FEDERAL COURT OF AUSTRALIA | Agreement between Australia and Thailand | Avoidance of Double Taxation | Relevant Cases in the field of international taxation
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FEDERAL COURT OF AUSTRALIA
Pike
v.
Commissioner of Taxation
LOGAN, J.
QUD 618 OF 2018
DECEMBER 24, 2019
Section 6, read with section 10, of the Domicile Act, 1982 and Article 4 of the Agreement between Australia and Thailand for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income - Resident - (Dual residency) - Income years 2009 to 2014 - Whether intention of a person in relation to residence is always relevant, but not determinative of residency; intention is one factor to be considered in context of whole of circumstances of a given case - Held, yes - Taxpayer was a Zimbabwe born person - Taxpayer and his wife decided to leave Zimbabwe - His wife got appointment in Australia and they relocated to Australia - They jointly took an apartment on rent and opened their bank accounts - Taxpayer got employment in Thailand and worked under work visa - His family stayed in Australia - In Thailand, Taxpayer occupied rented accommodation, furnished them so as to accommodate his wife and sons when they visited - He regarded that accommodation as his home when in Thailand and joined social life there - In 2009, Taxpayer, his wife and their sons were granted Australian permanent residency and in August, 2010, his wife and sons were granted Australian citizenship - In meantime, taxpayer and his wife sold their Zimbabwe home and purchased a land in Australia with intention to build a family home - Later it did not prove possible for them to build a home on purchased land; they sold it- In April, 2014, Taxpayer's Australian citizenship application was approved - Commissioner assessed Taxpayer for income-tax years for 2009 to 2013, 2015 and 2016 - Whether circumstances prove that whenever Taxpayer returned to Australia, he did not return as a resident of Thailand, rather he returned as husband and father to resume living and residing with his wife and children at family home which was his home also; hence Taxpayer would be a resident of Australia according to ordinary meaning of that word - Held, yes - Whether he was also a resident of Thailand between 2006 and 2014 - Held, yes - Whether only on and from April 2014 Taxpayer became a resident of Australia because until then he was not domiciled in Australia - Held, yes - Whether when considered conjunctively, Taxpayer's personal and economic relations were closer to Thailand than Australia, between 2009 and 2014 and that being so, Commissioner had no entitlement to assess him in respect of personal services income which he derived in Thailand from his employment there - Held, yes [Paras 60, 85 and 104] [Partly in favour of assessee]
CASES REFERRED TO
Stockton v. Commissioner of Taxation [2019] FCA 1679 (para 49), Addl v. Commissioner of Taxation [2019] FCA 1768 (para 49), Harding v. Commissioner of Taxation [2019] 365 ALR 286 (para 49), Commissioner of Taxation v. Harding [2019] HCR Trans 191 (para 49), Levene v. Commissioner of Inland Revenue [1928] AC 217 (para 52), Gregory v. Deputy Federal Commissioner of Taxation [1937] 57 CLR 774 (para 52), Commissioner of Taxation v. Miller [1946] 73 CLR 93 (para 52), CJ. Hafza v. Director General of Social Security [1985] 6 FCR 444 (para 52), Cooper (Surveyor of Taxes) v. Cadwalader [1904] 5 TC 101 (para 55), Commissioner of Inland Revenue v. Lysaght [1928] AC 234 (para 59), Dempsey & Federal Commissioner of Taxation, In re [2014] 98 ATR 698 (para 64), Radich v. Bank of New Zealand [1993] 45 FCR 101 (para 71) , Ferrieer Watson v. Mc Elrath [2000] 155 FLR 311 (para 72), Terrassin v. Terrassin [1968] 14 FLR 151 (para 72), Ah Yin v. Christie [1907] 4 CLR 1428 (para 73), Kolotex Hosiery (Australia) (P.) Ltd. v. Commissioner of Taxation [1975] 132 CLR 535 (para 82), Avon Downs (P.) Ltd. v. Federal Commissioner of Taxation [1949] 78 CLR 353 (para 83), Thiel v. Commissioner of Taxation [1990] 171 CLR 338 (para 92) and Mc Dermott Industries (Aust) (P.) Ltd. v. Commissioner of Taxation [2005] 142 FCR 134 (para 92).
P. Bickford and Irish Bentley Lawyers for the Applicant. P. Looney QC and D. Butler for the Respondent.
ORDER
1. The applicant's appeal against the respondent's objection decision dated 9 July 2018 (objection decision) be allowed in part.
2. So much of the objection decision as disallowed the applicant's objection against his assessments for the 2009 to 2014 income years (amended assessment in respect of the 2014 income year) be set aside.
3. In lieu thereof, it is determined the applicant's objection be allowed on the basis that, in respect of the 2009 to 2014 income years, the applicant was, by reason of the Agreement between Australia and the Kingdom of Thailand for the "Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income" (Australian Treaty Series 1989 No 36), as applied by the International Tax Agreements Act 1953 (Cth), deemed to be a resident of Thailand.
4. The matter be remitted to the respondent for the purpose of making and issuing amended assessments for those income years to the applicant on that footing.
5. Save as aforesaid, the objection decision be confirmed and the appeal be dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
Logan, J. - Mr Bradley Titus Pike, is dissatisfied with an objection decision made by the Commissioner of Taxation (Commissioner) on 9 July 2018 in respect of notices of assessment made by the Commissioner for the 2009, 2010, 2011, 2012, 2013, 2014 (amended assessment), 2015 and 2016 income years (relevant years). Accordingly, he has exercised his statutory right, conferred by s 14ZZ(1)(a)(ii) of the Taxation Administration Act 1953 (Cth), to appeal to this Court against that objection decision.
2. Each of the assessments is premised on the proposition, confirmed by the objection decision, that Mr Pike was, in each of the relevant years, a resident of Australia, as that term is defined by s 6 of the Income Tax Assessment Act 1936 (Cth) (1936 Act). The correctness of that proposition is the principal source of controversy between Mr Pike and the Commissioner. There is a related double taxation controversy for the 2009 to 2014 income years as to whether, even if he is a resident in terms of the 1936 Act alone, the effect of an international taxation agreement, as made part of Australian law, overrides that position. It will also be necessary to make brief reference to what proved, during the hearing of the appeal, no longer to be a tax exemption controversy in respect of the 2009 income year.
3. The onus lies on Mr Pike to prove the assessments to be excessive. He and the Commissioner each approached the appeal on the basis, permissible in law, that the question of whether Mr Pike was a resident of Australia during the relevant years needed to be answered in the context of the whole of his working and family life. There was no great evidentiary controversy between the parties in relation to this subject. In addition to the affidavit evidence concerning it, I had the benefit of hearing oral evidence from Mr Pike and his de facto wife, Ms Michelle Thornicroft. Each of them, I thought, was an honest and notably candid witness, whose affidavit and oral evidence I readily accept. The following account of Mr Pike's working and family life draws on the whole of the evidence tendered by the parties, including that in the agreed bundle of documents, Mr Pike's and Ms Thorincroft's affidavits and oral evidence, as well as some notorious, historical facts.
4. Mr Pike was born in 1972 in what was then, de jure, the internally self-governing British colony of Southern Rhodesia. The government of that colony had, in 1965, unilaterally declared its independence. By the time of his birth, its territory had become the location of an internationally unrecognised republic, known as Rhodesia. On 18 April 1980, having briefly reverted to its de jure colonial status, the territory once known as Rhodesia achieved independence and became the Republic of Zimbabwe.
5. In Zimbabwe, Mr Pike followed a career in that country's tobacco industry. By 2004, he had become highly experienced in tobacco selection, production and sales. Mr Pike was, then as now, in a longstanding de facto relationship with Ms Thornicroft. She had been born in Rhodesia in 1971. They had two sons, born in Zimbabwe in 1995 and 1999 respectively. Ms Thornicroft was then working in Zimbabwe's capital, Harare, for the international accountancy and business consultancy practice, Ernst & Young. Also by 2004, the economic crisis and shortages of food and basic supplies, which had proved to be the legacy of Zimbabwe's post-independence government, had provoked Mr Pike and Ms Thornicroft to discuss leaving that country with their children. To that end, Ms Thornicroft sought, was offered, and accepted an appointment in Ernst & Young's Brisbane office.
6. That appointment was due to commence on 4 April 2005. Mr Pike was then employed in Harare under a contract with the tobacco industry company, Alliance One (formed in 2005 by a merger between Dimon International Harare and Stancom). Prompted by the decision to relocate to Australia, Mr Pike negotiated an arrangement with Alliance One under the terms of which he would receive a payment after serving out the term of his existing contract.
7. In February 2005, Ms Thornicroft was granted, under the Migration Act 1958 (Cth) (Migration Act), a subclass 457 visa on the strength of her forthcoming Australian appointment with Ernst & Young. Mr Pike and their two sons had been listed as secondary applicants on the related visa application. Subsequent to the grant of the visa to Ms Thornicroft, Mr Pike and their sons were granted visas allowing them to accompany her to and live in Australia during the currency of her subclass 457 visa.
8. On 17 March 2005, the family travelled to Australia. From 2000 until the time of their departure, Mr Pike, Ms Thornicroft and their sons had been living in a home in Harare (the Harare home), which they had purchased from Ms Thornicroft's mother.
9. Upon their arrival in Australia, Mr Pike and Ms Thornicroft rented, in joint names and as their initial, family residence, an apartment in Fortitude Valley, Brisbane. Mr Pike returned to Zimbabwe shortly after the family's arrival in Australia. He did this so as to serve out his contract with Alliance One, to sell some assets (two cars and a boat but not the Harare home), which the couple owned in that country and to pack up and arrange the transportation to Australia of their furniture. He returned to Australia in September 2005.
10. Viewed in isolation, it might be thought that this familial separation of many months entailed in translating from Zimbabwe to Australia was an aberration. As later events transpired, that proved not to be so. Viewed in the context of those later events, this initial separation is indicative of the resilience of Mr Pike's and Ms Thornicroft's relationship and of their preparedness to make personal sacrifices in order best to provide for their children. More particularly, what emerges on the whole of the evidence is that Mr Pike has a strong work ethic and very particular occupational skills, as well as an equally strong sense of familial responsibility both towards his immediate family and his wider family. The interplay between these personal traits, qualifications and circumstance has meant he has been enduringly forced to pursue employment abroad ever since leaving Zimbabwe and to divide his personal life as between abroad and Australia.
11. On his return to Australia, Mr Pike sought employment. Unfortunately for him, the period during which he and Ms Thornicroft transitioned from Zimbabwe to Australia coincided with the winding up of the tobacco growing industry in Australia. So the skills and experience which he had by then gained in Zimbabwe were not translatable to Australia. Mr Pike found that he was unable to find suitable employment in Australia. In light of this, he sought to enrol in tertiary level studies in business so as to reskill for alternative employment. Unfortunately once gain for him, the enrolment requirements were such that he could not readily pursue this course of action. This led him to fall back on his existing skill and experience and international tobacco industry contacts which he had developed during his time in Zimbabwe. By this means, Mr Pike become aware, in March 2006, of the availability of work in Thailand, where a tobacco industry was being established.
12. That month, Mr Pike travelled to Thailand. He met there with persons involved in the establishment of Thailand's fledgling tobacco industry. In late March 2006, he was offered and took up a position, based in Thailand, as a tobacco and leaf consultant with Premium Tobacco (Asia) Ltd (PTAL). His initial contract for this work was of six months' duration. However, in June 2006, he entered into a further contract with PTAL as a sales manager. This appointment was of indefinite duration. His duties required that he be based in Thailand but also that he undertake duties elsewhere in Asia as required.
13. Related to his employment in Thailand, Mr Pike was granted a work visa by the Thai government, which allowed him to live and work in that country. He opened a bank account in Thailand. His salary was paid into this account.
14. Over the ensuing eight years, Mr Pike continued to be based in Thailand for employment purposes, travelling elsewhere in the Asian region as required. He was granted successive Thai work visas, each keyed, in terms of a right to live and work in Thailand, to ongoing employment in that country. Mr Pike's career in the tobacco industry there progressed and prospered. As his duties were modified or he was promoted, he entered into successive employment contracts with PTAL or an affiliate. Though he intended to, and did, return to his family in Australia, circumstance required that he spend most of his time working and living in Thailand. I detail below the number of days which he spent in Australia over the relevant period and the number of his related departures from Australia.
15. Between 2006 and 2014, Mr Pike occupied a succession of rented apartment or cottage accommodation in Chiang Mai, Thailand. These he furnished to his taste and also so as to accommodate Ms Thornicroft and their two sons when they visited. As he put it, his Thai accommodation had "all the comforts of home". He regarded that accommodation as his home, when in Thailand. A keen sportsman and spectator, Mr Pike joined and actively patronised golf, rugby and cricket clubs during his time in Thailand. He formed enduring friendships there. Mr Pike used his Zimbabwean driver's licence for the purpose of securing permission to drive in Thailand. He was allocated a company car for work and private use.
16. Also over this period and in succession to the apartment at Fortitude Valley, Mr Pike and Ms Thornicroft rented jointly in Brisbane a home at Taringa and, later, a four bedroom home at Seventeen Mile Rocks. Ms Thornicroft, their sons and, when in Australia, Mr Pike, have always occupied these premises as a family. The successive Brisbane residential relocations were the result of joint discussion and decision-making by Mr Pike and Ms Thornicroft. The properties which they have rented have been unfurnished. Mr Pike and Ms Thornicroft have jointly purchased furniture and household appliances as required for these properties. They have also jointly purchased motor vehicles for their use in Australia.
17. Following her move to Australia from Zimbabwe in 2012, Ms Thornicroft's mother joined them in these rented premises.
18. During the whole of his time in Thailand, Mr Pike lodged, with the assistance of his employer, taxation returns with Thailand's Revenue Department. He did not lodge income tax returns in Australia at all during the relevant period, save for the 2014 income year. On 25 August 2014, Mr Pike also lodged a tax return in Hong Kong for the 2013/2014 income tax year in Hong Kong. Perhaps because no resultant Hong Kong tax was assessed, the occasion for his doing this was not explored in evidence or submissions.
19. In September 2006, when his family initially visited him in Thailand, Mr Pike and Ms Thornicroft discussed the family moving there. Ms Thornicroft was not agreeable to this, both because of her by then established employment in Brisbane and because their sons had settled into school in Brisbane.
20. In 2010, Ms Thornicroft sustained a wrist injury. Initially following her injury, she took extended leave from Ernst & Young. However, in 2011, after that leave came to an end, she relinquished her position.
21. Both before and after Ms Thornicroft's injury and to this day, Mr Pike has supported her and their sons by regular financial contributions. These increased following Ms Thornicroft's cessation of working for Ernst & Young. Before their move to Australia, he and Ms Thornicroft had maintained separate bank accounts. Initially after their move, Mr Pike established an Australian bank account in his own name. His financial contributions were thus at first made by transfers from this account to Ms Thornicroft's account. Ho wever, in short order, they established a joint account with an Australian bank. Ever thereafter, Mr Pike has regularly transferred funds to this account to support Ms Thornicroft and their sons. The amount transferred has been in accordance with monthly budget requirements (inferentially as agreed between them). Again in short order, Mr Pike obtained a credit card with an Australian bank.
22. Apart from supporting his immediate family financially, Mr Pike has continued to support financially his father, his mother and his two brothers, each of whom remains living in Zimbabwe. He regards this as a matter of familial responsibility.
23. On 16 February 2009, upon the application of Ernst & Young, Ms Thornicroft, Mr Pike and their sons were granted Australian permanent residency (subclass 856 permanent resident visa). Even though this visa was termed a permanent resident visa, the related advice from what is now the Department of Home Affairs (Department), which reflects the effect of the Migration Act and regulations made thereunder, was that this visa "includes a return travel facility that allows travel in and out of Australia for a period of five years". Thereafter, subsequent travel out of Australia required the granting of a resident return visa in order to return to Australia as a permanent resident. This limitation was to cause a problem for Mr Pike in 2014 when he sought, yet again, to return to the family home. It required that he obtain a further Australian visa at short notice, as he had not by then completed all requirements for the conferral of Australian citizenship.
24. In September 2010, Mr Pike and Ms Thornicroft, with the assistance of borrowed funds, purchased vacant land at Brookwater (Brookwater land), a residential golf community in Ipswich, Queensland. Their intention was not only to build a family home on that land but also to provide something tangible in Australia for their sons. The land's proximity to a golf course was not, I find, a coincidence, given Mr Pike's longstanding interest in that sport. The Harare home was sold in October 2010 with the proceeds of sale being used to reduce the loan debt in respect of the Brookwater land. As it later transpired, it did not prove possible for them to build a home on the land. It was sold in November 2013.
25. In August 2010, Ms Thornicroft and the couple's two sons were granted Australian citizenship. She and Mr Pike had aspired to this eventuality for themselves and their sons ever since relocating to Australia in 2005.
26. Later that same year, Mr Pike made inquiries in Brisbane with the Department about his obtaining Australian citizenship. Up until then he had been using his Zimbabwean passport for international travel purposes. Increasingly, as his work-related international travel broadened beyond Asia to Europe and North America, he found that his use of this passport occasioned him particular scrutiny at international borders. However, he did not pursue a citizenship application until April 2013.
27. Mr Pike's Zimbabwean passport was renewed on 15 September 2010 and again on 6 December 2012, the latter current for 10 years.
28. In his April 2013 Australian citizenship application, Mr Pike gave as his residential address the then rented family home at Taringa. He also specified as his home telephone number the landline (inferentially) connected to those premises. In contrast, the mobile telephone number he specified was (inferentially from the +66 rather than the Australian +61 country code) a Thai number and the contact email address he specified was his Thai work email address. Mr Pike specified his then current citizenship as Zimbabwean. He also stated on the application that he intended to be absent from Australia for work for six weeks over the forthcoming 12 months.
29. Ms Thornicroft provided a letter in support of Mr Pike's citizenship application. In this and apart from attesting to the length of their de facto relationship and their children, she stated:
We moved from Zimbabwe to Australia in March 2005 and in 2006 Bradley was offered a position offshore in Thailand. He currently remains employed by Premium Tobacco as the Sales Manager for Thailand and China based out of Chiangmai Thailand. Bradley is now the primary bread winner in the family and needs to spend time abroad to fulfill his work responsibilities. I and our children became Australian citizens on 27 August 2010. Bradley has been a permanent resident since 16 February 2009. Prior to that, Bradley entered Australia on 17 March 2005 on the 457 visa as a result of my employment with Ernst and Young Brisbane. Australia and more so Brisbane is our family home. Bradley returns home regularly and is truly invested in our lives here. Further, we jointly own land in Springfield on which we planned to build a home.
[sic]
30. The reference in this letter to the land at Springfield is a reference to the Brookwater land.
31. By then, Mr Pike had sought and obtained advice (in 2010) from a firm of accountants that he was not an Australian resident for taxation purposes and, moreover, that this position would not change if he were to become an Australian citizen. This, I find, informed an explanation which Mr Pike gave about his citizenship application's residence specification that he distinguished between residence for taxation purposes and the home he occupied when in Australia as specified for the purposes of his citizenship application. Not only because I regard Mr Pike as an honest man but also because that can be the effect of a double taxation agreement, I accept this explanation. Inferentially also on the basis of accounting advice, he did come, in 2014, to change his mind about his residential position for taxation purposes. He lodged an Australian income tax return in 2014 in which he declared a capital loss on the sale of the Brookwater land and stated that he was an Australian resident.
32. Ms Thornicroft's thinking, as set out in her letter, was also hone st, I find. All throughout the lengthy periods of work-related separation from Mr Pike, she remained committed to their relationship and regarded, for good reason, Mr Pike as similarly committed with the premises rented in Brisbane from time to time being regarded as their family home. Her views were, I thought, candidly put, in a way which accurately revealed the true position, in this exchange during her cross-examination (referring to the whole of the relevant period):
All he is doing over there, as you regard it, is working and, of course, making the life as good as he can while he's there, but he's there to work and when he's not working he's coming home?—Well, and there's a little more to it, but if that's how you want to summarise it.
Well, when you say there's a little more to it? — He wasn't just working. He had a life there. He had friends. He was in a lot of clubs and he had a life that he didn't have here.
Right? — Yes.
But he didn't have a family there? -- -No.
No. And the family was always here? --- Yes, we were here.
And in terms of that, you would agree with me that the most important thing between you and Mr Pike throughout the whole of your relationship has been the importance of family? —Yes. The children, yes.
The children and you? --- Yes.
33. Mr Pike did indeed, as Ms Thornicroft stated, have a life abroad as well as with his family in Australia. His life abroad, wherever situated, has always included an active social and recreational dimension.
34. In the result, Mr Pike's citizenship application was refused in August 2013 on the basis of a decision by a Ministerial delegate that he did not satisfy particular residential requirements specified in the Australian Citizenship Act 2007 (Cth).
35. Mr Pike lodged a further application for Australian citizenship in October 2013. On this occasion, he was successful. He was notified that his application had been approved the following month and, after having made the necessary pledge, became an Australian citizen the following year. On the strength of his Australian citizenship, Mr Pike was issued with an Australian passport in 2014. He also enrolled on the electoral roll for the electorate in which the Seventeen Mile Rocks home was located. He remains so enrolled but at the time of the hearing, had only voted once (in 2016) in an election in Australia.
36. The year 2014 also saw Mr Pike relocate to Tanzania for employment purposes. This relocation was occasioned by a combination of career progression, workload and a downturn in the Thai tobacco industry. Mr Pike's Tanzanian employment was within the same corporate group of which PTAL was a member. It entailed performing duties under two separate contracts, each requiring that he be based in Morogoro, Tanzania. One contract was a tobacco industry consultancy with a company called Rushmore Consulting Inc, under which the fees payable to Mr Pike were to be paid into his Australian bank account. The other was an employment contract with Premium Active Tanzania Ltd with duties which extended to all of that company's tobacco growing areas in Tanzania. Mr Pike closed his Thai bank account and opened one in Tanzania on relocating there. As was the position with his Thai visa, Mr Pike's ability to live and work in Tanzania was conditioned by his visa to his ongoing employment in that country.
37. Mr Pike lived in fully furnished, rented accommodation for the duration of his time in Tanzania. He joined golf and tennis clubs there. As with Thailand, he made a home there.
38. In early 2016, Mr Pike was offered, again within the same corporate group, a promotion to the position of Regional Sales Manager for its Asia Division, based in Dubai in the United Arab Emirates (UAE). He took up this offer in short order. For that purpose, Mr Pike entered into with Premium Tobacco International DMCC an employment agreement which was stated to be an "Unlimited Period Employment Contract". The agreement gave as Mr Pile's address that of the rented home at Seventeen Mile Rocks, Brisbane. Mr Pike's UAE visa was keyed to the continuance of his employment there. His UAE driver's licence and other UAE identification documentation specified his nationality as Australian. Mr Pike remains so employed in Dubai.
39. On 8 February 2016, Mr Pike entered into a "Tenancy Contract" in relation to an unfurnished apartment in Dubai. The initial duration of the tenancy was one year but it has been extended. Mr Pike has furnished the apartment to his taste and so as to provide for visits from his family. He has purchased a vehicle in Dubai and opened bank and credit card accounts there. Mr Pike remains employed in Dubai living in his rented accommodation whenever in the UAE. Yet again, he has made a home there. He travels internationally regularly for work purposes.
40. Ms Thornicroft chose not to relocate to Tanzania when Mr Pike was employed there. The limited educational opportunities there for their sons were influential in this choice. Now that their sons are adults, Ms Thornicroft and Mr Pike are considering whether she will relocate to Dubai.
41. The following amounts were transferred into Mr Pike's Australian bank account from overseas during the income years specified below:
42. The number of days which Mr Pike spent in Australia in particular income years and the related percentage of that year are as follows:
43. When returning to Australia, Mr Pike has always returned to the home where Ms Thornicroft and their sons were for the time being located. He has always regarded this as the family home. Over the years, his returns to Australia have coincided with family occasions, such as birthdays, Christmas and school prize giving and have also been occasioned by family emergencies. The related number of departures which he has made from Australia to return to where he worked abroad are as tabulated below.
44. The agreed bundle of documents contains a collection of Australian incoming and outgoing passenger cards completed by Mr Pike, dating back to 14 July 2008. In the main, in respect of incoming passenger cards, Mr Pike has chosen the "Resident Returning to Australia" section while at the same time answering "No" to the question "Do you intend to live in Australia for the next 12 months?" Only after the Commissioner sent to his tax agent an inquiry as to his tax residential status in February 2017 has Mr Pike completed an incoming passenger card in which he stated that he was a visitor or temporary entrant to Australia. On his outgoing passenger cards, Mr Pike has chosen the "Australian resident departing temporarily" section.
45. On 15 June 2017, the Commissioner issued Notices of Assessment with respect to the income tax years for 2009, 2010, 2011, 2012, 2013, 2015 and 2016. He assessed Mr Pike for the following amounts of taxable income with the tax payable thereon being as tabulated below:
46. Also on 15 June 2017, the Commissioner issued a Notice of Amended Assessment with respect to the income tax year ending on 30 June 2014. This increased Mr Pike's taxable income from $1 to $195,156 and resulted in tax payable of $71,981.35.
47. Administrative penalties were also imposed for failing to lodge income tax returns.
48. Following Mr Pike's objection to the assessments, the Commissioner remitted in full these administrative penalties. He also decided in his objection decision of 9 July 2018 to allow foreign tax offsets (tabulated below) in respect of tax paid abroad by Mr Pike. These foreign tax offsets were consequently taken up in Notices of Amended Assessment for the income tax years ending on 30 June 2010 through to 30 June 2016 (inclusive), issued by the Commissioner on 17 July 2018. It is this objection decision which is the subject of the present appeal.
A resident of Australia - ordinary meaning?
49. This is the third in a succession of taxation appeals in the original jurisdiction entailing a taxation residence issue, the others being Stockton v. Commissioner of Taxation [2019] FCA 1679 (Stockton) and Addy v. Commissioner of Taxation [2019] FCA 1768 (Addy), which have fallen for determination by me since the Full Court's judgment in Harding v. Commissioner of Taxation [2019] 365 ALR 286 (Harding). Each was commenced before the Full Court gave judgment in Harding. I considered it prudent that judgment be deferred until after the fate of the Commissioner's application for special leave to appeal against the Full Court's judgment was known. Special leave to appeal was refused by the High Court on 13 September 2019: Commissioner of Taxation v. Harding [2019] HCA Trans 191.
50. In relation to the Australian income taxation of individuals, the definition of "resident" or "resident of Australia" is supplied by s 6(1) of the 1936 Act:
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 outs ide 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-sub paragraph (A) or (B); |
51. In the present case, neither sub-paragraph (a)(ii) nor (a)(iii) is relevant. During the relevant years, Mr Pike was not in Australia, continuously or intermittently, during more than one-half of any of the years of income. Further he was neither a superannuation fund member, an eligible employee, nor a child or spouse of such a person in terms of sub-paragraph (a)(iii).
52. In Stockton, with particular reference to Levene v. Commissioners of Inland Revenue [1928] AC 217 (Levene), Gregory v. Deputy Federal Commissioner of Taxation [1937] 57 CLR 774 (Gregory), at 777 - 778, per Dixon J, Commissioner of Taxation v. Miller [1946] 73 CLR 93, at 99 - 100, per Latham CJ, Hafza v. Director-General of Social Security [1985] 6 FCR 444 and Harding, I set out, at [19] - [30], principles applicable to the determination of whether a person was a "resident" within the ordinary meaning of that term in s 6(1) of the 1936 Act. As I did in Addy, I adhere to the views I there expressed in Stockton and incorporate them by reference for present purposes. Also in Stockton, in relation to the ordinary meaning of resident, I observed, at [23], that "both the nature, duration and quality of physical presence in a particular place as well as intention are relevant to determining whether and where an individual is a 'resident'". Cases concerning whether or not a person is a "resident" of a particular place according to the ordinary meaning of that word inevitably involve questions of fact and degree.
53. One aspect of the ordinary meaning of "resident", which did not arise for consideration either in Harding, Stockton or Addy was that of dual residence. As I noted at the outset, the assessments in question are predicated upon the proposition that Mr Pike was a resident of Australia in each of the relevant years. But it is no part of the Commissioner's assessing rationale, or his submissions on the appeal, that Mr Pike was not additionally a resident of Thailand between 2006 and 2014, Tanzania or now the UAE. Indeed, the Commissioner expressly conceded that Mr Pike was a resident of Thailand from 2006 to 2014.
54. In this regard, the Commissioner's assessing rationale is well supported by authority. In terms of the ordinary meaning of the word, there is no necessary antipathy between a conclusion that an individual is a resident of one country and a conclusion that that same individual is also a resident of another country. For example, in Gregory, at 777 - 778, Dixon J stated:
"A question of much importance in the present case is whether the word "resident" in sec. 5A should be interpreted in the same way as similar expressions are interpreted in the British Income Tax Acts. I think that the answer is that the word should receive the same meaning and application as "person residing" and "ordinary resident" have been given in England. No technical or artificial meaning has been placed upon these expressions and parallel expressions under the British income tax law. But certain principles have been laid down by judicial decision for interpreting and applying the expressions. The well-settled interpretation of the words includes in their application a man who resides in two or more places. That was first settled in Attorney-General v. Coote. The same view has been adopted in Cooper v. Cadwalader, Thomson v. Bensted, Pickles v. Foulsham and Peel v. Inland Revenue Commissioners. And finally the interpretation has been approved by the House of Lords in Levene v. Inland Revenue Commissioners and in Lysaght's Case.
[Emphasis added; footnotes omitted.]"
In Levene, one of the cases referred to in this passage, Viscount Cave LC stated, at 223:
"... a man may reside in more than one place. Just as a man may have two homes - one in London and the other in the country - so he may have a home abroad and a home in the United Kingdom, and in that case he is held to reside in both places and to be chargeable with tax in this country. Thus in Cooper v. Cadawalder, an American resident in New York who had taken a house in Scotland which was at any time available for his occupation, was held to be resident there, although in fact he had only occupied the house for two months during the year; and to the same effect in the case of Loewenstein v. de Salis. The above cases are comparatively simple, but more difficult questions arise when the person sought to be charged has no home or establishment in any country but lives his life in hotels or at the houses of his friends. If such a man spends the whole of the year in hotels in the United Kingdom, then he is held to reside in this country; for it is not necessary for that purpose that he should continue to life in one place in this country but only that he should reside in the United Kingdom. But probably the most difficult case is that of a wanderer who, having no home in any country, spends a part only of his time in hotels in the United Kingdom and the remaining and greater art of his time in hotels abroad. In such cases the question is one of fact and degree, and must be determined on all the circumstances of the case: Reid v. Inland Revenue Commissioners".
[Footnote references omitted; emphasis added]
55. To many in modern Australia, Viscount Cave's example, "two homes - one in London and the other in the country", may perhaps seem quaint or unfamiliar. Perhaps even more so, that may apply to the facts of Cooper (Surveyor of Taxes) v. Cadwalader [1904] 5 TC 101, one of the cases cited by his Lordship. That concerned a resident of New York in the United States of America with no business interests in the United Kingdom but who had the exclusive use under a lease of, and regularly lived in for two months each year during the grouse season, accompanied by his valet, a home in Scotland with shooting rights. He was found also to be a resident of the United Kingdom. There are ways of illustrating the point by Australian experience. So it is as well to give some local examples and to draw a local contrast.
56. In Australia, if blessed by good fortune, it is by no means uncommon for a couple to have a home in a capital city and a beach house or perhaps an apartment in a near metropolitan, seaside town within ready driving distance of the capital city. For someone living and working in Brisbane, that seaside location might be at the Gold Coast or at the Sunshine Coast. That couple, perhaps together with children, might spend a working week in the city, reserve the beach house for their own use, repair to it as often as possible during weekends and base themselves there for an extended period over the summer or other periods of leave. That couple might furnish the beach house to their own taste and store clothes, goods, food and beverages and other possessions there so that all that is needed at the end of a working week is just to lock up their capital city home and drive directly to their beach house. In these circumstances, that couple, without any strain of the ordinary meaning of the word, "reside", might be said to reside in both the capital city and the seaside town. Adopting once again the circumstance of a Brisbane resident, additional residence might also be found in a hinterland cottage at Mount Tamborine or Maleny, or a hobby farm near Beaudesert or Palmwoods. Ordinary experience of life would allow the formulation of other Australian examples.
57. The point is that it is no part of the ordinary meaning of reside in the 1936 Act that there be a "principal" or even "usual" place of residence. It is important that, as used in the definition in s 6(1) of the 1936 Act, "resident" not be construed and applied as if there were such adjectival qualifications. On the facts of a given case, the local dual residence examples given may find analogues in a conclusion that a person is a resident of more than one country, according to the ordinary meaning of the word "resident".
58. In contrast to the circumstances described above, a couple who spent their working life in a capital city but rented, for a fortnight over the summer, a furnished holiday house or apartment in an apartment complex in that same seaside town could not be said to reside other than in the capital city, even if there were a pattern of annual visits to that seaside town over the years. They would just be visitors to that seaside town. Less clear but illustrative of how questions of fact and degree are encountered would be the residential position of a couple who annually rented the same home or apartment for two months over the summer, even more so if they held a long term lease conferring exclusive occupancy but chose only to occupy the premises for that two month period.
59. The intention of a person in relation to residence is always relevant, but not determinative. Intention is but one factor to be considered in the context of the whole of the circumstances of a given case. As Lord Buckmater observed in another leading case, Commissioners of Inland Revenue v. Lysaght [1928] AC 234, at 248, "A man might well be compelled to reside here completely against his will". His Lordship cited as an example the circumstance of a man compelled by the exigencies of business to reside at a particular place. A person's preference might be to reside in one place but the exigencies of business might require that they reside in another. And, where a person has a close family, the exigencies of business might require that they reside in two places, the one where work is available; the other where their family is located, dividing their time as best they can between the two. That is this case.
60. When Mr Pike returned to Australia he was not, as his submissions invited me to conclude, a resident of Thailand, Tanzania or, as the case may be, Dubai in the UAE, returning as a visitor to Australia. Rather, he returned as husband (de facto) and father to resume living - residing - with his wife and children at the family home. It was not just their family home; it was his also.
61. The combined exigencies of Mr Pike's existing skill and experience and the absence of relevant work in Australia meant that the earning potential of that skill and experience could only be realised by living and working abroad. On the evidence, Mr Pike is obviously well regarded in the corporate group within which he has found employment ever since 2006. The irony of this is that, the more that his tobacco industry talent has manifested itself and his career correspondingly progressed, the more enduring has been the compulsion to live and to work abroad. But no less enduring and, as a matter of personal character, no less compelling for him, has been his devotion to his family. The evidence discloses that, over the relevant years, there is a pattern or habit on Mr Pike's part of living and working abroad and also of returning here to live with his family as often and for as long as possible.
62. In the overall circumstances of this case, that Mr Pike has always occupied rented accommodation abroad is no more relevant than that he and his family have always occupied rented accommodation in Australia. Occupancy of rented accommodation is not inconsistent with a conclusion that a person is settled in a particular place. Mr Pike's occupancy of rented accommodation, like his employment aboard, was terminable at relatively short notice in theory but the reality on the evidence was that it was indefinitely continuing. In Thailand, Tanzania and now in Dubai in the UAE, Mr Pike made and continues to make what, from the desirable perspective of continuous family life together, is the best of a difficult lot. He has undoubtedly made a home in these places, developing not just working but also sporting and social ties there. He has settled there. They were each, in the geographic sense, his places of abode. This is true even of Tanzania, as he had no idea when he took up a transfer there that his time in the country would prove to be relatively short. The reality on the whole of the evidence is that Mr Pike has led and continues to lead two lives, a working life abroad with an attendant social life and a family life in Australia. The two lives are inter-connected not just by the financial support that Mr Pike provides from the fruits of his working life but also by enduring ties of love and affection for his wife and sons and physical presence when possible. Ms Thornicroft's evidence offered eloquent support for the existence and continuance of such ties. Australia has also been, and continues to be, in the geographic sense, Mr Pike's place of abode. He has settled here, too. Mr Pike has also resided here over the relevant period.
63. While Mr Pike has settled in Australia as well as in each location abroad where he has been employed, his Australian settlement has not been unqualified. In respect of Thailand, Tanzania and now the UAE, he has canvassed with Ms Thornicroft the prospect of her joining him in these places so as to live there as a family. Her Australian employment while lasting and, more enduringly, the interests of their sons, at least until adulthood, have to date been countervailing factors. Even so, it is a striking feature of the case and hardly likely to be coincidental that, though they first moved to Australia in 2005, and though they did once contemplate building a dwelling here, Mr Pike and Ms Thornicroft have never owned a home in Australia. Renting carries with it a flexibility in relocation that home ownership may not.
64. In earlier tax residency cases, both in this Court this year and earlier in the Administrative Appeals Tribunal (with Deputy President Hack SC and Senior Member Kenny in Re Dempsey and Federal Commissioner of Taxation, Inre [2014] 98 ATR 698, I have regarded state ments which appear on an applicant taxpayer's passenger cards, incoming and outgoing, as relevant but far from determinative. Mr Pike's choosing "Resident returning to Australia" yet answering, "No" to the question "Do you intended to live in Australia for the next 12 months?" might be thought self-contradictory, if uninformed by a reading of the tax residency cases mentioned above. As I have observed in earlier cases, answers given on such cards must be read in the context of the overall circumstances relating to a given individual and in the knowledge that the card offers no explanation as to in what circumstances a person might be regarded as a resident. In Mr Pike's case, given that he held visas conferring an Australian right of residence and, more latterly citizenship, I can readily understand how he might have regarded his migration status as resident, even though he did not intend to live in Australia for the whole of the ensuing 12 months. I have not concluded that he was a resident of Australia in terms of the ordinary meaning of that word on the basis of his passenger card choice. There are more sure foundations for that conclusion, set out above.
65. Mr Pike's interest in, and ultimate acquisition of, Australian citizenship is relevant in relation to whether he is a resident but, again, far from determinative. Nowhere does the definition in s 6(1) posit a nationality test. In this case, taken in conjunction with the continuance in Australia throughout the relevant period of his family and family home Mr Pike's interest in and ultimate acquisition of Australian citizenship, especially after Ms Thornicroft and their sons became Australian citizens, is consistent with an intention to continue to make a home with her and them in Australia. He has sought and acquired via citizenship an unrestricted right to live and to work here. But the tie of citizenship is not necessarily the tie of residence. It is trite that a person might hold Australian citizenship yet reside abroad and only abroad. Further, ever increasingly on the evidence, there were other reasons also why Mr Pike sought and obtained Australian citizenship. These are to be found in the travel inconveniences and his perceived personal security advantages in his holding Australian citizenship and with that an ability to obtain and travel on an Australian, rather than a Zimbabwean, passport. I have treated Mr Pike's seeking and obtaining citizenship as a factor which is consistent with a conclusion as to his Australian residence otherwise open on the evidence.
66. Mr Pike's and Ms Thornicroft's joint acquisition of the Brookwater land with a view to building a home there is also consistent with an intention on Mr Pike's part to reside here. But it needs to be remembered that this was vacant land and the plan to build did not come to fruition. He did not need to own a home in Australia to be a resident here. Mr Pike and Ms Thornicroft were not transients in their occupancy of rented accommodation in Australia. They have made that accommodation their home here.
67. In short then, Mr Pike was a resident of Australia, according to the ordinary meaning of that word, in each of the relevant years. Further, the Commissioner's concession that he was also a resident of Thailand between 2006 and 2014 was aptly made. In addition, after leaving Thailand, Mr Pike became, successively, a resident of Tanzania and then Dubai in the UAE, where he remains resident. This foreign residential status was in addition to his Australian residential status.
68. A conclusion that, within the ordinary conception of that word, Mr Pike was a "resident" and a "resident of Australia" in terms of s 6(1) of the 1936 Act means that it is strictly unnecessary to consider whether that conclusion is additionally supported by his falling within subparagraph (a)(i) of the definition in s 6(1). Nonetheless, the question was fully argued and it is desirable to answer it.
"The Domicile Test"
69. It is uncontroversial that Mr Pike's domicile of origin was Zimbabwe.
70. The Commissioner submitted that Mr Pike acquired a domicile of choice in Australia in 2005 and has retained that ever after. Mr Pike contested that, maintaining that he did not acquire a domicile of choice until living in Thailand, retaining that until he left there in 2014 with Tanzania and the UAE successively becoming his domicile of choice.
71. Residence and domicile are not to be equated. As for example in the present case, a person may be resident in more than one place. But a person may only ever have one domicile at a time: Radich v. Bank of New Zealand [1993] 45 FCR 101 at 108 (Radich).
72. Section 10 of the Domicile Act 1982 (Cth) (Domicile Act) 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.
In Harding, at [31], Davies and Steward JJ, with whom I agreed in this regard, noted, by reference to Ferrier-Watson v. McElrath [2000] 155 FLR 311, per Holden and Jerrard JJ, that it had been accepted that the Domicile Act "was not a codification of the common law tests concerning where a person is domiciled " That accepted, the proposition that one may only ever have one domicile at a given time is basal. So, especially in cases where dual residence is evident, much, necessarily, lies behind the statutory prescription of an "intention to make his or her home indefinitely in that country". Thus, in my view, the following observation made by Lord Curriehill in Donaldson v. M'Clure [1857] 20 D 307, still has a role to play in determining domicile of choice:
... it is proper to keep in view what is meant by an animus or intention to abandon one domicile for another. It means something far more than a mere change of residence. It imports an intention not only to relinquish those peculiar rights, privileges, and immunities which the law and constitution of the domicile confer on the denizens of the country,—in their domestic relations ... in their purchases and sales and other business transactions ... in their political or municipal status,—and in their daily affairs of common life; but also the laws by which the succession to property is regulated after death. The abandonment or change of a domicile is therefore a proceeding of a very serious nature, and an intention to make such an abandonment requires to be proven by satisfactory evidence.
Of course this observation should not be used as a substitute for the text of the Domicile Act in relation to intention but, given that one may have a home abroad and a home in Australia, and be said to reside in each country, it does serve to inform all that is entailed in a conclusion, for the purposes of domicile, that there has been a choice to make one's home in Australia indefinitely. Similarly, while an earlier observation by Selby J in Terrassin v. Terrassin [1968] 14 FLR 151, at 154 - 155, that a conclusion as to a change in domicile be reached only on the basis of "clear and cogent evidence" cannot be regarded, in a taxation appeal, as a substitute for the civil standard of proof for which s 140 of the Evidence Act 1995 (Cth) provides, that observation can also be regarded as a useful reminder that something more than a mere choice of residence is required in order to establish a domicile of choice.
73. Section 10 of the Domicile Act speaks only to the requisite intention. It remains the case that, along with that intention, there must also be physical and lawful presence in the country concerned: Ah Yin v. Christie [1907] 4 CLR 1428, at 1431-1432, (Ah Yin v. Christie); Radich, at 108. A century and more later than Ah Yin (supra) with the ready facility for rapid international travel by air between countries, physical presence, while doubtless still relevant, may in particular cases, if not continuous, have to yield its particular persuasive force to other factors in a multi-factorial assessment, which includes but is not limited to the intention specified in s 10 of the Domicile Act and physical presence. The present case offers, in my view, an example of that.
74. Section 7 of the Domicile Act is also relevant in the present case. It provides:
7 Abolition of rule of revival of domicile of origin
The rule of law whereby the domicile of origin revives upon the abandonment of a domicile of choice without the acquisition of a new domicile of choice is abolished and the domicile a person has at any time continues until he or she acquires a different domicile.
Thus, Mr Pike's Zimbabwean domicile of origin will continue unless and until he has by choice acquired a different domicile.
75. Mr Pike and Ms Thornicroft made a considered decision to leave Zimbabwe with their children in 2005. But they did not then completely cut their ties with that country. At the time, not only did they retain Zimbabwean citizenship but they also retained ownership of the Harare home. They certainly aspired to make Australia their home from the moment they left Zimbabwe for Australia but their right lawfully to remain in Australia after they entered in 2005 was linked to the duration of Ms Thornicroft's class 457 visa and, in effect, to the continuance of her employment with Ernst & Young here. The right of Mr Pike and their children lawfully to remain here was wholly derived from Ms Thornicroft's right. The type of accommodation which they chose, rented accommodation, allowed them the flexibility to leave Australia with relative ease and was consistent with their then immigration status. So I do not accept the Commissioner's submission that Australia should be regarded as Mr Pike's domicile of choice from their arrival, such that, subject to the exception or "carve out" (Harding, at [20]), he additionally falls within subparagraph (a)(i) of the definition of resident as far back as the 2006 income year.
76. Neither, though, do I accept Mr Pike's contention that he was successively domiciled in Thailand, Tanzania and now the UAE. As I have found, he was resident in each of these places. Moreover, he resided in these two earlier countries on an indefinite basis, the same being presently true in relation to the UAE. However, in each instance, an element of economic necessity attended this residence. Mr Pike's intention as to residence in these places has been informed by this. His intention has been to reside in these places as long as suitable work is available, not to reside there irrespective of whether such work is available. He has never sought to become a citizen of these places. His qualified intention is not sufficient, in my view, to satisfy s 10 of the Domicile Act in relation to these places.
77. In my view, the evidence discloses that Mr Pike contemplated cutting but did not fully cut his ties with Zimbabwe in 2010. That was when he and Ms Thornicroft sold the Harare home and bought the Brookwater land, intending to build a home on it, when she and their sons acquired Australian citizenship and when he made inquiries about Australian citizenship. But as late as 2012 Mr Pike renewed his Zimbabwean passport. He had also used his Zimbabwean driver's licence in Thailand. In relation both to Thailand and Tanzania (and now the UAE), he contemplated, in discussion with Ms Thornicroft, her joining him to live there. In terms of physical presence in Australia, as the table above discloses, it has been as short as 32 days in one year and yet as long as 155 days in another. There was both genuine commitment but also an element of expediency in Mr Pike's acquisition of Australian citizenship in 2014. Truly, there are mixed signals, in terms of the acquisition of a domicile of choice, sent by Mr Pike's conduct since his arrival in Australia in 2005. Yet there is a consistent pattern of his returning to live in Australia in what he so very clearly regards as his family home, year after year, on and from his first departure for Thailand in 2006.
78. Somehow, the lyrics of the song, "I still call Australia home", made famous by the late Peter Allen, commend themselves as an apt way of describing Mr Pike's intention in relation to Australia as a home - "But no matter how far or wide I roam ... I still call Australia home." But to call Australia home indefinitely he needed, in his circumstances, an assured ability to live and work abroad while, at the same time, frequently returning into the indefinite future so as to resume living with Ms Thornicroft at the family home and enjoying her society and that of their sons. His experience was that a right of permanent residence in Australia was insufficient for this purpose.
79. Even though their sons were each adults by the time Mr Pike took up his present appointment in the UAE, Ms Thornicroft chose and, over four years later when she gave evidence, has continued to choose, to remain in Australia. Their sons are each apparently settled in Australia. Ms Thornicroft has lived here for over 14 years. Such is Mr Pike's devotio n to them, his acquisition of Australian citizenship, and, with it, an unfettered right to live here with his family and travel aboard to live and work, manifested, in my view, an intention on his part indefinitely to "call Australia home". The length of his physical presence in Australia from year to year is, in terms of pattern, unpredictable and occupationally dictated. But he is physically present as often as possible and with a frequency facilitated in the modern age by air travel. In my view, Mr Pike acquired an Australia domicile of choice in 2014, when he acquired Australian citizenship. That was when, finally, he completed a process, long in its progression, of severing his ties with Zimbabwe and unequivocally manifested, or at least confirmed, an intention to make Australia home indefinitely. Some, perhaps, might put the acquisition of Australian domicile earlier, perhaps in 2010, but, as I have observed, there are mixed signals.
80. In reaching this conclusion, I have not explored, because in my view the evidence was not sufficient, whether under the law of Zimbabwe, Mr Pike's acquisition of Australian citizenship extinguished his Zimbabwean citizenship. In any event, the abandonment of citizenship is but one factor to be considered in deciding whether a person has acquired or changed their domicile.
81. As to the "carve out" in relation to the domicile test, though it was conceded that it was not apparent from the objection decision, it was put on behalf of the Commissioner that the Court should infer that the Commissioner was satisfied that Mr Pike's permanent place of abode was outside Australia. But, as far as inferences are concerned, the absence of reference is more consistent with a conclusion that the Commissioner considered it was unnecessary to, and therefore did not, address the question of any application of the domicile test at all, given his conclusion, made manifest in the objection reasons, that Mr Pike was an Australian resident according to the ordinary meaning of the word.
82. There is another reason why I find that the more attractive inference to draw. In Kolotex Hosiery (Australia) (P.) Ltd v. Commissioner of Taxation [1975] 132 CLR 535, at 551 (Kolotex Hosiery) Barwick CJ referred to the "prime importance", in relation to assessing provisions dependent upon the Commissioner's satisfaction, of the Commissioner's recording his state of mind and its factual basis prior to the issuing of the assessment concerned. Ironically therefore, to accept the Commissioner's submission would, necessarily, also be to accept that, approaching half a century after a pellucid statement by Australia's Chief Justice as to a then deficiency in revenue law administration revealed by that case, the present administration remained deficient in that regard.
83. The amenability of satisfaction based assessing decisions to examination by the Court on a taxation appeal was considered in Avon Downs Pty Ltd v. Federal Commissioner of Taxation [1949] 78 CLR 353, at 360, Kolotex Hosiery and most recently at intermediate appellate level in Harding. It is not necessary again to consider that subject in the present case, only to assume that it is presently open to the Court to reach its own conclusions on the whole of the evidence as to how the Commissioner should have been satisfied with respect to whether Mr Pike's permanent place of abode was outside Australia. Until 2014, it would not have been necessary to address that question, because Mr Pike was not, for the reasons given, domiciled in Australia. Thereafter, there can be no question, in the circumstances described above and having regard to Harding, other than that Mr Pike had a place of abode outside Australia. However, to be satisfied that that place of abode is a permanent place of abode outside Australia, it is necessary to be satisfied that the person has "definitely abandoned" their Australia residence: Harding, at [36].
84. On and from his taking up employment in Thailand, Mr Pike has had a place of abode in, successively, that country, Tanzania and the UAE. However, Australia has also, at the same time, been his place of abode, at least in the sense of an indefinitely continuing residence here. So it is not possible on the facts of the case to be satisfied that he ever, during the relevant years, definitely abandoned his residence in Australia.
85. Thus, only on and from April 2014 did subparagraph (a)(i) apply to make Mr Pike a resident because, until then, he was not domiciled in Australia. Thereafter, he was domiciled in Australia and it was not possible to conclude, given his ongoing residence here, that he had definitely abandoned Australia.
Section 23AG
86. In respect of the 2009 income year, Mr Pike raised in the alternative as a ground of objection that, even if, which he denied, he were a resident of Australia for the purposes of the 1936 Act, his income was nonetheless exempt, pursuant to s 23AG of that Act. In that income year, s 23AG provided, materially:
(1) Where a resident, being a natural person, has been engaged in foreign service for a continuous period of not less than 91 days, any foreign earnings derived by the person from that foreign service are exempt from tax.
| ** | ** | ** |
(6) For the purposes of this section, a period during which a person is engaged in foreign service includes any period during which the person is, in accordance with the terms and conditions of that service:
| (a) | absent on recreation leave, other than [certain types of leave, as set out in sub-sections (i) to (iii)]; | |
| (b) | absent from work because of accident or illness. |
87. It was common ground that Mr Pike's employment in Thailand meant that he w as engaged in foreign service throughout the 2009 income year. Equally common ground though was that he was not, during that income year, so engaged for a continuous period of not less than 91 days. Mr Pike did not seek to prove that he fell within the exemption in s 23AG(6). Accordingly, by his counsel, he abandoned reliance on this ground of objection during the course of submissions.
Double Taxation
88. In 1989, Australia and Thailand entered into an agreement for the "Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income " (Australian Treaty Series 1989 No 36) (the Thai DTA). The Thai DTA entered into force on 27 December 1989.
89. The Thai DTA, as with other legislatively specified such agreements, is given force and effect as part of Australia's domestic law by the International Tax Agreements Act 1953 (Cth) (International Agreements Act). It is the "Thai agreement" as defined by s 3AAA and thus an "agreement", as defined by s 3 of the International Agreements Act. Section 5(1) of the International Agreements Act provides that, "Subject to this Act, on and after the date of entry into force of a provision of an agreement, the provision has the force of law according to its tenor". The "Thai agreement" is one of the agreements specified in s 5 of the International Agreements Act. Subject to a presently immaterial exception, a provision in an agreement thus given domestic force and effect prevails over a provision in an "Assessment Act" or a law imposing taxation, to the extent of any inconsistency. This paramountcy is the result of s 4 of the International Agreements Act. In this way, a provision in the Thai DTA will prevail over the 1936 Act and the Income Tax Assessment Act 1997 (Cth).
90. In cases of dual residency, Article 4, cl 3 of the Thai DTA provides for what may be described as a "tie breaker" test to determine whether an individual is deemed to be a resident of Australia or, as the case may be, Thailand. Both Mr Pike and the Commissioner approached the double taxation controversy on the footing that Mr Pike was both a resident of Australia and a resident of Thailand in the income years in question namely, the 2009 to 2014 income years. The common assumption of both parties was that Mr Pike was a dual resident in terms of Article 4, cl 1 of the Thai DTA. Thus, in relation to the income derived by Mr Pike from his employment in Thailand during these income years, the application of the test in Article 4, cl 3, in conjunction with the paramountcy mentioned, will determine whether it is Thailand or Australia which has the entitlement to tax him on that income.
91. Article 4, cl 3 of the Thai DTA prescribes a cascading test. Reproducing also Article 4, cls 1 and 4, it states, materially:
Article 4, Residence
1. For the purposes of this Agreement, a person is a resident of the Contracting States:
| (a) | in the case of Australia, if the person is a resident of Australia for the purposes of Australian tax; and | |
| (b) | in the case of Thailand, if the person is a resident of Thailand for the purposes of Thai tax. |
| ** | ** | ** |
3. Where by reason of the preceding provisions, an individual is resident of both Contracting States, the status of the person shall be determined in accordance with the following rules, applied in the order in which they are set out:
| (a) | the person shall be deemed to be a resident solely of the Contracting State in which a permanent home is available to the person; | |
| (b) | if a permanent home is available to the person in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State in which the person has a habitual abode; | |
| (c) | if the person has a habitual abode in both Contracting States, or in neither of them, the person shall be deemed to be a resident solely of the Contracting State with which the person's personal and economic relations are closer. |
4. For the purposes of the last preceding paragraph, an individual's citizenship or nationality of a Contracting State shall be a factor in determining the degree of the person's personal and economic relations with that Contracting State.
92. As I did in Addy, at [75], I take the relevant principles in relation to the interpretation of a double taxation agreement to as summarised by the Full Court, by reference to pertinent authority, notably including Thiel v. Commissioner of Taxation [1990] 171 CLR 338 (Theil), in McDermott Industries (Aust) (P.) Ltd v. Commissioner of Taxation [2005] 142 FCR 134, at 143 [38]:
The application of the Convention has been discussed by McHugh J in Applicant A v. Minister for Immigration and Ethnic Affairs [1997] 190 CLR 225 and in Thiel v. Commissioner of Taxation [1990] 171 CLR 338, the latter case being concerned with the interpretation of the double taxation agreement between Australia and Switzerland. The leading authority in this Court on interpretation of double taxation agreements is Lamesa. It is unnecessary here, to set out again what is there said. The following principles can be said to be applicable:
| ♦ | Regard should be had to the "four comers of the actual text". The text must be given primacy in the interpretation process. The ordinary meaning of the words used are presumed to be "the authentic representation of the parties' intentions": Applicant A at 252-253. | |
| ♦ | The courts must, however, in addition to having regard to the text, have regard as well to the context, object and purpose of the treaty provisions. The approach to interpretation involves a holistic approach. | |
| ♦ | International agreements should be interpreted "liberally". | |
| ♦ | Treaties often fail to demonstrate the precision of domestic legislation and should thus not be applied with "taut logical precision"". |
Further, though it cannot be a substitute for the text of a double taxation agreement, Theil at 344, 348-350, 356-357 establishes that it is permissible to have regard to any applicable commentary of the Organisation for Economic Cooperation and Development (OECD) for the purposes of interpretation.
93. The Commissioner's first submission was that taxing entitlement was resolved by Article 4, cl 3(a), because only in Australia was there a "permanent home" available to Mr Pike. That was said to be the "family home". However, in the present context, to seize upon the presence in Australia of a "family home" conceals as much as it reveals. That is because, as with Mr Pike's Thai accommodation, the home which Mr Pike and his family occupied in Australia was rented accommodation. The evidence discloses that in both Australia and Thailand, Mr Pike was disposed to change rented accommodation from time to time. That occurred in Thailand in 2008 and, in Australia (putting aside the initial, Fortitude Valley rented accommodation) in August 2014 (according to the initial tenancy agreement for the Seventeen Mile Rocks home).
94. The ordinary meaning of "permanent" is indefinitely continuing, lasting or enduring (Oxford English Dictionary, Online edition). No different understanding is evident in the OECD commentary in respect of its adjectival use in "permanent home" in Article 4: "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 evident that the stay is intended to be of short duration": OECD, Commentary to the Model Tax Convention 2017, commentary on Article 4, [12]. As used with "available', "permanent home" in Article 4 must mean residential premises rather than a geographic location, as Harding confirms "place of abode" can, in a different context, mean. Further, unlike the "carve out" in subparagraph (a)(i) of the s 6(1) definition of "resident" in respect of the geographic concept of a permanent place of abode, Article 4, cl 3(b) of the Thai DTA contemplates that one may have a "permanent home" available in the differing geographic locations of Thailand and Australia. Adherence to the meaning of the text in context and as a matter of ordinary English is singularly important when construing "permanent home" and considerable care is needed when looking at international commentaries and cases concerning this term, because of idiosyncrasies of English and other languages: see R X Resch 'Home Sweet Home: Tax Treaty Interpretation and the Problem with Language Under Consideration of the Permanent Home Tie-Breaker ' (2019) 2 British Tax Review 205.
95. The accommodation occupied by Mr Pike in Thailand and Australia between 2009 and 2014 was, in each country, his home and regarded by him as his home (a position which had prevailed there before 2009, too). It was rented accommodation but in neither case was the accommodation merely transient. His presence in Thailand and related occupancy of his rented home was inextricably linked to his continued employment in that country but the evidence discloses that this employment had an indefinitely continuing quality, interrupted only by his transfer on promotion to Tanzania in 2014. Unless and until he decided to change his rented accommodation in each country, that accommodation was available to him continuously each and every time he returned to that country.
96. I do not consider that there can be an inflexible rule of construction that a permanent home can never be a rented one. It would, for example, be odd to regard residential premises held under a 99 year lease as other than "permanent". So here, too, questions of fact and degree are necessarily entailed. Mr Pike and Ms Thornicroft contemplated the erection of a residence on the Brookwater land, which would have constituted a permanent home, but, as noted above, that land was sold, undeveloped, in 2013. The only home which they owned was the Harare home but they had quit this in 2005, never returned to it and sold it in 2010. I consider that the better view is that neither in Australia nor in Thailand did Mr Pike have, in terms of Article 4, cl 3(a) of the Thai DTA, a "permanent home" available to him. In each instance, for reasons already given, the flexibility of relatively short term, residential tenancy evidently suited him and, in Australia, Ms Thornicroft also. That type of accommodation does not strike me as a "permanent home". But even if I am wrong as to this, I consider that there is no material differentiation between the rented homes in Thailand and Australia, such that one would be characterised as "permanent" and the other not.
97. As Article 4, cl 3(a) is inapplicable, one "cascades" to Article 4, cl 3(b). In each country, Mr Pike had a habitual abode. Once again though, there is nothing, in my view, to choose between Thailand and Australia. Mr Pike's life routine had two aspects. One was that as, when and for as long as necessary, and always for more than half the year, he worked in or from Thailand and occupied there premises which he had made his home. The other was that as, when and for as long as possible, he lived with his family in Australia. The length of time as between each country for these purposes varied from year to year but, in relation to each country, he had an established residential habit.
98. As it happens, this approach accords with the understanding evident in the OECD commentary:
The application of the criterion ... requires a determination of whether the individual lived habitually, in the sense of being customarily or usually present, in one of the two States but not in the other during a given period; the test will not be satisfied by simply determining in which of the two Contracting States the individual has spent more days during that period ... "habitual abode" [is] a notion that refers to the frequency, duration and regularity of stays that are part of the settled routine of an individual's life and are therefore more than transient ... it is possible for an individual to have an habitual abode in the two States, which would be the case if the individual was customarily or usually present in each State during the relevant period, regardless of the fact that he has spent more days in one State than in the other.
99. For these reasons, I reject the Commissioner's submission that Article 4, cl 3(b) confers taxing entitlement on Australia. Equally though, for those same reasons, I do not accept Mr Pike's submission that habitual abode ought to be determined just by length of residence such that Mr Pike's greater length of residence in Thailand in each year meant that, between the 2009 and 2014 income years, only in Thailand could be said to have a habitual abode.
100 In light of this, there is a further "cascade" to Article 4, cl 3(c). A critical textual consideration is the use of the conjunctive with respect to "personal and economic relations " One sees in the OECD Model Convention, in Article 4(2), a parenthetical addition of the expression "centre of vital interests" after "personal and economic relations". However, this addition is not present in Article 4, cl 3(c) of the Thai DTA. The present task is to construe and apply only that text.
101 On the evidence, Mr Pike undoubtedly had a range of personal relations while he resided in Thailand. He formed particular friendships and actively engaged in various sporting and social activities there. As Ms Thornicroft neatly put it, "He had a life there." He was hardly there a mere fly in/fly out worker eating and sleeping at a work camp with no wider community life. However, at an emotional level, his closer personal relations were, undoubtedly, with Ms Thornicroft and their sons in Australia. In contrast and overwhelmingly, Mr Pike's economic relations were closer to Thailand. It was this Thai sourced income stream, derived from Mr Pike's ongoing employment there, which not only supported his life and lifestyle there but also, all the more so after Ms Thornicroft's employment with Ernst & Young came to an end, supported his family in Australia, including him, when he was able to be with them. Contrary to his original aspiration, Mr Pike had never been employed in Australia. There is not even any evidence that the group of which PTAL was a member was controlled from Australia. His journeys here were wholly personal, never in the additional nature of reporting in person to, or working for a time at, a "head office" or even controlling regional office.
102 For part of the period between 2010 and 2013, Mr Pike owned a capital asset in Australia, the Brookwater land. While I accept that this land can, on the basis of ownership alone, be regarded as evidencing an economic relationship with Australia, it did not have the additional feature of being a competitor of any sort with the Thai employment for income production. Mr Pike maintained bank accounts in both Thailand and Australia but these were but conduits through which living and other expenses in Thailand or Australia for him or, as the case may be, him and his family were met. Mr Pike jointly owned cars in Australia but, even taken in conjunction with the Brookwater land, as a foundation for relative closeness of economic relations, these pale into relative insignificance when compared with Mr Pike's Thai employment.
103 Article 4, cl 4 makes nationality a factor but until almost the end of the period in question, Mr Pike's nationality was Zimbabwean. He became an Australian citizen only in April 2014. Thus, though this assumption of nationality is relevant, it is, in the overall circumstances, a factor of little weight in supporting a conclusion that the degree of Mr Pike's personal and economic relations was closer to Australia. If anything, Mr Pike's Zimbabwean citizenship for most of the period in question rather emphasises the importance, relative to his Australian connection, of his personal and economic ties with Thailand.
104 In my view, when considered conjunctively, Mr Pike's personal and economic relations were, contrary to the Commissioner's submission but in keeping with that of Mr Pike, closer to Thailand than Australia, between 2009 and 2014. That being so, the effect of Article 4, cl 3 (c) is that he was, in each of these income years, deemed only to be a resident of Thailand. That deemed residence prevails, by virtue of the International Agreements Act, over the position that, in terms of the 1936 Act alone, he was a resident of Australia. It necessarily follows that, in respect of the 2009 to 2014 income years, the Commissioner had no entitlement to assess him, as person taken to be a Thai resident, in respect of the personal services income which he derived in Thailand from his employment there. Mr Pike has proved that the assessments in question are excessive. To this extent, the objection decision was in error.
105 There is no similar double taxation agreement applicable to Mr Pike in respect of the 2015 and 2016 income years. In respect of these income years, his failure to prove that he was not a resident of Australia means that he has not proved the assessments for these years to be excessive.
106 The appeal must be decided accordingly.
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