SUGIANTO GUNAWAN and COMMISSIONER OF TAXATION
[2012] AATA 119
•28 February 2012
[2012] AATA 119
Division TAXATION APPEALS DIVISION File Number(s)
2010/4223-4225; 2011/2792-2795; 2010/4217-4219
Re
SUGIANTO GUNAWAN
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal M D Allen, Senior Member
Date 28 February 2012 Place Sydney The decisions under review are affirmed.
.................[sgd].......................................................
M D Allen, Senior Member
CATCHWORDS
INCOME TAX – was the Applicant a resident of Australia and therefore liable to pay tax – Assessments raised after audit of taxpayer's affairs – onus on taxpayer to show assessments excessive not made out – no grounds to remit penalties – decisions under review affirmed.
LEGISLATION
Income Tax Assessment Act 1936: s 6
Tax Administration Act 1953: ss 14ZZK, Schedule 1 ss 284-75, 284-90
Migration Act 1958: s 134
CASES
Federal Commissioner of Taxation v Dalco (1950) 168 CLR 164
Hafza v Director-General of Social Security (1985) 6 FCR 444
Hart v Federal Commissioner of Taxation (2003) 131 FCR 203
BRK (Bris) Pty Ltd v Federal Commissioner of Taxation (2001) 46 ATR 347REASONS FOR DECISION
M D Allen, Senior Member
28 February 2012
In these proceedings the Applicant sought review of objection decisions made by the Respondent in respect of the tax years ended 30 June 2002, 2003, 2005 and 2006, together with penalties imposed with respect to those years.
The Tax Agent who appeared for the Applicant submitted that the questions before the Tribunal had been correctly summarised at paragraph 3.2 of the Respondent’s written submissions namely:
(a)whether the Applicant was a resident of Australia in the relevant years;
(b)whether the withdrawals made by the Applicant from the Austindo bank account are properly characterised as income according to ordinary concepts;
(c) whether, if not income according to ordinary concepts, those withdrawals constitute dividends; and
(d)whether all or part of the penalty imposed should be remitted.
Pursuant to s 14ZZK of the Tax Administration Act 1953 the Applicant bears the onus of proving that any assessment of tax is excessive. In order to discharge the onus of proof, a taxpayer must prove not only that the assessment is excessive, but also prove what the true amount should be. See Federal Commissioner of Taxation v Dalco (1990) 168 CLR 164.
RESIDENCE
“Resident” or “resident of Australia” is defined in s 6 of the Income Tax Assessment Act 1936 (ITAA) in the following terms:
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.
As I understand the Applicant’s submissions, he claimed that as he had spent more than 183 days in each of the relevant tax years outside Australia he was not a resident of Australia in those years.
This submission is misconceived in that it fails to take into account neither the provisions of s 6(a)(i) of the ITAA nor the fact of residence in Australia.
The concept of residence was summed up by Wilcox J in Hafza v Director-General of Social Security (1985) 6 FCR 444 at 449:
There is a plethora of decisions, arising in various contexts but predominantly matrimonial causes and revenue cases, relating to the legal concept of residence. As a general concept residence includes two elements: physical presence in a particular place and the intention to treat that place as home; at least for the time being, not necessarily forever. The concept was explained in a taxation case, Koitaki Para Rubber Estates Ltd v Commissioner of Taxation (Cth) (1941) 64 CLR 241 at 249, by Williams J:
"The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other abode."
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] 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.
The Applicant arrived in Australia in 1995 on a Business Skills visa. Significantly, s 134 of the Migration Act 1958 requires the holder of such a visa to:
(a)Obtain a substantial ownership in an eligible business in Australia;
(b)Utilise his or her skills in actively participating at a senior level in the day to day management of that business.
The Applicant’s visa status gave the Applicant permanent residency in Australia, and his current immigration status is still that of a permanent resident.
Since coming to Australia in 1995 the Applicant’s family, including his wife, have resided in Australia, and his children have been educated in Australia. He has purchased property in Australia, not only for the purposes of housing his wife and children, but has also held investment properties from which he received rent.
On 10 January 1996 Penta Property Group Pty Ltd and Meriton Apartments Pty Ltd authorised and appointed PT Austindo Penta Abadi, an Indonesian company of which the Applicant was Managing Director, to act on their behalf in the sale of residential units developed by Meriton Apartments.
On 29 October 1996 Austindo Pty Ltd (“Austindo”) was incorporated in New South Wales. The directors were the Applicant and his daughter, although additional directors were appointed later. Each of the Applicant and Ms Gunawan held a single ordinary share in Austindo. The registered office for Austindo was at a unit in Bondi Junction, which had been purchased from Meriton by the Applicant.
The Applicant worked for Austindo as a sales agent on commission for Meriton Apartments selling Australian residential property to overseas investors mainly in Indonesia.
On 16 July 1997 the Applicant signed, on behalf of PT Austindo Penta Abadi, a joint agency agreement with Penta Properties International Pty Ltd. This agreement provided for PT Austindo Penta Abadi to be the exclusive agent for Penta Properties International Pty Ltd for the purpose of marketing property in Jakarta, Indonesia. The agreement provided for the payment by Penta Properties International Pty Ltd to PT Austindo Penta Abadi a commission of 1.5 per cent of the purchase price for a completed sale of each Meriton apartment that PT Austindo Penta Abadi referred. The agreement further provided that Penta Properties International Pty Ltd would meet half the costs of certain marketing activities, such as exhibition costs and production of relevant receipts for those costs.
On or around 18 February 2003 the Applicant and his wife purchased a property in Kensington, New South Wales. In an interview held by the Australian Taxation Office on 17 September 2009 the Applicant stated that this property was the family home where the Applicant and his wife and children lived and that his children have grown up and been educated in Australia. Each time the Applicant has re-entered Australia from Indonesia he has re-entered on the basis of his permanent residency in this country.
I am therefore satisfied that at all relevant times, notwithstanding his absences in Indonesia where he was engaged in selling, on commission, properties constructed by Meriton Apartments Pty Ltd, the Applicant has had his home, that is to say his settled place of abode, in Australia and therefore had been resident in Australia.
WITHDRAWALS FROM THE BANK ACCOUNTS OF AUSTINDO
As stated above Austindo was incorporated in New South Wales. The original directors were the Applicant and his daughter. Later, additional directors were appointed.
During the income years relevant to this application the Applicant was engaged in selling Meriton Apartments in Indonesia. He withdrew sums from the bank account of Austindo set out as below:
2002 $53,990.00 2003 $98,600.00
2005 $27,316.00 2006 $13,900.00
In these proceedings the Applicant claimed that the said amounts were reimbursement for expenses. The said expenses were incurred in arranging venues for and then conducting promotions with the aim of selling Meriton Apartments to Indonesian investors.
It appears from the evidence before me, that the presentations in Indonesia also suggested that by purchasing an apartment in Australia migration to Australia would be facilitated.
Although not formally tendered as evidence, the Applicant’s Tax Agent lodged with the Tribunal a number of documents which appear to be accounts for expenses incurred in Indonesia by and on behalf of Austindo. No explanation was given regarding these documents or as to their provenance.
In any event, I have a more fundamental difficulty with the Applicant’s case. In the course of cross-examination he conceded that he had made false statements to the National Australia Bank as to his income in order to obtain funds to purchase real estate.
Given this admission, I find that I can give no credence to any evidence given by the Applicant unless it is corroborated.
Although the Applicant claimed that the withdrawals from the funds of Austindo were to reimburse expenditure incurred, the accounts of Austindo show the sums as being “commission”.
On cross-examination the Applicant initially stated that the accounts of the company were prepared by his daughter. Later he retracted that statement and said that the accounts were prepared by a firm of accountants acting on information provided by the directors of the company.
I can see no reason why a firm of accountants responsible for preparing the accounts for a company, for both taxation and Australian Securities and Investments Commission purposes, should class a reimbursement of expenses incurred in carrying out the company’s business as “commission”.
No witness was called by the Applicant from the firm of accountants to state how the accounts had been prepared and why, according to the Applicant, the term “commission” referred to expenditure incurred.
I am not satisfied that the Applicant has proved that the assessments of income challenged by him are in any way incorrect.
PENALTIES
So far as penalties are concerned, I find that the suggestion that the Applicant was not liable to pay income tax because of the time spent out of Australia to be misconceived.
Section 284-75 of Schedule 1 to the Taxation Administration Act 1953 relevantly imposes a penalty if:
(c)the taxpayer or taxpayer’s tax agent makes a statement to the Commissioner;
(d)the statement is false and misleading; and
(e)the taxpayer has a shortfall amount as a result of the statement.
Section 284-90 of Schedule 1 to the TAA provides that the base penalty amount is:
(a)50 per cent of the shortfall amount if the shortfall amount resulted from recklessness by the taxpayer or the taxpayer’s agent; or
(b)25 per cent of the shortfall amount if the shortfall amount resulted from a failure by the taxpayer or the taxpayer’s agent to take reasonable care.
The decision under review found that the Applicant or his agent acted recklessly.
Recklessness involves behaviour that shows disregard or indifference to a risk that is foreseeable by a reasonable person. The Full Court of the Federal Court in Hart v Federal Commissioner of Taxation (2003) 131 FCR 203 endorsed the following comments of Cooper J in BRK (Bris) Pty Ltd v Federal Commissioner of Taxation (2001) 46 ATR 347 at 364, namely:
Recklessness in this context means to include in a tax statement material upon which the Act or regulations are to operate, knowing that there is a real, as opposed to a fanciful risk, that the material may be incorrect, or be grossly indifferent as to whether or not the material is true and correct, and that a reasonable person in the position of the statement-maker would see there was a real risk that the Act and regulations may not operate correctly to lead to the assessment of the proper tax payable because of the content of the tax statement. So understood, the proscribed conduct is more than mere negligence and must amount to gross carelessness.
The Applicant failed to file tax returns in circumstances where it should have been readily foreseeable that he would be regarded as a resident or domiciled in Australia.
Material obtained by the Respondent by summons shows that the Applicant has incurred considerable interest expenses on properties purchased. For example, in 2003 $45,171.35, 2005 $100,435.33 and in 2006 $108,123.95. Although servicing these interest payments, no substantial source of income has been disclosed. Even when the returns were lodged the Applicant did not disclose all sources of income.
As I am satisfied that the Applicant has attempted to disguise the true state of his affairs and the income derived as a result, I am satisfied that the penalties imposed should be affirmed.
For the reasons outlined above the decisions under review are affirmed.
I certify that the preceding 36 (thirty- six) paragraphs are a true copy of the reasons for the decision herein of M D Allen, Senior Member.
..............[sgd]..........................................................
Associate
Dated: 28 February 2012
Date(s) of hearing 9 February 2012 Advocate for the Applicant Mr D Gunawan Counsel for the Respondent Mr J Mitchell Solicitors for the Respondent Ms R Sayed, ATO Legal Services Branch
0
6
0