s 23AG(7) of the ITAA 1936: refer to paragraphs 49 to 54 above.
Foreign Tax Offsets – years ended 30 June 2006 to 30 June 2011
Section 770-10(1) of the ITAA 1997 provides that a taxpayer is entitled to a tax offset for an income year for foreign income tax paid by the taxpayer in respect of an amount that is all or part of the taxpayer’s assessable income for an income year.
Mr Shord has not produced evidence to support an entitlement to any foreign income tax offset, or the quantum of any such offset, during the years ended 30 June 2006 to 30 June 2011. Specifically, there is no evidence that Mr Shord paid any foreign income tax on the foreign source income he derived whilst working overseas in the Relevant Period. Accordingly, Mr Shord has failed to positively establish what must be done to correct the Amended Assessments: Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63; Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614.
Mr Shord’s alleged reliance on ATO advice regarding his residence
In his Witness Statement, Mr Shord states:
7.During early 1998 I attended the offices of the Child Support Agency making enquiries to my continued obligations to pay child support……
8.Finally the Child Support Agency advised me that I should leave the country, be a non resident and work outside Australia, then the issues with my former spouse would cease. I visited both the Child Support Agency and the Tax Office in Cannington on several occasions, including meetings in their interview rooms, seeking advice on how to become a non resident. The advice included, close my usual bank accounts, remove myself from all electoral Rolls, sell personal assets like cars, have no super in Australia, my 1/3 share of ownership of a house was ok to keep. All my income would be earnt overseas with overseas employers, all that income would be excluded from the jurisdiction of the Child Support Agency and Tax Office. They also concluded I would have to stay out of the country for a minimum of 183 days of the year. I also needed a residential address outside Australia. This I already had. I made many personal visits to the Child Support Agency and Tax Office at eh Cannington branch. During this time, I met so many people from so many departments within the Tax Office, in an effort to make sure that the advice that I was being given was correct. These meetings included phone calls to the Eastern States. Finally, I was given a questionnaire to complete. This was handed into the Child Support Agency and Tax Office, consequently I received a letter from Cathy (Deputy Commissionaire (sic.) of Taxation) confirming my non residency for Taxation purposes. I recall the only request was, I was “to advise the Department if my circumstances were to change”.
9.In 1998 I was asked by a diving company by the name of Oceaneering to carry out a diving contract involving a chemical spillage by Woodside. Subsequently when the 1999 Income Tax return was prepared I declared myself as a non resident and taxed as a non resident, The Notice of Assessment contains the notation
**********Additional Information**********You have been deemed to be a non-resident of Australia income tax purposes – no tax free threshold is available to non-residents. If your residency status has changed, please read the information on residency in TaxPack.
I took this additional information as confirmation of the advice I had previously been given when attending the offices of the Tax Office.
…………
41.I did not lodged (sic.) income tax returns from 2000 to 2011 because I believed I was a non-resident for taxation purposes as per the agreement I had with the Tax Office. Up until August 2010, when I returned long term to Australia, my working situation did not change from 1999.
…………
43.The Tax Office during the audit process, before any audit decision was made, demanded the 2006 to 2011 tax returns, otherwise I was to be fined 75%. So on the advice of my Accountant, we entered these required tax returns. These tax returns had to be lodged before any decisions were made on my residency position. They were lodged under the duress of the 75% penalty if I failed to lodge. The then penalising me for lodging tax returns incorrectly, when they were demanded under duress, before any decision was made is very unfair…….I was denied personal attendance to the audit in Perth. Everything had to be done by correspondence to Queensland. Apparently “no-one” in Perth could do the audit. The Objection was done in the Eastern States, so I have never been given an opportunity to give my story first hand, face to face with anyone in the Tax Office.
Mr Shord’s alleged reliance on the ATO’s advice that he was a non-resident for Australian income tax purposes in the Relevant period is only relevant to the issue of whether the Administrative Penalty or the SIC ought be imposed.
In any event, there is no objective evidence that Mr Shord received the advice from the ATO that he claims to have been given (as set out in paragraph 97 above).
In the Response to the ATO Questionnaire, Mr Shord stated, in his response to question 8 (refer to paragraph 5 above), that he relied on the Statement in the 199 Assessment that “You have been deemed to be a non-resident of Australia for income tax purposes”. Mr Shord did not refer to any other, more detailed, oral advice.
In Mr Shord’s SFIC, Mr Shord states (at [8]) that he was advised he could keep his then one third share in “a property” without affecting his “non-resident claim”. At the time the advice was allegedly given, however, Mr Shord owned two properties jointly with his wife, rather than having a one third interest in one property. Mr Shord makes no distinction between what he was allegedly told by the ATO and what he was allegedly told by the Child Support Agency in relation to the issue of residence: Mr Shord’s SFIC at [8].
In his letter to the ATO, dated 16 September 2013, when addressing the alleged content of the advice given by a combination of the ATO and the Child Support Agency, Mr Wytkin describes the representations in different terms to those referred to in Mr Shord’s SFIC. Specifically, no mention was made of a representation that it would not affect Mr Shord’s status as a “non-resident” if he continued to own real property in Australia. This casts doubt on the credibility of this evidence.
If Mr Shord was told by an ATO officer, in about 1998 or 1999, that in order to establish that he was not a resident for Australian income tax purposes he would have to stay out of the country for a minimum of 183 days per year and have a UK address, he did not rely on this advice: refer to paragraph 96 above. That is, Table A (refer to paragraph 45 above) indicates that Mr Shord did not stay out of Australia for at least 183 days in the years ending 30 June 2000 to 30 June 2004. Rather, Mr Shord first stayed outside Australia for 183 days or more in the year ending 30 June 2005, at least 6 years after he alleges he was allegedly given advice by the ATO. Further, there is no evidence that Mr Shord established a United Kingdom address until April 2014.
Given that Mr Shord did not, apparently, follow the advice that he says he was given by the ATO, and the inherent unlikelihood of the advice concerning the ownership of property (i.e. based on Mr Shord’s circumstances at the relevant time), the Tribunal does not accept that any such advice was given by the ATO, or that Mr Shord acted in reliance on such advice.
At the hearing, Mr Shord said that he did receive written advice some time before 1999 from Ms Cathy Argyle of the ATO but that he cannot find that advice.
Even if Mr Shord did receive advice from the ATO in about 1998 or 1999 in relation to his residence for Australian income tax purposes for the income year ended 30 June 1999, it was reckless of him to continue to rely on such advice in subsequent income years, and it was certainly reckless of him to do so some 8 to 13 years later. The same applies in relation to Mr Shord’s alleged reliance on the Statement in the 1999 Assessment, which he must have been aware was based on his own self-assessment as a non-resident in his income tax return for the 1999 income year.[9]
[9] In his Witness Statement (at [9]), Mr Shord states that he “declared” himself as a non-resident in his 1999 income tax return.
Remission of SIC and Administrative Penalties
By s 280-160 of Schedule 1 to the TAA, the Commissioner has the discretion to remit all or part of an amount of SIC if the Commissioner considers it fair or reasonable to do so.
By s 298-20 of Schedule 1 of the TAA, the Commissioner has discretion to remit all or part of an administrative penalty.
Mr Shord has not demonstrated that there are sufficient grounds to exercise the discretion to remit either the SIC or the Administrative Penalty referred to in paragraphs 22 and 23 above.
As stated above (in paragraph 106), to the extent Mr Shord relied on the Statement in the 1999 Assessment (refer to paragraph 5 above), or any oral advice received from the ATO in 1998 or 1999, as establishing that Mr Shord was not an Australian resident in the years ended 30 June 2006 to 30 June 2011 (i.e. the Relevant Period), he was reckless to do so.
In such circumstances, there is no basis for remitting the SIC or the Administrative Penalty, either in part or in full.
DECISION
For the above reasons, the Tribunal affirms the Objection Decision.
I certify that the preceding 112 (one hundred and twelve) paragraphs are a true copy of the reasons for the decision herein of Senior Member CR Walsh ................[sgd A Tran]........................................................
Associate
Dated 21 May 2015
Date of Hearing 9 April 2015
Representative for the Applicant
Mr R Wytkin
C. Pope & Associates Pty LtdCounsel for the Respondent Ms F Vernon
Representative for the Respondent Mr G Bei
Australian Taxation Office
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