Stefanie Koustrup and Commissioner of Taxation
[2015] AATA 126
•6 March 2015
[2015] AATA 126
Division Small Taxation Claims Tribunal File Number(s)
2014/1004
Re
Stefanie Koustrup
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
Date 6 March 2015 Place Sydney The decision under review is affirmed.
........................................................................
Professor R Deutsch, Deputy President
Catchwords
TAXATION – notice of assessment – tax return – resident of Australia – ordinary concepts test – 183 day test – decision affirmed
Legislation
Income Tax Assessment Act 1936 (Cth) s 6(1)
Cases
Commissioner of Taxation v Executors of the Estate of Subrahmanyam (2001) 116 FCR 180
Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1
R v Braithwaite [1918] 2 KB 819Secondary Materials
Income Tax Assessment Bill 1930 (Cth) Explanatory Notes
REASONS FOR DECISION
Professor R Deutsch, Deputy President
INTRODUCTION
This is one of three cases heard together but in relation to which I have found it necessary to deliver three separate decisions. All three cases involved backpackers who were foreign nationals each of whom stayed in Australia for more than 183 days in the tax year to 30 June 2013. Beyond those facts, the fact pattern in each case differs materially and consequently requires separate consideration.
Stefanie Koustrup (“the Applicant”) seeks review of a decision made by the Commissioner of Taxation ('the Commissioner') on 7 February 2014 disallowing an objection to a Notice of Assessment issued to the Applicant for the year ended 30 June 2013.
THE FACTS
The facts relevant to this proceeding are not in dispute.
Stefanie Koustrup and Entering Australia
The Applicant was born in Denmark on 1 March 1991 and is a Danish national.
On 18 August 2012 the Applicant entered Australia under a “working holiday visa” (subclass 417). In the Incoming Passenger Card completed that day, the Applicant described herself as a “visitor or temporary entrant” coming to Australia for the main reason of having a “holiday”. She further nominated that her intended length of stay in Australia would be 8 months. The Applicant had no plans to live in Australia; she was a “visitor”.
Before traveling to Australia, the Applicant attended high school between 2009 and 2011. While doing so she lived with her mother in Kalundborg, Denmark. After finishing high school the Applicant lived with her father in Viborg, Denmark. In a Residency Questionnaire completed by the Applicant she nominated her father's house as a place where she could return to live when she left Australia.
The Applicant has had several part-time jobs since high school that has funded her travel. She has “very few possessions” and apparently did not store anything aside from some clothes with one or both of her parents while in Australia. She had no substantial assets in Australia.
The Stay in Australia
From 18 August 2012 until about 24 August 2012, the Applicant stayed in a hostel in Sydney. Thereafter she attended a “farmer course” for a week and stayed at a house connected with it.
From 3 September 2012 until 3 December 2012, the Applicant stayed in a room on cattle station known as “Julia Creek”. While there she worked for Numill Downs Pty Ltd almost every day.
From 4 December 2012 until about 24 March 2013, the Applicant ‘backpacked’ around Australia staying predominately in hostels.
From 25 March 2013 until 25 May 2013, the Applicant stayed on a farm in Mungindi, Queensland (Qld) where she worked for Chenonetta Pty Ltd. There were no set hours of work.
From 26 May 2013 until about 31 May 2013, the Applicant stayed in hostels in Brisbane and Darwin, where she went on a four day tour.
All up, the Applicant stayed in Australia for a total of 287 days.
Departure, Post-departure Living in Denmark and Further Travel
Having stayed longer than anticipated, on 1 June 2013, the Applicant departed Australia and returned to Denmark. It was her plan to “return” to Denmark and stay with one of her parents long enough to save enough money to travel again.
On her return to Denmark the Applicant returned to her father's home, where she lived for about a month. After that time, she moved to Copenhagen, living with her mother. There she worked for about nine months, saving enough money to travel again.
On 6 March 2014, the Applicant departed Denmark and has travelled through parts of South East Asia. She is now staying in New Zealand on a twelve month visa
The Tax Return and Notice of Assessment
After departing Australia, the Applicant authorised Backpackers Buddy Pty Ltd to, inter alia, lodge a tax return on her behalf. The Applicant did so by a Power of Attorney (Common Law) & Agency Agreement signed on 28 July 2013. In that document the Applicant is described as being “of”… “Viborg, Denmark”— her father's house. That document suggests, contrary to the Applicant's evidence that she was still living with her father at least until the end of July 2013.
On 10 July 2013, a tax return was lodged on behalf of the Applicant. On 17 October 2013, the Commissioner advised that he had completed a review of the tax return and concluded that the Applicant was not a resident of Australia for the year ended 30 June 2013. On 4 November 2013 the Commissioner issued a Notice of Assessment assessing the Applicant on her income as a non-resident.
On 6 November 2013, Backpackers Buddy on behalf of the Applicant objected to the Notice of Assessment on the grounds that the Applicant was a resident of Australia for the year ended 30 June 2013. On 7 February 2014, the Commissioner disallowed the Applicant's objection. The Applicant now seeks a review of that decision.
To assist, the attached timeline provides a visual depiction of how the stay in Australia related to the Applicant’s time overseas.
THE ISSUES
The broad issue involved in these proceedings is whether the Applicant was a “resident of Australia” in the year ended 30 June 2013.
The term resident is defined in section 6(1) of the Income Tax Assessment Act 1936 (Cth) as follows
“resident or resident of Australia” means:
(a) A person, other than a company, who resides in Australia and includes a person:
(i)whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia;
(ii)who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia; or
(iii)who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990;
(B) an eligible employee for the purposes of the Superannuation Act 1975
(C) the spouse, or child under 16, of a person covered by sub-paragraph (A) or (B).
Using shorthand descriptions, this formulation is often described as giving rise to four different possible bases for determining that a person, being an individual, is a resident of Australia. Thus a person is a resident of Australia if he or she meets
·the ordinary concepts test - the person resides in Australia because of the application of ordinary concepts;
·the domicile test - the person resides in Australia because the person is domiciled in Australia unless permanent place of abode is outside Australia;
·the 183 day test - the person resides in Australia because they are present in Australia for at 183 days in the relevant year if income unless the usual place of abode is outside Australia and no intention to take up residency in Australia;
·the superannuation fund test - the person is a member of certain superannuation funds.
While there are four possible bases of residence, it was agreed between the parties that the Applicant could only be treated as a resident of Australia on the third basis referred to above – i.e. that she was physically present in Australia for more than 183 days in the year of income to 30 June 2013 and that even though she does not intend to take up residence in Australia, the Commissioner could not be satisfied that her usual place of abode was outside Australia.
This is an unusual situation in that the Applicant here is asserting the proposition that she is at the relevant times a resident of Australia and the Respondent is asserting the contrary proposition, namely that the Applicant is not a resident of Australia. More commonly, one finds that opposite sides are taken such that the Applicant seeks to be treated as a foreign resident so as to prevent Australian tax being imposed on foreign sourced income.
The unusual positions adopted in this case come about largely because of the rather substantial tax-free threshold that applies to a resident but which does not apply in the case of a foreign resident. The existence of the tax-free threshold in the context of a resident gives rise to a zero rate of tax applying to the first $18,200 of taxable income. This is to be contrasted with a rate of 32.5% which applies to the first $18,200 of taxable income if the taxpayer is treated as a foreign resident.
In these proceedings the resolution of the residence issue comes down to a very narrow question as to whether the Tribunal ought to be satisfied that the Applicant’s usual place of abode was outside Australia. If the Tribunal is so satisfied, the Tribunal must find in favour of the Respondent on the basis that the Applicant was a foreign resident. By comity of reasoning, if the Tribunal is not so satisfied, the Tribunal must find in favour of the Applicant on the basis that the Applicant was a resident of Australia.
The resolution of this issue raises a number of questions.
KEY QUESTIONS AND RESOLUTION
During what time period must the usual place of abode be tested?
Although not clear from the statutory formulation it seems that the satisfaction of the Commissioner (and in his stead now – this Tribunal) must be during the relevant year of income. Thus, in this case the question to consider is “during the year ended 30 June 2013 should the Commissioner be satisfied that the Applicant’s usual place of abode is outside Australia?”
What is a usual place of abode?
A “place of abode” has been described as “the physical surroundings in which a person lives”: Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1 at 16 (Fisher J).
The phrase has often been treated as synonymous with “residence” or “place of residence”: R v Braithwaite [1918] 2 KB 819 at 325.
The phrase has also been defined by way of comparison to a somewhat different composite phrase “permanent place of abode”. As Fisher J explained in Applegate (1979) 38 FLR 1 at 17:
To my mind the proper construction to place upon the phrase —permanent place of abode" is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.
All these comments seem to point in the same direction in that the usual place of abode refers one to the place where the person usually or customarily dwells. Thus, a person who lives at a place in Country X and travels to Australia for a seven month working holiday while retaining a street address in Country X to which he always intends to return to, would clearly have a usual place of abode in Country X
Is it possible not to have a usual place of abode?
Clearly this possibility can arise in circumstances where a person is moving about with no fixed address which the person would retain as his or her usual place of dwelling.
This type of person is rare and has been referred to as a so-called “bird of passage” – such a person may genuinely have no usual place of abode at all.
Is it possible to have more than one usual place of abode?
In my view it is not possible to have two or more usual places of abode at the same time. Where there are two competing places of abode it needs to be assessed based on all the available facts as to which one is “usual”. As Emmett J explained in Commissioner of Taxation v Executors of the Estate of Subrahmanyam (2001) 116 FCR 180, 197-198 at [78]:
When comparing two places of abode of a particular person, in order to determine whether one is the usual place of abode, it is necessary to examine the nature and quality of the use to which the person makes of each particular place of abode. It is then possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the usual place of abode.
It is however possible for there to be two different usual places of abode at different times. Thus, a person can have a usual place of abode in one location for half the tax year and because of changed circumstances that same person can have a different usual place of abode for the other half of the year.
What was the Applicant’s usual place of abode during the year ended 30 June 2013
When one looks at the Timeline, the picture one sees is of a person who lived
· prior to coming to Australia with her mother in Kalundborg, Denmark and her father in Viborg (periods one and two);
· in various different locations in Australia for some nine months (periods three, four, five, six and seven);
· after returning to Denmark for one month with her father and for nine months with her mother (period eight); and
· from 6 March 2014 in places in South East Asia and finally in New Zealand where she appears to be at the moment (period nine).
This picture is more complicated than that presented by the other two cases in this trilogy. It is more complicated in that at least since 6 March 2014, it could be argued that the Applicant no longer regards or treats her Danish parent’s places as her abode, let alone as a usual place of abode.
Nonetheless, during the year ended 30 June 2013 it is the view of this Tribunal that based on the facts presented, the Applicant's usual place of abode was either her father's or her mother’s house in Denmark.
A number of factors are relevant in reaching this conclusion.
First, her father's house in Viborg, Denmark was where the Applicant lived before her time in Australia.
Secondly, it was also the place she identified in her Residency Questionnaire as where she could return to live when she left Australia. She indeed did return to live there albeit for only one month after her return to Denmark.
Thirdly, there is no basis on which it could be said that the Applicant had a usual place of abode in Australia. There is no “choice” to be made along the lines of what was suggested by Emmett J in Subrahmanyam. It must be doubted whether the Applicant had a place of abode in Australia at all. There is no evidence that the Applicant treated any place as if it were “home” as distinct from any other place where someone might stay for a period of time while on holiday.
Fourthly, the fact that the Applicant moved from her father's home to her mother's home one month after returning from Australia does not detract from the conclusion that her father's place was her usual place of abode. It is likely in any event that the Applicant’s move to her mother's place happened in the year ended 30 June 2014 rather than 30 June 2013 — the year in issue. From the available factual evidence, it appears to be the case that, as at 28 July 2013, the Applicant still lived at her father’s address. That is the address she gave when she signed the Power of Attorney on that day.
In any event, it almost certainly does not matter. The statutory question asked by section 6(1)(a)(ii) is whether the Applicant's usual place of abode is “outside Australia”. Whether it be her mother's home or, more likely, her father's, the answer to the statutory question asked by section 6(1)(a)(ii) is still the same – she had a usual place of abode outside Australia either at her father’s place or her mother’s place.
Fifthly, there is no room for the suggestion that the Applicant was a “bird of passage” without a usual place of abode at all. The Applicant did not flit from place to place in the year ended 30 June 2013. The Applicant travelled to Australia from Denmark and after completing her Australian adventure returned to Denmark. The pattern of travel described by the Applicant in her evidence is not suggestive of someone who simply wanders from place to place. She returns to Denmark at the end of one trip and lives with her parents to work and save money. In other words, as much as the Applicant may travel, she has what one may describe as “settled headquarters” in Denmark.
Sixthly, it is true that the Applicant left Denmark again on 6 March 2014 bound for destinations in Southeast Asia and New Zealand. This may or may not have given rise to an abandonment of the usual place of abode in Denmark. Further facts as to exactly what her intentions were at that point in time and what her behaviour might reveal are needed to assess this issue. Nonetheless, even if one could conclude that she no longer has a usual place of abode from 6 March 2014, this is well after the conclusion of the relevant tax year and as indicated earlier, the question is and remains did the Applicant have a usual place of abode outside Australia during the year ended 30 June 2013. What happened some 9 months later is too late to effect the conclusions one might reach in relation to the previously concluded year of income.
As already set out, plainly the Applicant had no intention of taking up residence in Australia during the year ended 30 June 2013. It follows that despite the Applicant having spent more than one half of the year in Australia, she is not a resident because the qualification in s 6(1)(a)(ii) is satisfied.
Why was the qualification to the 183 day test enacted?
While the Parliamentary intentions are not always relevant to examine it is worth noting that the various qualifications to the 183 day rule were enacted by Parliament “in order that there may be no danger of treating as residents persons who are purely visitors”: Explanatory Notes on Amendments contained in the Income Tax Assessment Bill 1930 to amend the Income Tax Assessment Act 1922-29, page 11. Thus, overseas visitors on holidays or working in Australia who are in Australia for more than 183 days would not be residents during their stay under this test, as they would usually have a usual place of abode elsewhere and would not have an intention of taking up residence in Australia.
This lends support to the conclusions I have reached. It is only if the Applicant had completely abandoned her usual place of abode overseas in Denmark during the year ended 30 June 2015 that the result would be otherwise.
CONCLUSION
Based on all the facts, I am satisfied that the Applicant had a usual place of abode at her mother or father’s place in Denmark at all relevant times Accordingly, I am of the view that for the year ended 30 June 2013, the Applicant was not a resident of Australia.
The decision under review is affirmed.
54. I certify that the preceding 53 (fifty-three) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President.
...........................[sgd].............................................
Associate
Dated 6 March 2015
Date(s) of hearing 24 November 2014 Date final submissions received 25 November 2014 Counsel for the Applicant Mr I Stanley Advocate for the Applicant Mr P Browne Counsel for the Respondent Mr B Kasep, Mr S Spadijer Solicitors for the Respondent Ms L Zhou, ATO Dispute & Resolution
0
2
0