Oberg and Commissioner of Taxation (Taxation)
[2021] AATA 4606
•13 December 2021
Oberg and Commissioner of Taxation (Taxation) [2021] AATA 4606 (13 December 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2020/5513
2020/5514
2020/5515
2020/5516
Re:John Oberg
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Senior Member Dr M Evans-Bonner
Date:13 December 2021
Place:Perth
The reviewable decision, being the objection decision dated 7 August 2020, is affirmed.
............[Sgd]............................................................
Senior Member Dr M Evans-Bonner
CATCHWORDS
INCOME TAX – whether taxpayer is a resident of Australia – income tax years ending 30 June 2015 to 30 June 2018 – employment in Indonesia and Mongolia – residency according to ordinary concepts test – summary principles in Harding v Commissioner of Taxation [2019] FCAFC 29 – reviewable decision affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth) ss 6(1), 6(1)(a), 6(1)(a)(i), 6(1)(a)(ii), 6(1)(a)(iii)
Income Tax Assessment Act 1997 (Cth) ss 6-5(2), 6-5(3), 6-10(5), 995-1(1)
CASES
Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93
Hafza v Director-General of Social Security (1985) 6 FCR 444; (1985) 60 ALR 674
Harding v Commissioner of Taxation [2018] FCA 837
Harding v Commissioner of Taxation [2019] FCAFC 29
Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217
Stockton v Federal Commissioner of Taxation [2019] FCA 1679; (2019) 110 ATR 7721
SECONDARY MATERIALS
Taxation Ruling IT 2650 – Income Tax: residency – permanent place of abode outside Australia – para 5, 19
REASONS FOR DECISION
Senior Member Dr M Evans-Bonner
13 December 2021
SUMMARY
Mr Oberg is an Australian citizen who relocated to Australia in November 2020 after working overseas for approximately 23 years, including in Indonesia and Mongolia. The Commissioner of Taxation has assessed him as being an Australian resident for income tax purposes for the financial years ending 30 June 2015 through to 30 June 2018. I will refer to these as the relevant tax years. Consequently, Mr Oberg has been assessed as liable to pay income tax for those financial years.
Mr Oberg disagrees with these assessments and has sought review in this Tribunal.
For the reasons set out below, I have decided that Mr Oberg was an Australian resident for income tax purposes during the relevant tax years.
THE ASSESSMENTS AND THE APPLICATION
After being advised by the Commissioner that he may have overdue income tax returns for the income years ending 30 June 2016 and 30 June 2017, on 26 March 2019, Mr Oberg lodged income tax returns for the income tax years ending 30 June 2016 and 30 June 2017.
On 12 June 2019, the Commissioner issued notices of assessment for the year ending 30 June 2016, which assessed Mr Oberg as being liable to pay income tax of $55,012.15, and for the year ending 30 June 2017, which assessed Mr Oberg as being liable to pay income tax of $93,227.70. On 19 June 2019, Mr Oberg lodged an objection to those assessments.
On 23 October 2019, Mr Oberg lodged further income tax returns for the tax years ending 30 June 2015 and 30 June 2018 after being advised by the Commissioner that they were overdue.
On 30 October 2019, the Commissioner issued notices of assessment for the income tax year ending 30 June 2015, which assessed Mr Oberg as being liable to pay income tax of $18,540.75, and for the income tax year ending 30 June 2018, which assessed Mr Oberg as being liable to pay income tax of $89,772.20.
On 13 November 2019, Mr Oberg lodged an objection to the assessments for the income years ending 30 June 2015 and 30 June 2018. He subsequently provided further information and submissions through his legal representatives in in support of his objections.
However, on 7 August 2020, the Deputy Commissioner of Taxation decided not to allow Mr Oberg’s objections to his income tax assessments for the relevant tax years. This objection decision is the reviewable decision that is currently before the Tribunal, and the separate application numbers represent each income tax year.
On 8 September 2020, Mr Oberg lodged an application seeking review of the reviewable decision in this Tribunal.
ISSUE
The issue that I need to decide is whether Mr Oberg was an Australian resident for tax purposes during the relevant tax years.
SUMMARY OF THE EVIDENCE
Mr Oberg has worked for a global mining company named the “Sandvik Group” for approximately 23 years. The company is a global company with operations in over 160 countries worldwide. Mr Oberg has spent approximately 20 years of his time with the company working overseas. His life overseas, for example, in Indonesia and Mongolia was tied to his employment. Mr Oberg described himself as always having gone where the company has wanted him to go.
In the relevant tax years, he was physically present in Australia for approximately: 92 days (in the year ended 30 June 2015); 104 days (in the year ended 30 June 2016); 79 days (in the year ended 30 June 2017); and 90 days (in the year ended 30 June 2018). These calculations were cited by Mr Oberg in his witness statement and differ slightly from his movement records, which is explained by overnight flights and layovers in Hong Kong.
Mr Oberg married Carolyn Oberg in 1981. They have an adult son. After several years of marriage, they divorced. They reconciled several years after their divorce and remarried in 1997. They bought a four-bedroom house in a Perth suburb in 1995 (Australian house).
In the relevant tax years, Mr Oberg’s assets were a houseboat moored in Western Australia, which he used when he was back in Australia. He had an interest in a factory unit in Western Australia which he owned jointly with his wife. He stored vintage cars that he owned in this unit. He also had shares in one Australian company and an Australian private health insurance policy which covered himself and Mrs Oberg. He was also a member of two recreational clubs in Australia. He had two loan accounts with an Australian Bank. One was taken out in 2014 for engines on the houseboat. The other was for the purchase of a car in 2017.
Ghana (1997 to 2005)
From approximately 1997 to November 2020, Mr Oberg worked overseas for a company that was later taken over by the Sandvik Group in approximately 1999. He was first posted to Ghana in October 1997. Mr Oberg stated that his intention at the time he left Australia “was to reside in Ghana permanently and indefinitely”. He further stated, “I believed the opportunity in Ghana was going to be a permanent and indefinite one”.
He relocated to Ghana with his wife, and his son (who was then 13 years old). His son enrolled in the international school and his wife accepted a teaching position there. Mr Oberg was promoted to the position of Managing Director of Sandvik Ghana and Sandvik Nigeria. His role included managing the Sandvik Group in Ghana and setting up a Sandvik branch in Nigeria.
Life in Ghana was difficult for Mr Oberg’s wife and son. There were power outages and water shortages that often lasted several days. He worked long hours on site, which was approximately a five-hour drive from where the family were living. He only saw his family on weekends. In 1999, Mr Oberg’s wife and son relocated to Australia so his son could finish his final two years of high school in Australia. His wife obtained work in Australia as a teacher.
Zambia (2005 to 2011)
In December 2005, Mr Oberg relocated from Ghana to Zambia to undertake the position of Managing Director of Sandvik Central Africa, where he established Sandvik Group’s mining operations in the Democratic Republic of Congo.
His son was, at that time, an independent adult, and his wife relocated to Zambia to live with him, staying there for a total of six years. Mrs Oberg undertook volunteer educational work in the community to promote HIV and AIDS awareness, and to support various charities and orphanages.
In 2007, Mr Oberg accepted the position of Managing Director of the company’s Congo operations. Mr and Mrs Oberg continued to live in Zambia and Mr Oberg would travel regularly to the Democratic Republic of Congo, to set up the Sandvik Group’s operations there.
Mr Oberg also undertook community work in Zambia. Specifically, in April 2008, he was appointed chairman of the Zambian Business Coalition on HIV and AIDS.
Australia (2011 to 2013)
In December 2011, after a global management restructure, Mr Oberg’s contract with Sandvik Central Africa was not renewed.
Mr Oberg and his wife relocated to Australia where he accepted a position with Sandvik Australia and Pacific in Australia “while [he] waited for an overseas management position to become available”. He stated that he and his wife had the “expectation” that they “would relocate abroad again when the next job opportunity arose within the Sandvik Group.” And further:
From December 2011 to October 2013, I lived in Australia and continued to work for the Sandvik Group with the intention that I would return to work overseas when a suitable job opportunity arose.
Indonesia (2013 to 2016)
The restructure was completed in September 2013, and at that time Mr Oberg was offered a position with Sandvik Mining Australia in West Papua, Indonesia. He travelled between Australia and Indonesia until January 2014, when he relocated from Australia to West Papua, Indonesia.
There were issues with suitable and available housing, as well as security issues from civil unrest.
Mr Oberg resided in a house supplied by Sandvik Indonesia in a secure compound patrolled by security guards. He needed a workers’ permit to reside there. He shared this house with two other Sandvik expatriate employees. He provided his own linen, crockery, kitchen utensils, towels and clothesline.
Mr Oberg stated that the issues with his living conditions, including security issues, shared accommodation, and the need for a permit to reside in the compound “meant that it was better for [Mrs Oberg] to remain in Australia until [Mr Oberg] moved to a safer and more suitable country.”
He was unable to obtain accommodation in his own name for reasons outside of his control, including difficulties with expatriate employees purchasing property in Indonesia at that time. Mr Oberg had an Indonesian drivers’ licence and shared a vehicle with two other employees.
Mr Oberg was in Indonesia for more than 183 days each income year and was taxed as a resident of Indonesia. He had an Indonesian tax card and submitted income tax returns to the Indonesian taxing authority for the income years ended 30 June 2015 through to 30 June 2017. He opened an Indonesian bank account but did not use it.
Mr Oberg held a KITAS visa / limited stay permit in Indonesia which was valid for one year with five options to extend it for 12 months. This allowed him to be employed, earn a salary, and open a bank account in Indonesia.
In Indonesia, Mr Oberg played golf and was a member of a golf club. He attended language classes and Sunday Christian Church services. He organised Friday lunchtime Church services at his workplace while his Muslim colleagues attended their Friday prayers.
Mr Oberg had three employment contracts concerning his employment in Indonesia. The first contract is titled, “Employment Contract Australia”. It was entered into on 15 May 2014 between Sandvik Mining as the employer and Mr Oberg, whose address was stated as the address of the Australian house. The contract contains an “effective date” of 1 October 2013, which corresponds with the time Mr Oberg commenced his employment. The contract is expressed to be governed by the laws of Australia, and jurisdiction is given to the Queensland courts. The company’s premises was located in Western Australia. A base salary is stated with no reference to the currency, and so, I infer it is in Australian dollars. The contract contains a provision for the payment of Australian superannuation. It refers to the employee being expected to travel frequently, both locally and regionally. Mr Oberg’s evidence was that although it seemed from the contract that he was operating from Australia, he was based in Indonesia.
The second contract was signed on 3 April 2015 but was dated to commence on 1 January 2015. It is titled, “Employment Contract Indonesia” and is written in both Indonesian and English. The employer was a company named PT Sandvik SMC. Again, Mr Oberg’s Australian address was stated. His point of hire was noted as being Western Australia and he reported to a manager in Western Australia. His salary was stated to be in US dollars. The contract provided for return flights to the point of hire. Mr Oberg agreed that if his contract was terminated, he would be returned to the point of hire. The applicable law is the law of the Republic of Indonesia.
The third employment contract is like the second. It is between Mr Oberg and the company named PT Sandvik SMC. It was signed on 10 December 2015 but was dated to commence on 1 January 2016. It is also titled, “Employment Contract Indonesia” and is written in both Indonesian and English. Again, Mr Oberg’s address is stated as that of the Australian house. The remaining terms are like those of the second contract, including the contract being governed by Indonesian law, but the salary is in Indonesian currency. Mr Oberg entered into a mutual separation agreement dated 21 December 2016, which freed him up to commence work in Ulaanbaatar, Mongolia.
Mongolia (2016 to November 2020)
In approximately February or March 2016, Mr and Mrs Oberg decided to sell their Australian house because Mrs Oberg was considering relocating to Mongolia to live with Mr Oberg, and because they wanted to realise the value of the property. However, Mrs Oberg’s elderly parents began to experience significant health issues. Mrs Oberg decided to stay in Australia to care for her parents and the Australian house was withdrawn from sale after approximately six months on the market.
In August 2016, Mr Oberg made his first trip to Mongolia, having been offered the position of Managing Director of Sandvik Mongolia. Between August 2016 and November 2016, he performed duties for his old position of Managing Director for Sandvik West Papua and his new position of Managing Director of Sandvik Mongolia. In November 2016, Mr Oberg relocated from West Papua, Indonesia, to Ulaanbaatar, Mongolia. In December 2016, he stopped working for Sandvik West Papua altogether.
In Ulaanbaatar, Mongolia, Mr Oberg was provided with a fully furnished apartment, leased for his sole use, which his wife could reside in. Like Indonesia, he provided his own linen, crockery, kitchen utensils, towels and clothesline. Similarly, during re-examination, Mr Oberg agreed that this accommodation was the place where he resided, cooked, ate, slept, and lived permanently for most of the year. He also had the shared use of a vehicle with two other employees.
In January 2017, Mr Oberg took annual leave to bring Mrs Oberg to Mongolia as he intended for her to relocate to Mongolia. Mrs Oberg travelled with her husband to Mongolia to see the housing and living arrangements. However, upon return to Australia, her parents’ health began to deteriorate further, and she remained in Australia to help care for them. In approximately April 2017, Mrs Oberg undertook renovations to the kitchen of the Australian house but noted in her evidence that if they were going to sell the house in the future the kitchen would need improving.
In Mongolia, Mr Oberg used an Australian credit card. He had two bank accounts in Mongolia: one for living expenses, and another for emergencies. Mr Oberg paid tax in Mongolia at the same rate as Mongolian nationals.
From July 2016 to November 2016, Mr Oberg had a business visa, which is issued to businesspersons visiting Mongolia. From November 2016 to May 2019, he was issued with an investors visa, which is issued to foreign investors or senior managers.
From March 2020, COVID-19 started to impact daily life in Mongolia with quarantine periods for visitors being up to five weeks and regular lockdowns. He also became concerned about the ability of the health system in Mongolia with respect to COVID-19. In November 2020, Mr Oberg had the opportunity to leave Mongolia and did so due to these concerns. His employment contract was not renewed in December 2020 due to the impact of the COVID-19 pandemic.
Two contracts concerning Mr Oberg’s employment in Mongolia are before the Tribunal. The first is a contract entered into on 27 October 2016. The second Mongolian contract was entered into on 5 November 2018.
The first is titled, “Employment Contract Mongolia”. Under this contract Mr Oberg is employed as “Territory Manager – Mongolia” of Sandvik Mongolia LLC. Under the second contract, titled, “Employment Agreement Mongolia”, he was employed by the same entity as “Managing Director (Territory Manager – Mongolia)”. Both contracts state his address as the Australian house, and the point of hire as Western Australia. For both, the applicable law is that of Mongolia and the salary is in US dollars. There is a provision for superannuation, which Mr Oberg confirmed was paid into his salary. The contracts state that any tax consequences associated with the home location were to be borne by the employee. The contracts also provide for several “Home flights” per annum back to Australia.
LEGISLATIVE PROVISIONS
Section 6-5(2) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) provides that an Australian resident is assessed on income from all sources:
(2)If you are an Australian resident, your assessable income includes the ordinary income you derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
Whereas a foreign resident is only assessed on income derived from Australian sources. Section 6-5(3) of the ITAA 1997 provides:
(3) If you are a foreign resident, your assessable income includes:
(a) the ordinary income you derived directly or indirectly from all Australian sources during the income year; and
(b) other ordinary income that a provision includes in your assessable income for the income year on some basis other than having an Australian source.
Further, s 6-10(5) of the ITAA 1997 provides:
(5)If you are a foreign resident, your assessable income includes:
(a) your statutory income from all Australian sources; and
(b) other statutory income that a provision includes in your assessable income on some basis other than having an Australian source.
Subsection 995-1(1) of the ITAA 1997 provides that:
“Australian resident” means a person who is a resident of Australia for the purposes of the Income Tax Assessment Act 1936.
The Income Tax Assessment Act 1936 (Cth) (ITAA 1936) defines a “resident or resident of Australia” in s 6(1), 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 the person’s 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; or
(B)an eligible employee for the purposes of the Superannuation Act 1976; or
(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B); and
(b)a company which is incorporated in Australia, or which, not being incorporated in Australia, carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia.
(Emphasis added.)
THE TESTS
As can be seen from the emphasised wording of the definition in s 6(1) of the ITAA 1936, there are four tests to determine whether a person is a resident for Australian tax purposes. Satisfaction of any one of these tests will be sufficient to establish that a person is a resident of Australia for tax purposes.
The tests are the:
(a)residence according to ordinary concepts test (s 6(1)(a) of the ITAA 1936);
(b)domicile and permanent place of abode test (s 6(1)(a)(i) of the ITAA 1936);
(c)183-day test (s 6(1)(a)(ii) of the ITAA 1936); and
(d)Commonwealth superannuation fund test (s 6(1)(a)(iii) of the ITAA 1936).
Both parties agree that it is only the first two tests, being the residence according to ordinary concepts test and the domicile and permanent place of abode test, that are relevant to this application.
TAXATION RULING IT 2650
I note that there is a policy, namely the Taxation Ruling IT 2650 – Income Tax: residency – permanent place of abode outside Australia (Tax Ruling) which provides guidance for decision-makers applying the first two tests. It is a current policy of the Commissioner and was considered in making the reviewable decision. It is therefore relevant for me to consider the policy where it is applicable.
However, there is a warning on the first page of the Tax Ruling which states that it is being reviewed because of the decision in Harding v Commissioner of Taxation [2018] FCA 837, which I note was subsequently appealed to the Full Court of the Federal Court of Australia in Harding v Commissioner of Taxation [2019] FCAFC 29 (Harding). I have therefore focussed on the guiding principles from Harding, with some reference to the Tax Ruling to the extent that it is relevant.
RESIDENCE ACCORDING TO ORDINARY CONCEPTS TEST
In their joint judgment in Harding, Davies and Steward JJ defined the residence according to ordinary concepts test as follows:
36.… the primary or first test of residence is largely directed at the identification of where physically a person ordinarily lives regardless of citizenship or domicile.
Their Honours continued to explain the definition of “reside”:
57.… It was not disputed that the test of residence was correctly set out by the learned primary judge at [31] of the reasons for decision as follows:
The ordinary meaning of the term “reside” is not, in itself, defined for the purposes of Australian Income Tax Law. That said, it is now well accepted that the ordinary meaning of the word is that identified by Latham CJ in Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93 at 99-101. There, the Chief Justice considered that a person “resides” where they “lived” or where they keep house and do business and in doing so approved the observations in Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217. The Chief Justice said:
I should have thought that there was no doubt that a man resided where he lived, and I do not think that there is any interpretation of the word “reside” by the courts which makes it impossible to apply the ordinary meaning of the word “reside” in the present case. ...
Further, in Commissioner of Taxation v Miller [1946] HCA 23; (1946) 73 CLR 93 (Miller), Latham CJ cited the following passage from the judgment of Viscount Cave L.C in Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217 (Levene). This passage indicates that “reside” is to be given its ordinary meaning.
The word “reside” is a familiar English word and is defined in the Oxford English Dictionary as meaning “to dwell permanently or for a considerable time, to have one’s settled or usual place of abode, to live in or at a particular place”. … In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure.
A person can still be a resident of Australia for income tax purposes despite being physically absent from Australia during the income tax year. In Harding, Davies and Steward JJ cited the following passage from the judgment of Wilcox J in Hafza v Director-General of Social Security (1985) 6 FCR 444; (1985) 60 ALR 674 regarding the role of physical presence and intention to treat that place as home in determining residency. I have highlighted the parts of this passage which assist to explain how the test operates:
60.… Wilcox J was of the view that residence involved two concepts – physical presence in a particular place and an intention to treat that place as home. His Honour said at 449-450:
Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place – even involuntarily: see Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 248 and Keil v Keil [1947] VR 383 – a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place – Levene v Inland Revenue Commissioners [1928] UKHL 1; [1928] AC 217 at 225 and Judd v Judd (1957) 75 WN (NSW) 147 at 149 – together with an intention to return to that place and an attitude that that place remains “home”: see Norman v Norman (No 3) (1969) 16 FLR 231 at 236. It is important to observe firstly, that a person may simultaneously be a resident in more than one place – see the facts of Lysaght (supra) and the reference by Williams J to “a home or homes” – and, secondly, that the application of the general concept of residence to any particular case must depend upon the wording, and underlying purposes, of the particular statute in relation to which the question arises. But, where the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as “home”, a change of intention may be decisive of the question whether residence in a particular place has been maintained.
(Emphasis added.)
Further, their Honours continued:
61.The learned primary judge specifically considered the role of physical presence and of intention in a determination of residence at [42]-[45] as follows:
42.The question of “presence” is relatively straight-forward and that is particularly so when there is evidence of a person’s physical presence in a particular place. However, where a person has more than one residence or the question is whether they remain resident in a particular location given that they spend significant time in other locations, different issues arise. In such situations there needs to be consideration of the connecting factors or the continuity of association between the person and the particular location. Here, the question is whether the connecting factors or the continuity of association are such that they establish that the person retains a “presence” in the community as a resident. Factors such as a home, a family unit, possessions, relationships with people and institutions and the like are all relevant to the determination of whether the person has maintained a presence in the community as a resident despite being physically absent.
43.The determination of whether or not a person has the intention to treat a particular place as their home will involve a consideration of numerous factors. Certainly, the evidence of the taxpayer as to their intention at the relevant time will be significant as would be any contemporaneous statement made by a taxpayer as the location of their residency. However, the objective manifestation of a person’s intention is often a more accurate indicator of their state of mind at a particular time in the past than is an assertion about that alleged prior intent. A person’s present belief about what their intention may have been in the past will necessarily be affected by their sub-conscious and the context in which they called upon to identify that past intention. That is especially so when, at the relevant time, the person did not then consider what their then intention may have been.
44.Even evidence of a person’s contemporaneous statement as to their intention at a particular time in the past should be approached with a degree of care. Whilst that is likely to be more accurate than their present assertion of what their previous intention was, the value of the contemporaneous evidence will be affected by the circumstances of the statement and reasons for the making of the statement.
45. That being so, the more cogent evidence of a person’s prior intention as to where they resided are the objective facts which reflect the person’s then intention. In ascertaining whether a person intended to make a particular place their residence or to terminate their residency in a place, the facts and circumstances surrounding their mode of living will be a strong indicator of their presence in or continued association with a particular place and the intention accompanying that presence.
The foregoing passages disclose, in our view, no error of law and are plainly correct.
(Emphasis added.)
In Stockton v Federal Commissioner of Taxation [2019] FCA 1679; (2019) 110 ATR 7721, Logan J explained that each case must be considered individually:
26.The application in the circumstances of a particular case of the ordinary meaning of “resident” inevitably involves questions of fact and degree. At the margin, there may also be cases where, without any violation of principle, reasonable people might reasonably differ as to whether or not an individual was a “resident” within the ordinary meaning of that word. … there is nothing beneficial to be served by rehearsing numerous examples of outcomes on particular facts and comparing and contrasting them with the circumstances of the present case. Indeed, so doing may entail risks of error.
(Emphasis added.)
The Tax Ruling at paragraph [5] summarises the factors that may be considered to determine whether a person is an Australian resident for tax purposes as follows:
(a) the intended and actual length of the individual’s stay in the overseas country;
(b) any intention either to return to Australia at some definite point in time or to travel to another country;
(c) the establishment [of] a home outside Australia;
(d) the abandonment of any residence or place of abode the individual may have had in Australia;
(e) the duration and continuity of the individual’s presence in the overseas country; and
(f) the durability of association that the individual has with a particular place in Australia.
However, in Harding at [7]-[8], Logan J cautioned against the use of “check lists of factors found relevant in earlier cases”. Logan J further warned that facts found to be determinative in a previous case should not be “elevate[d] to matters of principle in a later case”. Being mindful of Logan J’s caution, I would suggest that the factors from the Tax Ruling may be nevertheless be relevant to a consideration of whether, in the specific facts and circumstances and merits of an individual case, a person is an Australian resident for tax purposes.
With this guidance in mind, I have summarised the more general guiding principles identified in Harding, other relevant case law and the Tax Ruling regarding the meaning and application of the residence according to ordinary concepts test in s 6(1)(a) of the ITAA 1936:
(a)The word “reside” is to be given its ordinary meaning. In Miller and Levene, the Oxford English Dictionary definition of “reside” was cited as “to dwell permanently or for a considerable time, to have one’s settled or usual place of abode, to live in or at a particular place”.
(b)The test requires the identification of where, physically, a person ordinarily lives (that is, their settled or usual abode) regardless of citizenship or domicile. This may include a consideration of where they live, keep house, and do business.
(c)A person’s intended and actual length of stay in the overseas country may be relevant. However, a person does not cease to be a resident because they are physically absent from their country of residence. Rather, what should be considered is whether a person has retained a continuity of association with a place, together with an intention to return to that place and to treat that place as home.
(d)A person’s home, family, possessions, relationships with people, relationships with institutions and presence in the community are relevant to determine whether a person has a continuity of association with a place despite being physically absent.
(e)With respect to an intention to return to that place and to treat it as home, a person’s actual intention is relevant, however, their objective intention (determined from the facts and circumstances surrounding their mode of living), may be more accurate.
(f)Determining residence involves questions of fact and degree and so each case must be considered on an individual basis and preferably without comparing the present case with the facts and outcomes of previous cases.
Finally, I also note the Tax Ruling provides the following guidance:
19.… If the test of residence according to ordinary concepts is satisfied, there is no need to go any further. The person is a resident of Australia for income tax purposes.
Application to Mr Oberg’s circumstances
Mr Oberg is a man who is dedicated to his work and his career. He has had a successful career with the Sandvik Group for the last 23 years. He describes himself as a company man who will go wherever his employer sends him. He enjoys the challenge of working overseas in developing countries with challenging living conditions. Indeed, the prioritising of his work contributed, in part, to the breakdown of his first marriage to Mrs Oberg.
Mr Oberg stated in his evidence that when he went to Indonesia and Mongolia, he intended to reside in those countries permanently and indefinitely. I have no doubt that Mr Oberg was sincere in expressing this intention, but the objective evidence, which is more reliable than memory and untainted by these proceedings, is suggestive of a continuing association with Australia.
His accommodation in Indonesia and Mongolia was provided by the companies he worked for, pursuant to his contracts of employment and is better categorised as being temporary, rather than as a home.
His Indonesian accommodation was shared with two other employees of Sandvik, and Mr Oberg brought his own linen, crockery, kitchen utensils, towels and clothesline. He modified the house so that he could live separately in what was originally the maid’s quarters. Whilst I appreciate that there were security concerns which made it difficult for Mrs Oberg to join him and difficulties for expatriate employees purchasing property there, it cannot be concluded that this accommodation was a home or a settled place of abode.
Similarly, in Mongolia, Mr Oberg’s accommodation was a furnished apartment selected and rented by his company. He again brought his own linen, crockery, kitchen utensils, towels, and clothesline. Again, I note that Mr and Mrs Oberg stated that they intended for Mrs Oberg to reside in Mongolia. I acknowledge that Mrs Oberg was not able to relocate to Mongolia because she had to remain in Australia to care for her elderly parents. However, the evidence, including Mrs Oberg travelling there to see if she liked the accommodation and weather, suggests that there were no firm plans in place.
In addition, other than the basic items of linen and the like that Mr Oberg bought with him, there is no evidence of Mr Oberg moving any of his other possessions to his accommodation in Indonesia or Mongolia.
Additionally, in both locations, Mr Oberg shared a vehicle with other employees. This is also suggestive of a temporary place of abode and that Mr Oberg had not made a home there. Mr Oberg purchased a car in Australia in October 2017 for which he obtained finance. The purchase of a car while he was living in Australia, in circumstances where he was sharing a car in Mongolia, is suggestive of a continuity of association with Australia.
Mr Oberg’s housing and visa status in Indonesia and Mongolia were dependent on his employment with the company. As I have mentioned, under his employment contracts, housing was provided by the companies. If that employment ceased, he would not be able to remain, and would have to return to Australia, with the company paying for his flights back to Australia.
Mr Oberg’s first employment contract in Indonesia appears from its title and its terms to be an Australian employment contract with Australia company premises, an Australian manager, Australian salary and superannuation which was subject to Australian laws. Mr Oberg stated that he was based in Indonesia and suggested a period of transition between the Australian and Indonesian entities, but the express terms of the contract indicate that up until approximately 1 January 2015, Mr Oberg was based in Australia and travelling between Australia and Indonesia. His movement records also show approximately seven arrivals in Brisbane between February 2015 and January 2019, which Mr Oberg indicated were for business meetings associated with his Sandvik employment.
Although the subsequent employment contracts were expressed to be subject to Indonesian and Mongolian laws, they have an Australian point of hire, Mr Oberg’s Australian address is stated as his address, Mr Oberg reported to Australian Managers, and the company provided for return flights to Australia.
The temporary nature of his residence in Indonesia and Mongolia can be seen when contrasted with Mr Oberg’s time in Zambia. Specifically, in Zambia, both Mr and Mrs Oberg resided in the community with their son who attended school there. Both Mr and Mrs Oberg worked and contributed to the community through volunteer work. In Indonesia and Mongolia, there is less evidence of integration and involvement in the community through social activities or social connections. In Indonesia, Mr Oberg was a member of a golf club, took language classes and arranged church services. The only community involvement in Mongolia, that I am aware of was a charity drive organised by the Australian Chamber of Commerce in Mongolia. Thus, there is little evidence of Mr Oberg’s ties to these communities. Indeed, Mr Oberg’s main hobbies of vintage car collecting and using his houseboat are Australian based.
Mr Oberg retained a continuity with Australia by retaining his Australian home. The home is large and requires a fair amount of upkeep, and so retaining it suggests a continuity of connection. One reason for retaining the home appears to be because it was practical to do so. Specifically, his wife and son needed to live there after they returned from Ghana, and Mrs Oberg lived there when Mr Oberg was in Indonesia. When Mrs Oberg was considering relocating to Mongolia, the house was placed on the market for a period of six months but withdrawn when Mrs Oberg decided not to relocate to care for her elderly parents. I note Mrs Oberg’s evidence that the house was renovated in 2017, and that one of the reasons was that the kitchen would need to be renovated if the house was sold in the future. However, renovations are also suggestive that the family home was being improved for the family in the future. Also, Mr Oberg used the address of the family home as his address for his overseas employment contracts, which is further objective evidence of an intention to return there.
Mr Oberg regularly returned to Australia, including returning every year for his birthday, his wife’s birthday, and Christmas. Although Mr Oberg stated that when he returned to Australia it was to see his wife, rather than him having any sense of returning home, returning to Australia for these significant events does objectively suggest a continuity of association and an intention to treat Australia as home.
Mr Oberg’s recreational pursuits were mostly in Australia. He enjoyed restoring vintage cars, and owned several which were stored in the factory unit in Western Australia. This Australian hobby suggests a continuity of association. Mr Oberg also used his houseboat on his returns to Australia and took out a loan for two engines for it in September 2014, which he paid off in 2017, while he was in Mongolia. This purchase and loan are suggestive of a continuity of association, and when viewed objectively suggests an intention to return.
Although Mr Oberg was living and working overseas, most of his income was paid into his Australian bank account. Mr Oberg also had an Indonesian Bank account that was never used. Indeed, in Indonesia, all his salary, bonuses and severance pay were paid into his Australian bank accounts. He used his Australian credit card for living expenses. He opened two Mongolian bank accounts in May 2017 that were used for living expenses and emergency savings. Retaining and using the Australian bank accounts in this manner is suggestive of continuity of association with Australia and an intention to return. I also note that there are many charges on Mr Oberg’s Australian credit cards for foreign transaction fees.
I do not place a great deal of weight on Mr Oberg having retained Australian health insurance. It is indicative of some continuity of association, but given that Mr Oberg lived in developing countries, it is likely that having Australian health insurance was a matter of practicality, given the superiority of the Australian health system.
Mr Oberg’s investments were in Australia. As I mentioned above, he had shares and a factory unit in Australia. I accept Mr Oberg’s evidence that he has Australian investments because it is safer to invest here than in developing countries. They are still objective evidence of continuity, but I accept Mr Oberg’s explanation, and accordingly, I give them less weight as evidence of continuity of association.
Overall, I am reasonably satisfied on the evidence before me that despite his working in Indonesia and Mongolia and his lengthy absences from Australia, that Mr Oberg’s settled place of abode was in Australia, that he had a continuity of association with Australia and an objective intention to return.
CONCLUSION
I therefore find that Mr Oberg is an Australian resident for tax purposes under the residence according to ordinary concepts test. It is therefore not necessary for me to consider the domicile and permanent place of abode test.
Unfortunately for Mr Oberg, this means he will be liable to pay the amounts assessed by the Commissioner for the relevant tax years.
DECISION
The reviewable decision, being the objection decision dated 7 August 2020, is affirmed.
I certify that the preceding 85 (eighty-five) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner
.........[Sgd]...............................................................
Associate
Dated: 13 December 2021
Dates of hearing: 6 and 7 September 2021 Representative for the Applicant: Ms G Bourke, Zafra Legal Representative for the Respondent: Ms E Luck, instructed by Mr D Scalzi of the Australian Taxation Office
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