Taxpayer and Commissioner of Taxation
[2013] AATA 394
[2013] AATA 394
Division TAXATION APPEALS DIVISION File Number
2012/4009
Re
Taxpayer
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Senior Member C R Walsh
Date 22 March 2013 Date of written reasons 12 June 2013 Place Perth Decision Summary
The Tribunal affirms the Commissioner’s objection decision dated 6 September 2012.
..............[sgd]..........................................................
Senior Member C R Walsh
CATCHWORDS
INCOME TAX – whether Applicant, who worked in Singapore and India during relevant tax year, was an “Australian resident” – meaning of “resident” or “resident of Australia” considered – ordinary meaning of “resides” considered – whether Applicant a resident according to ordinary concepts – domicile test discussed – whether Applicant’s “domicile of choice” was in Australia – whether Applicant acquired a “domicile of choice” in Singapore or India - whether Applicant had a “permanent place of abode” outside Australia – Double Taxation Agreements – residence “tie-breaker’ provisions considered - whether Applicant a “resident of Singapore” under the Singapore/Australia Double Taxation Agreement – India/Australia Double Taxation Agreement considered - OECD Model Tax Convention – Commissioner’s objection decision affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) – s 35(2)
Domicile Act 1982 (Cth) – s 10
Income Tax Assessment Act 1997 (Cth) – s 6-5 (2) & (3) – s 6-10(4) & (5) – s 995-1
Income Tax Assessment Act 1936 (Cth) – s 6(1)(a)
International Tax Agreements Act 1953 (Cth) – s 4
Representation of the People (Amendment) Act 2010
CASES
ANZ Savings Bank Ltd v Federal Commissioner of Taxation 94 ATC 4844
Federal Commissioner of Taxation v Applegate 79 ATC 4307
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 164
Federal Commissioner of Taxation v Miller (1946) 73 CLR 93
Gauci & Ors v Federal Commissioner of Taxation (1975) 135 CLR 81
Henderson v Henderson [1965] 1 All ER 179
Joachim v Federal Commissioner of Taxation 2002 ATC 2088
Re Kirby and Collector of Customs (1989) 20 ALD 369
Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241
Macmine Pty Ltd v Federal Commissioner of Taxation 79 ATC 4133
McCormack v Federal Commissioner of Taxation 79 ATC 4111; 80 ATC 4179
Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139
Shand v Federal Commissioner of Taxation 2003 ATC 2080
Subrahmanyam v Commissioner of Taxation 2002 ATC 2303
SECONDARY MATERIALS
Agreement Between the Government of the Commonwealth of Australia and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income – Article 2(1)(l) – Article 3(1)(c) & (d) – Article 3(2) – Article 11(1) – Articles 12, 13 & 14 – Article 18
Agreement Between the Government of the Commonwealth of Australia and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income
Organisation for Economic Cooperation and Development - Model (Tax) Convention (dated 22 July 2010) – Commentary of Article 4
Macquarie Dictionary 5th Ed. (2009)
New Shorter Oxford English Dictionary Vol. 2 (1993)
REASONS FOR DECISION
Senior Member C R Walsh
12 June 2013
INTRODUCTION
Pivotal to this application is whether the Taxpayer was an Australian “resident” for income tax purposes in the year ended 30 June 2011 pursuant to the relevant provisions of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). If it is determined that the Taxpayer was an Australian “resident” in the 2011 income year, a further issue arises as to whether the Taxpayer was also a resident of Singapore or India during in that year and the consequences which flow from that.
The Taxpayer seeks a review of the Commissioner’s objection decision (dated 6 September 2012) which disallowed the Taxpayer’s objection (dated 3 August 2012) against an income tax assessment (issued on 31 May 2012) for the income tax year ended 30 June 2011.
In accordance with a direction made by the Tribunal at the hearing of this application (on 22 March 2013) pursuant to s 35(2) of the Administrative Appeals Tribunal Act 1975 (Cth), these Reasons for Decision have been written so as to, as far as practicable, prevent the identification of the Taxpayer.
BACKGROUND
The Taxpayer was born in India and remains an Indian citizen (or “national”).
The Taxpayer came to Australia in about 1989.
The Taxpayer has not applied for Australian citizenship but, at all material times, has held a visa which, broadly, entitles him to remain indefinitely in Australia and to regain his status as an Australian permanent resident if he travels outside of Australia and then returns, provided he returns to Australia within 5 years of leaving.
In January 2011 the Taxpayer and his wife purchased, as joint tenants, a property in Western Australia (Western Australian Property). The Western Australian Property is where the Taxpayer lives when he is in Australia and since being purchased it has been the home of his wife and adult children, all of whom are Australian citizens. The Western Australian Property is mortgaged to the Commonwealth Bank.
Prior to purchasing the Western Australian Property, the Taxpayer’s “home address”, as stated on his income tax returns for the years ended 30 June 2007 to 30 June 2010, inclusive, was another property in Western Australia.
The Taxpayer is an engineer.
At various times in the period from 2007 to early 2010 the Taxpayer worked for a company in Victoria. The Taxpayer’s employment with the Victorian company was terminated in 2010. The Taxpayer subsequently applied for a number of jobs in Australia but was unsuccessful in securing any employment here.
On 1 June 2010 the Taxpayer left Australia to commence employment in Singapore.
While working in Singapore, the Taxpayer lived in a serviced apartment.
On 30 April 2011 the Taxpayer ceased his employment in Singapore.
In May 2011 the Taxpayer commenced new employment in India.
While working in India, the Taxpayer lived in fully-furnished quarters which were provided by his Indian employer.
The Taxpayer lived and worked in India until 31 July 2011 and then returned to Australia on 2 August 2011, where he lived at the Western Australian Property.
On 12 October 2011 the Taxpayer returned to India and worked there until 12 January 2012. During this period, the Taxpayer lived in the same accommodation as before.
The Taxpayer returned to Australia again on 12 January 2012, where he lived at the Western Australian Property.
On 24 April 2012 the Taxpayer returned to India and worked there until 26 July 2012. During this period, the Taxpayer lived in the same accommodation as before.
On 22 April 2012 the Taxpayer applied to the Australian Taxation Office (ATO) for a private binding ruling that he was not a resident of Australia for income tax purposes “from financial year commencing on 1 July 2010”.
On 11 May 2012, the Taxpayer’s tax agent lodged an income tax return for the year ended 30 June 2011 with the ATO on his behalf (2011 Tax Return).
The 2011 Tax Return stated that the Taxpayer was an “Australian resident”, disclosed $75,065 in “Assessable foreign source income” and declared that the Taxpayer received $2,943 in Australian sourced interest income. The 2011 Tax Return also disclosed the receipt of $12,100 of Australian source “Other business income” in addition to his “Assessable foreign source income”.
On 21 May 2012 the Commissioner issued the Taxpayer with an income tax assessment for the year ended 30 June 2011 in accordance with the 2011 Tax Return (Assessment).
On 7 June 2012 the Commissioner issued the Taxpayer with a “Notice of Private Ruling” in relation to the 2011 and 2012 income years in which he ruled that the Taxpayer was an Australian resident for income tax purposes in those years (Private Ruling).
The Taxpayer returned to Australia again on 26 July 2012, where he again lived at the Western Australian Property until 31 October 2012.
On 3 August 2012 the Taxpayer sought to object to the Private Ruling.
On 27 August 2012 the Taxpayer was telephoned by an ATO officer who advised the Taxpayer that his objection to the Private Ruling was invalid so far as it related to the year ended 30 June 2011. This was said to be the case because an assessment had already issued to the Taxpayer in respect of the 2011 year, being before the Taxpayer had purported to object to the Private Ruling.
During that telephone conversation the Taxpayer advised the ATO officer concerned that he agreed that the purported objection, so far as it related to the year ended 30 June 2011, should, instead, be treated as an objection to the Assessment. The Taxpayer also agreed to withdraw the objection to the extent it related to the year ended 30 June 2012 (Objection).
On 6 September 2012 the Commissioner disallowed the Objection on the basis that the Taxpayer was a resident of Australia for income tax purposes in the year ended 30 June 2011 (Objection Decision).
On 11 September 2012 the Taxpayer applied to the Tribunal for a review of the Objection Decision. In his “Reasons for Application”, attached to his “Application for Review of Decision”, the Taxpayer stated:
……as stated repeatedly…….I….moved out of Australia with effect from 1 June 2010 eventually to resettle in my home country [i.e. India] which is also my natural domicile…..it is India, my home country to which I have relocated.
My engagement in Singapore from 2 June 2010 till 3 May 2011, is a part and parcel of my relocation to India…….my stay in India cannot be delinked from my relocation to India plan.
……
I have given convincing evidence that during the entire tax year of 1 July 2010 to 30 June 2011, Australia ceased to be my place of residence nor choice of domicile. Hence my prayer to the AAT is on two counts:
a)to overturn the decision communicated in the letter of 6 September 2012 and direct ATO to treat me as a non-resident for taxation purposes for the year 2010-11.
b)to direct ATO to treat me as non-resident for taxation purposes indefinitely for all future years. As a resident and domiciled citizen of India and considering my old age,….I cannot keep appealing for a decision each year.
I am returning to [India] on 31 October 2012.
EVIDENCE
The Taxpayer did not provide any witness statements in support of his application. However, having identified that the Taxpayer’s “Statement of Facts, Issues and Contentions”, dated 21 January 2013 (Taxpayer’s SOFIC), contains material which would ordinarily be provided by way of witness statement, the Tribunal tendered the Taxpayer’s SOFIC (comprising 142 paragraphs, together with attachments numbered E-1 to E-68) into evidence as “Exhibit A1”. The Commissioner did not take issue with this course, other than to question the evidentiary weight of the material contained in Exhibit A1 as follows:.
22.………..In this case, much of the evidence of the [Taxpayer] would be inadmissible in a court of law as being vague, conclusionary, speculative or hearsay and should therefore be accorded little weight by this Tribunal.
23.There is no contemporaneous evidence that supports the contentions made as to the intention of the [Taxpayer].
The Taxpayer did, however, appear before the Tribunal and give verbal evidence in support of his application.
The Commissioner’s evidence in this application comprised:
· the Sub-Section 37(1AB) Statement in Lieu “Statement of Findings on Material Questions of Fact, Evidence, Reasons for Decision and Relevant Documents” (commonly referred to as the “T Documents”), which were tendered as “Exhibit R1”;
· a copy of the “Record of Certificate of Title” for the Western Australian Property, which was tendered as “Exhibit R2”;
· a copy of the “Mortgage” for the Western Australian Property, which was tendered as “Exhibit R3”;
· a search result for the Taxpayer from the National Engineering Registration Board internet web-site, which was tendered as Exhibit R4”;
· photocopies of the Taxpayer’s Australian immigration “Incoming passenger cards” for the period from 22 May 2005 to 26 July 2012, which were tendered in one bundle (comprising 21 pages) as “Exhibit R5”;
· photocopies of the Taxpayer’s Australian immigration “Outgoing passenger cards” for the period from 19 June 2005 to 31 October 2012, which were tendered in one bundle (comprising 20 pages) as “Exhibit R6”; and
· an extract from the Indian legislation Representation of the People (Amendment) Act 2010 (ROTPAA), which was tendered as “Exhibit R7”,
· an extract from the “Current Affairs & Analysis” internet web-site concerning the ROTPAA, which was tendered as “Exhibit R8”; and
· an extract from the “Unique Identification Authority of India” internet web-site, which was tendered as “Exhibit R9”.
ISSUES
The fundamental issue for determination by the Tribunal is whether, in the year ended 30 June 2011, the Taxpayer was a “resident” or a “resident of Australia” as defined in s 6(1) of the ITAA 1936 and, therefore, for the purposes of the ITAA 1997.
If the Taxpayer was an Australian “resident” in the 2011 year, whether, in that year, the Taxpayer was also a resident of:
(i)Singapore for the purposes of the “Agreement Between the Government of the Commonwealth of Australia and the Government of the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income” (Singapore/Australia DTA); and/or
(ii)India for the purposes of the “Agreement Between the Government of the Commonwealth of Australia and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income” (India/Australia DTA).
BURDEN OF PROOF
Pursuant to s 14ZZK(b)(i) of the TAA, the Taxpayer bears the burden of proving that the Assessment is excessive: Federal Commissioner of Taxation v Dalco (1990) 168 CLR 164 and ANZ Savings Bank Ltd v Federal Commissioner of Taxation 94 ATC 4844. The standard of proof is on the balance of probabilities: Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139 and Re Kirby and Collector of Customs (1989) 20 ALD 369. The question for determination is whether the Assessment is wrong. This means that the Taxpayer must prove that the Assessment is excessive and what the correct assessment ought to be.
There is no onus on the Commissioner to show that the Assessment is reasonable or supported by evidence: Gauci & Ors v Federal Commissioner of Taxation (1975) 135 CLR 81 at 89 per Mason J.
If the Taxpayer is unable to establish that the Assessment is excessive, then the Assessment must stand, irrespective of whether there are any facts or circumstances which would, on the face of it, support the Assessment: McCormack v Federal Commissioner of Taxation 79 ATC 4111; 80 ATC 4179 and Macmine Pty Ltd v Federal Commissioner of Taxation 79 ATC 4133.
RELEVANT LAW & ANALYSIS
Under the ITAA 1997, an “Australian resident” is generally assessable on ordinary and statutory income derived from all sources, whether in or out of Australia, during the income year: ss 6-5(2) and 6-10(4) of the ITAA 1997.
In contrast, a “foreign resident” is generally assessable only on ordinary and statutory income derived from all Australian sources, during the income year: ss 6-5(3) and 6-10(5) of the ITAA 1997.
The definition of “Australian resident” in section 995-1 of the ITAA 1997 provides that “Australian resident” means a person who is a resident of Australia for the purposes of the ITAA 1936. The definition of “foreign resident” in section 995-1 of the ITAA 1997 states that a “foreign resident” means a person who is not a resident of Australia for the purposes of the ITAA 1936. In other words, the definition of “Australian resident” and “foreign resident” in the ITAA 1997 both cross-reference back the definition of “resident” or “resident of Australia” in section 6(1) of the ITAA 1936.
The definition of “resident” or “resident of Australia” in section 6(1) of the ITAA 1936 includes not only a person who “resides” in Australia, within the ordinary meaning of that word (commonly referred to as the “ordinary concepts test”), but also a person who satisfies any one of three additional statutory tests set out in section 6(1)(a)(i) to (iii) of the ITAA 1936, being: (i) the domicile test; (ii) the 183 day test; and (iii) the superannuation fund test.
The s 6(1) definition is complementary and enlarges the group of persons who do not physically reside in Australia but who are nonetheless liable to pay Australian income tax: Federal Commissioner of Taxation v Applegate 79 ATC 4307 at 4313 per Northrop J.
Of the three statutory tests, only the “domicile test” in section 6(1)(a)(i) of the 1936 ITAA 1936 is relevant to this application. Broadly, the effect of this test (which is considered in further detail later in these reasons) is that when a person has a “domicile” in Australia they are deemed to be a “resident” for income tax purposes, unless they can establish that their “permanent place of abode” is outside Australia.
Resident according to ordinary concepts
The primary test for deciding the residency status of an individual is whether the individual resides in Australia according to the ordinary meaning of “resides”. As the term “resides” is not defined in Australian income tax law it takes its ordinary meaning.
The Macquarie Dictionary 5th Ed. (2009) defines “reside” as “to dwell permanently or for a considerable time; have one’s abode for a time”. Further, the New Shorter Oxford English Dictionary Vol.2 (1993) defines “reside” as meaning “b. Dwell permanently or for a considerable time, have one’s regular home in or at a particular place.”
According to the High Court of Australia in Federal Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99-100, per Latham CJ, the term “reside” should be given a wide meaning for the purposes of section 6(1)(a) of the ITAA 1936. Similarly, in Subrahmanyam v Commissioner of Taxation 2002 ATC 2303 DP Forgie said at [43-44] that the widest meaning should be attributed to the word “reside” as it is used in the opening words of section 6(1)(a) of the ITAA 1936, for the following two reasons:
The first is the context of the 1936 Act which is mirrored in the 1997 Act. The context is that of legislation to levy income tax. It provides for the levy of that income tax upon both residents and non-residents. However, given that the income regarded as assessable income under both the 1936 Act and the 1997 Act is more broadly based for a resident than for a non-resident, it can be presumed from the fact that it is income tax legislation that Parliament intended that the word ‘reside’ should be given its broadest ordinary meaning rather than any narrower meaning. That is so because it is its broadest meaning that leads to the greatest pool of assessable income upon which income tax is assessed.
The second is the form in which Parliament has chosen to frame the definition of ‘resident’. It has chosen the ‘means and includes’ form of definition. As a general rule, which an expression is defined by reference to ‘means … and includes’, it ‘indicates an exhaustive explanation of the meaning which for the purposes of the statute must be attached to the term the subject of definition, and conveys both the idea of enlargement and exclusion’. [Emphasis added]
Further, in Subrahmanyam, in considering the ordinary meaning of the word “resides”, DP Forgie also said at [48]:
In its broadest sense, ‘resides’ carries with it the notion of having a home in a particular place. It carries with it the notion of some physical presence with the notion of an intention to treat the place as home, at least for the time although not necessarily forever. It may be expressed in terms of dwelling in a place. In general terms, that would seem to be the sense in which the word is used in the definition of ‘resident’ in s.6(1) of the 1936 Act…
As stated by the High Court in Miller (1946) 73 CLR 93, the question whether an individual “resides” in a particular country is a question of fact and degree and not of law. In deciding this question, the courts have consistently referred to and taken into account the following factors as being relevant:
(i) Physical presence in Australia;
(ii) Nationality;
(iii) History of residence and movements;
(iv) Habits and “mode of life”;
(v) Frequency, regularity and duration of visits to Australia;
(vi) Purpose of visits to or absences from Australia;
(vii) Family and business ties to Australia and the other country; and
(viii) Maintenance of a place of abode.
The weight to be given to each factor will vary with the individual circumstances and no single factor is necessarily decisive.
As acknowledged by the Tribunal in Shand v Federal Commissioner of Taxation 2003 ATC 2080 at [35]:
questions of residence, domicile, permanent place of abode, have frequently been found by the courts and tribunals to be difficult to assess on a factual level and not easy to define in concrete legal terms.
The Taxpayer’s application is no exception. However, based on the totality of facts and evidence before it, the Tribunal considers that, on balance, the Taxpayer was throughout the year ended 30 June 2011 a “resident” or a “resident of Australia” for the purposes of s 6(1)(a) of the ITAA 1936. It follows, therefore, that the Taxpayer was also an “Australian resident” for the purposes of the definition of that term in section 995-1 of the ITAA 1997 and as used in section 6-5(2) of the ITAA 1997 in the year ended 30 June 2011. In reaching this conclusion, the Tribunal is mindful of the fact that it has been previously held that the ordinary meaning of “reside” in section 6(1)(a) of the ITAA 1936 should be attributed with the widest possible meaning, as that is what Parliament intended: Miller and Subrahmanyam.
More particularly, the Tribunal reached the conclusion that the Taxpayer was an Australia “resident” during the 2011 income year based on the following facts and evidence before it:
(i) Physical presence in Australia
·In the year ended 30 June 2011, the Taxpayer was physically present in Australia for approximately 5 of the 52 weeks in the year. The primary reason the Taxpayer returned to Australia in the 2011 year was to visit his wife and two children.
·On each occasion that the Taxpayer returned to Australia from overseas in the 2011 year, he lived with his wife and two children at the Western Australian Property (from January 2011) and, before purchasing the Western Australian Property January 2011, at their previous family home in Western Australia.
·On each of his Australian immigration “Outgoing passenger cards” for the 2011 year, the Taxpayer identifies himself as an “Australian resident departing temporarily” and states that “Western Australia” is the State in which he “lives”.
·On each of his Australian immigration “Incoming passenger cards” for the 2011 year, the Taxpayer identifies his “Intended address in Australia” as being the Western Australia Property (from January 2011) and his other family home in Western Australia (before January 2011). Further, he consistently identifies himself on those “Incoming passenger cards” as being a “Resident returning to Australia”.
·In is 2011 Tax Return, the Taxpayer states that he is an “Australian resident” and that his “home address” is his family home, at the relevant time, in Western Australia;
In the Tribunal’s view, the above facts and evidence indicate that the Taxpayer retained a “continuity of association” with Australia, together with an intention to return to Australia and an attitude that Australia remains “home”: see Joachim v Federal Commissioner of Taxation 2002 ATC 2088.
(ii) Nationality
·The Taxpayer was born in India. Throughout the 2011 year the Taxpayer was, and he remains presently, an Indian citizen or “national”. However, at all material times, the Taxpayer had an Australian visa which, subject to certain disqualifying conditions, entitled him to live in Australia as a permanent resident.
(iii) History of residence and movements
·The Taxpayer first came to Australia in 1989 with his wife and two children. Since that time, the Taxpayer has travelled extensively for his work, both inside and outside Australia.
·As stated above, although not an Australian citizen (instead being and Indian citizen/national), the Taxpayer has at all relevant times maintained a visa which, subject to certain disqualifying conditions, entitles him to live in Australia as a permanent resident.
(iv) Habits and “mode of life”
·When working in Singapore in the 2011 year, the Taxpayer lived in a serviced apartment. The Taxpayer’s employment in Singapore was for a limited period and his visa to work in Singapore was conditional upon that employment.
·When working in India in the 2011 year, the Taxpayer lived in fully-furnished quarters provided by his Indian employer.
·The Taxpayer took his personal effects, professional books, personal library, computer programs, publications and the like with him to Singapore and, subsequently, to India. On each occasion that the Taxpayer returned to Australia in the 2011 year, he left most of those items behind in Singapore or India, as relevant.
·As stated above, on each occasion that the Taxpayer returned to Australia in the 2011 year, he lived with his wife and two children at their family home, being the Western Australian Property from January 2011 and their previous home in Western Australia before January 2011.
·The Taxpayer’s wife and two children did not accompany him to either Singapore or India but instead remained living in Western Australia at their family home at the relevant time. However, as stated, during the 2011 year, the Taxpayer returned to Australia a number of times to visit his wife and two children and his wife and two children visited him in both Singapore and India.
·The Taxpayer’s wife has been unable to obtain a long-term visa for India and has travelled there on a tourist visa.
(v) Frequency, regularity and duration of visits to Australia
·As stated, in the 2011 the Taxpayer travelled to Australia on a number of occasions to visit his wife and two children and on those occasions he stayed with his wife and children in their family home at the relevant time.
(vi) Purpose of visits to or absences from Australia
·The primary reason the Taxpayer returned to Australia in the 2011 year was to visit his wife and two children.
·In the 2011 year, the Taxpayer went to Singapore and India to work. Although, as discussed in further detail below, the Taxpayer also had personal, including religious and ancestral reasons, for his association with India in the 2011 year and in subsequent years.
(vii) Family and business ties to Australia, Singapore and India
·The Taxpayer’s closest and most immediate family ties are with Australia for the reason that his wife and two children have at all material times lived in Western Australia in the Taxpayer’s family home, being the Western Australian Property (from January 2011) and their other family home in Western Australia (before January 2011).
·The Taxpayer’s wife and two children are Australian citizens.
·Throughout the 2011 year, the Taxpayer and his wife held a joint bank account with the Commonwealth Bank of Australia (Joint CBA Account). The Taxpayer also held, in his own name, a BankWest account in Western Australia.
·The Taxpayer’s salary from his employment in Singapore in the 2011 year was initially paid into an account which he held with a Singapore based bank. However, in the 2011 year the Taxpayer made several transfers from that Singapore bank account to the Joint CBA Account.
·The Taxpayer’s salary from his employment in India in the 2011 year was paid into an account kept by him in India.
·As already stated, the Taxpayer and his wife acquired the Western Australian Property, as joint tenants, in January 2011. Since then, the Taxpayer’s wife and two children have live in the Western Australian Property and the Taxpayer has lived there with them on each occasion he returned to Australia in the 2011 year. The Western Australian Property is mortgaged to the Commonwealth Bank.
·In February 2010, the Taxpayer obtained an Australian Business Number (ABN) as a sole trader under the trading name “XYZ”. At the same time, the Taxpayer became registered for goods and services tax (GST). The Taxpayer’s ABN remains current. However, his GST registration was cancelled effective 30 June 2012.
·Throughout the 2011 year, the Taxpayer and his wife were members of the Hospital Benefits Fund of Western Australia (HBF) and were insured for private patient hospital expenses with that fund.
·The Taxpayer has at all material times maintained his registration with Australia’s National Engineering Registration Board (his registration being valid from July 1994 until 30 June 2013).
·When in Australia (including in the 2011 year), the Taxpayer umpired cricket matches as a hobby.
·The Taxpayer has family, cultural and religious ties to India. The Taxpayer’s extended family (i.e. apart from his wife and two children) and many of his friends and relatives live in India. The Taxpayer claims a share in an ancestral property in India but says that he has not received any returns from the property as it has been the subject of a legal dispute.
·The Taxpayer is a member of a co-operative building society in India. As a member of that society, he made a payment for the allotment of a house site in 1997 but, to date, no site has been allotted to him.
(viii) Maintenance of Place of abode
·As stated above, the Taxpayer and his wife acquired the Western Australian Property for their and their children’s personal use in January 2011. Since acquiring the Western Australian Property in January 2011, the Taxpayer lived in the Western Australian Property each time he returned to Australia. Before the acquisition of the Western Australian Property in January 2011, the Taxpayer maintained another “place of abode” in Western Australia with his wife and two children which he also lived in on each occasion that he returned to Australia in the 2011 year.
Domicile Test
Having reached the conclusion that the Taxpayer was a “resident of Australia” according to ordinary concepts in the 2011 year, it is unnecessary for the Tribunal to consider whether he was a resident in the relevant period under any of the three additional statutory tests in s 6(1)(a) of the ITAA 1936.
The three additional statutory tests in the definition of “resident” in s 6(1) of the ITAA 1936 are to be read as enlarging, and not restricting, the ordinary meaning of “resident” in the antecedent part of the definition: Applegate 79 ATC 4307 at 4313 per Northrop J. Accordingly, even if a person is found not to be a resident of Australia according to ordinary concepts, the person will nevertheless be resident in Australia if he or she satisfies any one of the three additional statutory tests in s 6(1)(a) of the ITAA 1936. Conversely, if an individual “resides” in Australia according to the ordinary meaning of the word, the other tests do not require consideration: Applegate.
However, for completeness, the Tribunal will briefly examine the “domicile test” in s 6(1)(a)(i) of the ITAA 1936 (being the only statutory test of residence relevant to this application) and how it considers it would have applied to the Taxpayer’s particular case, if it had not found him to be a resident according to ordinary concepts, as discussed above.
Under the domicile test in section 6(1)(a)(i) of the ITAA 1936, a person is resident in Australia if his or her domicile is in Australia, unless the Commissioner is satisfied that the person’s “permanent place of abode” is outside Australia.
Very broadly, a person acquires a domicile of origin at birth and retains that domicile until he or she acquires another “domicile of choice” by operation of law: Henderson v Henderson [1965] 1 All ER 179. Section 10 of the Domicile Act 1982 (Cth) (DA), which Act governs the rules in Australia as to how a person acquires a “domicile of choice”, states:
The intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country. [Emphasis added]
In determining whether a person “intended” to make his or home “indefinitely” in a particular country, thereby acquiring a “domicile of choice’ in that country for the purposes of s 10 of the DA, it is important to distinguish between the person’s “motive” and his or her “intention”, since those two words bear different meanings.
“Motive” is defined in the Macquarie Dictionary 5th Ed. (2009) as “1. something that prompts a person to act in a certain way or that determines volition, an incentive. 2. the goal or object of one’s action.” In contrast, “intent” is defined as “1. an intending or purposing, as to commit some act…2. that which is intended, purpose; aim; design; intention…3. … the state of someone’s mind which directs their actions towards a specific object. 4. the end or object intended.” Further, “intention” is defined as “1. the act of determining mentally upon some action or result; a purpose or design. 2. the end or object intended.”
It is not in dispute that the Taxpayer’s “domicile of origin” is India. The real question here is whether the Taxpayer acquired a “domicile of choice” in Australia after moving here from India and, if so, whether he acquired a different “domicile of choice” upon moving to Singapore, and, subsequently to India, to work in the 2011 year.
Based on the facts and evidence before it, the Taxpayer acquired a “domicile of choice” in Australia in about 1989 when he came to Australia from India. As regards whether the Taxpayer acquired a different “domicile of choice” upon leaving Australia in June 2010 to commence employment in Singapore, the Taxpayer’s contention is that the work he has been engaged in India since the 2011 year is merely a continuation of the work he commenced, in collaboration with his colleagues, as long ago as 2009. That is, his employment in Singapore cannot be “de-linked” from his subsequent employment in India. It follows, the Taxpayer’s asserts, that he intended to permanently reside in India when he left Australia for Singapore in June 2010 such that his “domicile of choice” has been India since June 2010.
The Tribunal is of the view that there is no evidence to support the Taxpayer’s contention that, at the time of leaving Australia for Singapore in June 2010, he “intended” to make his home “indefinitely” in India for the purposes of s 10 of the DA and s 6(1) of the ITAA 1936.
Indeed, on his Australian immigration “Outgoing passenger card”, dated 1 June 2010 (in Exhibit R6), the Taxpayer expressly states that he is an “Australian resident departing temporarily” (i.e. for 2 months), that Western Australia is the Australian “State” in which he lives and that “Singapore” is the country in which he will spend most of his time abroad. It is difficult in such circumstances for the Tribunal to accept the Taxpayer’s assertion that he “intended” to permanently leave Australia and “indefinitely” reside in India when he temporarily departed Australia for Singapore in June 2010.
Further, the Tribunal considers, based on the facts and evidence before it, that the Taxpayer did not otherwise acquire a “domicile of choice” in Singapore in the 2011 year for the purposes of s 10 of the DA and s 6(1) of the ITAA 1936. The reason for this is that at the time the Taxpayer left Australia for Singapore (in June 2010) he did not, in the Tribunal’s opinion, “intend’ to make his home “indefinitely” in Singapore.
Permanent Place of Abode Outside Australia
As stated above, under the first statutory test for determining whether a person is “resident in Australia”, a person is so resident if he or she is domiciled in Australia unless the Tribunal is satisfied that his or her “permanent place of abode” is outside Australia. Having found that the Taxpayer was domiciled in Australia in the 2011 year (and that he did not acquire a “domicile of choice” in either Singapore or India), the question becomes whether he had a “permanent place of abode outside Australia” in that year.
As regards what is meant by “place of abode”, in the High Court’s decision in Koitaki Para Rubber Estates Limited v Commissioner of Taxation [1941] HCA 13; 64 CLR 241 Williams J stated (at 64 CLR 241 at 249):
Physical presence and intention and coincide for most of the time but few people are always home. Once a person has established a home in a particular place, even involuntary, a person does not necessarily cease to be resident here because he or she is physically absent. The test is, whether the person has retained a continuity of association with the place together with an intention to return to that place and an attitude that the place remains home.
A person’s “permanent place of abode” is a question of fact to be determined in the light of all the circumstances of each case. However, the expression “permanent place of abode” has been held to mean a person’s “fixed and habitual place of abode” and to connote “a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there in usual place of abode”: Applegate 79 ATC 4307 at 4317 per Fisher J.
In Applegate, in considering whether a person has acquired a “permanent place of abode” outside Australia, Fisher J stated (at 79 ATC 4307 at 4317):
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.
The Tribunal considers that the Taxpayer did not establish a “permanent place of abode” outside Australia (in either Singapore or India) in the 2011 income year such that he was a “resident” under the “domicile test” in s 6(1)(a)(i) of the ITAA 1936 (and, it follows, an “Australian resident” for the purposes of the ITAA 1997). This is on the basis, of course, that the Tribunal had not otherwise found the Taxpayer to be a resident according to ordinary concepts, which it did.
The facts and evidence which lead the Tribunal to this conclusion include (but are not limited to) the following:
·the Taxpayer’s employment in Singapore was limited in duration (commencing no earlier than January 2010 and ending in February 2011). The Taxpayer’s visa to work in Singapore was conditional upon his employment and was limited in duration;
·when working in Singapore in the 2011 year, the Taxpayer lived in a serviced apartment;
·the Taxpayer’s employment in India in the 2011 year was not permanent or indefinite and was, rather, temporary in nature;
·in the 2011 year, the Taxpayer maintained a joint bank account with his wife in Australia, being the Joint CBA Account. He also maintained a separate account in Australia, in his own name, with BankWest;
·in the 2011 year, the Taxpayer transferred some of the income he earned in Singapore from his Singapore bank account to the Joint CBA Account;
·in January 2011, the Taxpayer purchased the Western Australian Property with his wife as joint tenants. The Western Australian Property was mortgaged to the CBA;
·before acquiring the Western Australian Property, the Taxpayer had another family home with his wife and two children located in Western Australia;
·In the 2011 year, the Taxpayer and his wife had HBF health insurance;
·In his 2011 Tax Return, the Taxpayer stated that he was an “Australian resident” and that his “home address” was his family home in Western Australia;
·when working in India in the 2011 year, the Taxpayer lived in fully-furnished quarters provided by his Indian employer;
·the Taxpayer did not take all of his belongings with him to either Singapore or India. Instead, he only took his personal effects, computer programs, publications, personal library, professional books and the like. The remainder of his property (jointly owned or otherwise) remained with his wife and two children in Australia;
·The information contained in the Taxpayer’s Australian immigration “Outgoing passenger cards” and “Incoming passenger cards” for the 2011 year clearly show that his “permanent place of abode” was in Australia and not in either Singapore or India;
·In the 2011 year, the Taxpayer maintained his registration with Australia’s National Registration Engineering Board;
·In the 2011 year, the Taxpayer returned to Australia to visit his wife and children and during those visits he lived with his wife and two children at their family home at the relevant time;
·In the 2011 year, the Taxpayer’s wife and two children visited him in both Singapore and India;
·In the 2011 year, the Taxpayer earned some Australian sourced consultancy income under his ABN and trading name “XYZ”;
·In the 2011 year, the Taxpayer earned some Australian sourced interest income; and
·The Taxpayer works in a profession in which international travel is reasonably common.
In conclusion, the Tribunal considers, based on the totality of facts and evidence before it, that in the 2011 year the Taxpayer’s “fixed and habitual place of abode” was in Australia, that he retained a continuity of association with Australia and that he maintained an intention to return to Australia and an attitude that Australia remained home: Koitaki Para Rubber and Applegate. Consequently, in the 2011 year the Taxpayer was an Australian resident for income tax purposes under the “domicile test” in s 6(1)(a)(i) of the ITAA 1997.
Singapore/Australia DTA & India/Australia DTA
Australia has concluded double taxation agreements (DTAs) with both Singapore and India. The primary legislation governing DTAs is the International Tax Agreements Act 1953 (Cth) (International Agreements Act). The ITAA 1936 and the ITAA 1997 are incorporated into the International Agreements Act such that they are read as one: see s 4 of the International Agreements Act. However, the provisions of the DTAs prevail (i.e. have force of law) in the event that they conflict with the provisions in Australia’s domestic tax laws, including the ITAA 1936 and the ITAA 1997: see ss 5 and 7 of the International Agreements Act.
DTAs are intended to relieve taxpayers from double taxation and to counter fiscal evasion. Two main methods of relieving double taxation are adopted in Australia’s DTAs, being: (i) to reserve the taxing rights over certain “classes” of income to the country of “residence” of the person deriving the income; and (ii) to allow all other income to be taxed in the country in which the income derived is “sourced”. Where the country of “residence” of the person deriving the income also taxes that income, that country is generally required to grant a credit against its tax for the tax which has been levied in the “source” country.
Each of Australia’s DTAs contains rules designed to classify each person as either a resident of Australia or as a resident of the other country who is a party to the DTA. These rules look first at the domestic tax laws of each country and then to the “tie-breaker” rules in the particular DTA. The “tie-breaker” rules are designed to attribute a sole country of “residence” to a person in the event that the person is a resident under the domestic laws of both countries (i.e. is a “dual resident”).
The Singapore/Australia DTA is no exception to this. Article 2(1)(l) of the Singapore/Australia DTA provides that the expression “resident of Singapore” has the meaning which it has under “the laws of Singapore relating to Singapore tax” and that the expression “resident of Australia” has the meaning which it has under “the laws of the Commonwealth relating to Australian tax” (including the ITAA 1936 and the ITAA 1997).
Article 3(1)(c) and (d) of the Singapore/Australia DTA provides that the expression “Singapore resident” means any person who is a “resident of Singapore and “Australian resident” means any person who is a “resident of Australia”.
Article 3(2) of the Singapore/Australia DTA contains a “tie-breaker” provision which provides that where by reason of Article 3(1) an individual is both a “Singapore resident” and an “Australia resident”:
(a)he shall be treated solely as a Singapore resident –
(i)if he has a permanent home available to him in Singapore and has not a permanent home available to him in Australia;
(ii)is sub-paragraph (a)(i) of this paragraph is not applicable but he has an habitual abode in Singapore and has not an habitual abode in Australia;
(iii)if neither sub-paragraph (a)(i) nor sub-paragraph (a)(ii) of this paragraph is applicable but the Contracting State with which his personal and economic relations are closest is Singapore.
(b)he shall be treated solely as an Australian resident –
(i)if he has a permanent home available to him in Australia and has not a permanent home to him in Singapore;
(ii)if sub-paragraph (b)(i) of this paragraph is not applicable but he has an habitual abode in Australia and has not an habitual abode in Singapore;
(iii)if neither sub-paragraph (b)(i) nor sub-paragraph (b)(ii) of this paragraph is applicable but the Contracting State with which his personal and economic relations are closet is Australia. [Emphasis added]
The “Organisation for Economic Cooperation and Development” (OECD) has a Model Convention (OECD Model Convention). The OECD Model Convention, and its associated commentaries, provide a useful tool for interpreting Australia’s DTAs, since many of Australia’s DTAs are based on the OECD Model Convention.
The “Commentary” to Article 4 of the OECD Model Convention (tiled “Concerning the Definition of Resident”) makes the following comments regarding when an individual will be considered as having “a permanent home available to him”:
12. …….it is considered that the residence is that place where the individual owns or possesses a home; this home must be permanent, that is to say, the individual must have arranged and retained it for his permanent use as opposed to staying at a particular place under such conditions that it is evidence that the stay is intended to be of short duration.
13. As regards the concept of home, it should be observed that any form of home may be taken into account…….But the permanence of the home is essential; this means that the individual has arranged to have the dwelling available to him at all times continuously, an not occasionally for the purpose of a stay which, owing to the reason for it, is necessarily short of duration (travel for pleasure, business travel, education travel, attending a course at a school etc.).
For the reasons already given, the Tribunal takes the view that in the 2011 year the Taxpayer was a “resident of Australia” under Australian domestic tax law (i.e. under the relevant provisions of the ITAA 1936 and the ITAA 1997) and, therefore, a “resident of Australia” within the meaning of Article 2(1)(l) of the Singapore/Australia DTA and for the purposes of Article 3(1) of the Singapore/Australia DTA. However, if , in the present case, the Taxpayer was also a “resident of Singapore” under Singapore domestic tax law in the 2011 year, the Tribunal considers that the Taxpayer would nonetheless be a treated solely as an “Australian resident” for the purposes of the Singapore/Australia DTA pursuant to the “tie-breaker” test in Article 3(2)(b)(i) of the DTA for the reason that in the 2011 year the Taxpayer had a “permanent home” available to him in Australia, being the Western Australian Property, from January 2011, and his other family home in Western Australia before that. In contrast, the Taxpayer only had a temporary serviced apartment available to him in Singapore in the 2011 year which cannot be described as “permanent” in nature.
Most of Australia’s DTAs provide that “independent profession or personal services income” (as derived, for example, by engineers like the Taxpayer) is generally taxable only in the country of “residence” of the recipient of the income. However, this class of income may also be taxed in the “source” in certain conditions such as: (a) the income is attributable to a fixed base in the source country; (b) the period during which the services are performed exceeds the specified period, usually 183 days; (c) the income is deductible in determining the profits of an enterprise or permanent establishment in the source country; and (d) the income derived exceeds a certain limit.
For example, Article 11(1) of the Singapore/Australia DTA states:
(1)Subject to this Article and to Articles 12, 13 and 14, remuneration or other income derived by an individual who is a resident of one of the Contracting States in respect of personal (including professional) services shall be subject to tax only in that Contracting State unless the services are performed or exercised in the other Contracting State. If the services are so performed or exercised such remuneration or other income as is derived shall be deemed to have a source in, and may be taxed in that other Contracting State.
As discussed above, the Tribunal considers that in the 2011 year the Taxpayer was a “resident of Australia” under Australian domestic tax law and under the “tie-breaker” provision in Article 3(2)(b)(i) of the Singapore/Australia DTA. The effect of Article 11(1) of the Singapore/Australia DTA (set out immediately above) in present case is that because the Taxpayer (an Australian resident) performed the services for which he derived income in Singapore, and not Australia, that income may, subject to what is said in Articles 12, 13 and 14 of the Singapore/Australia DTA, also be taxed in Singapore (i.e. being the country “source”).
What happens next under the Singapore/Australia DTA, in such circumstances, is broadly that the income is either exempt from tax in Singapore, pursuant to Article 12, or, if tax is paid on the income derived by the Australian resident for services performed in Singapore, the Australian resident will receive a credit in Australia for tax paid in Singapore in accordance with Article 18 of the Singapore/Australia DTA. Based on the evidence before the Tribunal, that is exactly what occurred in the present case in relation to the Taxpayer’s Singapore “sourced” income. That is, in the 2011 Tax Return the Taxpayer stated that he was an “Australian resident” and he claimed, and was allowed (i.e. in his Assessment), a tax credit for foreign tax paid of $1,291.
The India/Australia DTA contains Articles which are in substantially similar terms to those contained in the Singapore/Australia DTA, as discussed above. Broadly, if the Taxpayer (who the Tribunal has found was an Australian resident in the 2011 year, under domestic law) was also a resident of India in the 2011 year, the Taxpayer would nevertheless be a resident solely of Australia in the 2011 year pursuant to the “tie-breaker” provision in Article 4(2)(a) of the India/Australian DTA for the reason that he had a “permanent home” available to him in Australia throughout the 2011 year. The Taxpayer’s living arrangements in India throughout the 2011 year did not constitute a “permanent home” as that expression is described in the commentary to OECD Model Convention and as it would ordinarily be understood to mean. Pursuant to the India/Australia DTA, the Taxpayer would then be taxable in Australia on the income he earned in India in the 2011 year.
DECISION
For the above reasons, the Tribunal: (i) considers that the Taxpayer has not discharged his burden of proving, on the balance of probabilities, that the Assessment was excessive; and (ii) affirms the Objection Decision.
I certify that the preceding 88 (eighty eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member C R Walsh.
..................[sgd D Brodie]...........................................
Administrative Assistant
Dated 12 June 2013
Date of hearing 22 March 2013 Date final submissions received 5 April 2013 Representative for Applicant Self-represented Counsel for the Respondent Ms C H Thompson Solicitor for the Respondent Mr R McGrade
Senior Lawyer
ATO Legal Services Branch
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