CATCHWORDS Income Tax — Appeal - Permanent place of abode outside Australia Income Tax Assessment Act 1936, s.6(1)(a)(i) THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v. GEOFFREY DAVID APPLEGATE G. No. 31 of 1978 Coram: Franki, Northrop and Fisher JJ. 29 June 1979 Sydney IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT RNGISTRY G. No. 31 of 1978 GENERAL DIVISION } IN THE MATTER of the Income Tax Assessment Act 1936 BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALTA Appellant AND : GEOFFREY DAVID APPLEGATE ' Respondent Coram: Franki, Northrop and Fisher JJ. 29 June 1979 Sydney PA een Semone mm ray QO R D E R JUDGES MAKING ORDER: Franki, Northrop and Fisher JJ. i | DATE OF ORDER: 29 June 1979 WHERE MADE: Sydney THE COURT ORDERS THAT: 1. The appeal is dismissed with costs. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY) G. No. 31 of 1978 GENERAL DIVISION IN THE MATTER of the Income Tax Assessment Act 1936 BETWEEN: THE COMMISSIONER OF TAXATLON OF THE COMMONWEALTH OF AUSTRALIA Appellant AND: GEOFFREY DAVID APPLEGATE Respondent Coram: Franki, Northrop and Fisher JJ. 29 June 1979 Sydney REASONS FOR JUDGMENT FRANKI J: This appeal by the Commissioner of Taxation is brought pursuant to leave granted by this Court upon condition that the appellant pay the respondent's costs of the appeal in any event. The relevant facts have been set out in the judgments of Northrop and Fisher JJ. which I have had the opportunity to read and I do not propose to deal with the facts in any detail. It seems clear that the respondent, Mr. Applegate, TCT ASS SE ee SR RA a TT EN, OP RO rr Aer ~2- left Australia to take up his position in Vila and that in the absence of some unforeseen circumstances he was likely to remain there until he had completed his assignment which would probably take several years. Mr. Applegate left Sydney on 8 November 1971 and apart from two brief periods he remained in Vila for the balance of the relevant tax year. The time at which the Commissioner of Taxation was to form a view as to the assessability for tax in respect of the year ended 30 June 1972 might be expected to have been some time during the last half of the year 1972 and in the subject case the assessment was issued on 1 February 1973. The question which was argued before us was whether on the facts of the case Mr. Applegate during the relevant period had "his permanent place of abode" outside Australia within the meaning of those words in s.6(1)(a)(i) of the Income Tax Assessment Act 1936 ("the Act"). This section reads that unless the contrary intention appears: "tresident! or 'tresident of Australia' means - (a) a person, other than a company, who resides in Australia and includes a person - (i) whose domicile is in Australia, unless the Commissioner is satisfied that his permanent place of abode is outside Australia." In my opinion two fundamental matters must be borne in mind. The first 1s that liability to tax arises i Tt ! t r -3- annually and the question of where the taxpayer's permanent place of abode is, if relevant, must be determined annually and secondly that the words "his permanent place of abode" are in a sub-section which contains the word "domicile". In the argument before us nothing turned on the meaning of the words "place of abode" and both parties adopted the view that these words were to be given a broad meaning. This seems to be a reasonable approach (see generally Price v. West London Investment Building Society Limited [i964] 1 W.L.R. 616). The word "permanent" is a word which must be construed in the light of the context in which it appears. Lord Evershed pointed out in McClelland v. Northern Ireland General Health Services Board [1957] 1 W.L.R. 594 at p.609 that the word "permanent" is clearly capable, PRS BALI TESTS SN ne Oe me imme tn according to the context, of many shades of meaning. In that case the House of Lords was considering the expression "permanent and pensionable" in relation to employment and Lord Keith of Avonholm, although dissenting in the final conclusion said at p.605 that "A mere statement that a person holds a permanent and pensionable post is very imprecise. It contains no indication of the degree of permanence or the nature and conditions of the pension." The Oxford English Dictionary (1933), aE Rene meme me paper Re ee -he Vol. VII at p.710 gives as the first meaning of permanent "Continuing or designed to continue indefinitely without change; abiding, lasting, enduring; persistent. Opposed to temporary." In my opinion the fact that the phrase "permanent place of abode" appears in a context which includes the word "domicile" is of great significance. The word "person" in s.6(1)(a) of the Act does not appear to be limited to male persons or to female persons or to persons of any particular age. Considering the section in relation to an adult male person whose domicile of origin was Australia, it would be difficult to regard such a person as domiciled in Australia 1f his permanent place of abode was outside Australia in the sense that he intended to remain forever in that other country unless perhaps it wuld be said that he had no intention to abandon his domicile of origin. (See generally Cheshire's Private International Law 9th Edn. at pp. 160-166). In the case of an adult male whose domicile of choice was Australia it is difficult to see how he could be domiciled in Australia if he had left Australia with the intention of residing elsewhere permanently in the sense of for the rest of his life. The position would be different with a married woman whose domicile was in Australia because she had married a man whose domicile was in Australia and who went permanently to live in a country outside Australia intending to live there for the rest of her life. I ae nn ee ee ne iain mae Ree eeee tl an ee i ee ee fae ae ~5- consider, however, that the section must be read as designed to apply generally and not only to married females or to any other particular category of persons. Accordingly in my opinion the phrase "permanent place of abode outside Australia" is to be read as something less than a permanent place of abode in which the taxpayer intends to live for the rest of his life. There is nothing in the sub-section which requires the intent of the taxpayer to be the critical factor even though it is, of course, a relevant factor. Essentially the question is whether, as a matter of fact the taxpayer's permanent place of abode was outside Australia at the relevant time. Senior counsel for the Commissioner did not contend that an intention to live outside Australia for the rest of the taxpayer's life was required. He conceded that if, for example, a young man left Australia intending to spend the rest of his working life ina particular country outside Australia the mere fact that he had the intention upon retirement of returning to Australia would not, at least necessarily, prevent him from having a permanent place of abode outside Australia. His submission was that "a permanent place of abode outside Australia" required an intention to live outside Australia indefinitely, without any definite intention of ever returning to Australia in the foreseeable future other than at some remote, albeit specific, point of time. Er rere agent te ans eee ne Hoe - = ~~ PRR UES ee Rn em nr mere re -6- I consider that if the relevant question was whether Mr. Applegate had a "permanent position", in the sense of permanent employment, in Vila the answer would be "yes" and likewise I consider he had a permanent place of abode in Vila at the relevant time. The question is one of degree and bearing in mind the association of the phrase "permanent place of abode" with the word "domicile" and the fact that the liability for tax falls to be determined annually in my opinion the learned judge from those judgment this appeal is brought was correct. I consider that the learned judge correctly posed the relevant test when he said that "...what is required is that there be a permanent place of abode outside Australia and that the enauiry as to whether there is or not 1s an objective one, notwithstanding the fact that the intention of the taxpayer in relation to the length of time that he will reside in a place outside Australia is a relevant factor to be taken into account", Whilst the Commissioner (and presumably the Board of Review) was entitled to look to the events which had happened since the end of the tax year in my opinion the question of the taxpayer's intent as to the length of his stay is no more than a relevant factor to be considered. In my opinion the appeal should be dismissed with costs. I certify that this and the five preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Franki mt Rolly J Gu wel . Dated: 24 Sane [OI Associate BT ree ime eee err 6 tment ene et er See re ee eee eee - ey OSLER RO EAE ROLE TT TT TEATS eine ens A a ea en nee i a ee a ae le, (eee Mr ate te tee Boe Le te a Bone DN ee ee RY le Ee EL ee IN THE PEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G 31 of 1978 GENERAL DIVISION Between: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant and GEOFFREY DAVID APPLEGATE , Respondent NORTHROP J. REASONS FOR JUDGMENT 29 June, 1979. This is an appeal brought by the Commissioner by leave of the Federal Court of Australia against a decision of the Supreme Court of New South Wales allowing an appeal against a decision of the Board of Review confirming the disallowance by the Commissioner of an objection by the taxpayer to an assessment of income tax for the year ended 30 June 1972, The appeal concerns the question of whether for part of that year of tax the taxpayer was a non-resident within the meaning of that word when used in s.25(1) and s.23(r) of The Income Tax Assessment Act1936, as amended; the Act. The facts are not in dispute. The taxpayer is a sOlicitor wko at all relevant times was employed by Messrs. Sly and Russell, a firm of Sydney Solicitors. During the year ended 30 June 1972, at the request of the firm, the taxpayer went to Vila in the New Hebrides for the purpose of openingand managing there a branch office on behalf of the firm. On 8 November 1971 he left Sydney and journeyed to Vila, where apart from two brief periods he remained for the balance of the tax year. It is not disputed that for the period 8 November 1971 to 30 June 1972 his income was derived from sources wholly out of Australia, The taxpayer was married. At the time of Ae wee —_-- ee ee eee a en a rr dada tn arntabenlh Date tee ae nse = the ae dn ata 4 { {{ A oh SPS eee a woe - ae eee 2. leaving Sydney, his wife was expecting their first child. On leaving Sydney, the taxpayer gave up the tenancy of the flat in which he and his wife had been living. He left no assets in Australia, but he retained his membership in Australia of the Hospitals Contribution Fund. Upon arrival in Vila he and his wife spent the first two weeks in an hotel. He then obtained a lease of a house in which he and his wife thereafter lived. The term of the lease initially was for a period of twelve months with an option of renewal for a further period of twelve months. He was admitted as a legal practitioner in the New Hebrides. He obtained a residency permit for a period of twelve months and subsequently this was renewed for a second term of two years. Initially his staff consisted of a secretary only, but later additional staff were engaged, The taxpayer and his wife had intended that her confinement for the birth of the child would take Place in Vila, but, because of the view they formed concerning the nature of the medical treatment available there, she returned to Sydney for the birth of the child. This occurred in February 1972. The taxpayer spent three weeks on holiday in Sydney during the Christmas 1971 period. In March 1972 he returned to Sydney where he spent three days before returning to Vila with his wife and child. Shortly after the birth of the child, the wife of the taxpayer applied successfully in Sydney for child endowment payments, and these were paid into a bank account in Sydney in the name of the wife's mother, The taxpayer did not know of the application for or receipt of the child endowment payments. Subsequent to the tax year ending 30 June 1972, apart from a holiday in Australia of about a month, the taxpayer and his wife resided at Vila until July 1973. About that time the taxpayer became ill and received treatment in hospital, In July he was transferred to a hospital in Sydney. He received medical advice that "he should take it easy", He was disinclined to return to Vila to live 3. indefinitely 1n a tropical climate, Late in July he returned to Vila but his firm agreed to replace him. In September 1973, he was replaced by another employee of the firm and he and his family returned to Sydney. Owing to a fall off in international business, the branch office of the firm at Vila was closed in 1975. The relevance of the evidence of events occurring after 30 June 1972 is not clear. No objection was taken to that evidence and it can be used to test the weight to be given to the evidence of the taxpayer as to his intention when he first went to Vila in November 1971 and during his stay there for the remainder of that financial year, c/f. Nelungaloo Pty. Ltd. v. The Commonwealth (1947) 75 C.L.R. 495 per Williams J. at p.515, Willis v. The Commonwealth (1946) 73 C.L.R. 105 per Dixon dg. at p.116. It was always intended by the taxpayer and by his firm that after the lapse of an indefinite period of time he would return to the Sydney office. The period was not specified or defined in the minds either of the taxpayer or the partners of the firm, but it was anticipated that it would be of a substantial length. The taxpayer would have remained in Vila beyond September 1973 if it had not been for his illness. At the hearing before the Board of Review, evidence was given by one of the partners of the joint intention in the following terms: Meshes Rinabitha! inertia een atniechIeA HA a he ole Pll Sartor on 9 Matern maven min tee ie em aracntnten ue Penne inti aa A ay There was no definite period set. He was asked to go there for an indefinite period. There was obviously the establishment of the office which had to be contemplated. We always looked at a period of a couple of years just to get toa break-even stage, so we regarded that as just the establishment period, But Mr. Applegate's function was not merely to establish the office, it was to establish it and get 1t running, because we were very conscious of the fact that who ever went there would get a certain amount of on the job expertise that would be hard to replace and we certainly would not want to discard it after it had just been achieved." | | | | | In his own evidence the appellant said: "I certainly intended that not only would I establish but manage it and be the manager of that branch office. My expectation was that I would be permitted to return if I wanted to, Seana 3 abe veh et th ras ee re a nee Fa abetted ee aint © A hae Ltn rind cneainitebed ou? Aedes A- < frome. oe! Laan 7o ao. Dbelbhed Baiee ih. 4, whenever I wanted to, but I would come back if I was ever recalled. Beyond that I had no expectation. The CHAIRMAN: When you say you would be permitted to return, this is because of your status with the firm and as an associate partner - is that so? --- Yes, I would think so. The conditions were not easy in that sort of environment and I expected that not only my stay, but I think the firm was a reasonably tolerant employer and I would have permission to return if I did not enjoy it. In fact I did enjoy it." In a letter dated 25 September 1973 written to the Commissioner the taxpayer said: "At the time of leaving Australia in November 1971 it was my intention to set up a home for myself and my family, so that I could attend to the job assigned to me by my employer, namely the establishment and operation of a Vila Branch Office of the Sydney firm. I did not, under any circumstances, intend to return to Australia after a short period of temporary absence. Nor did I ever intend that I would never return to Australia. As I have never claimed to have abandoned my domicile of origin, I submit that this is irrelevant. The position to which I was appointed was (and is) a permanent position and required me to establish a permanent abode or residence for myself and family. My clear intention was that I would reside outside Australia permanently but not indefinitely." During cross~examination while giving evidence before the Board of Review, the taxpayer was referred to the last sentence in the paragraph just set out and in relation to it he said: "I think the word 'indefinitely' is probably on reflection not a good choice of words; if that means without finite term I think it is not right. What I meant to say was, not forever." It is necessary to set out the relevant provisions of the Act. Section 25(1) provides as follows: "25.(1) The assessable income of a taxpayer shall include - (a) where the taxpayer is a resident - the gross income derived directly or indirectly from all sources whether in or out of Australia; and 5, (b) where the taxpayer is a non-resident - the gross income derived directly or indirectly from all sources in Australia, which is not exempt income," Section 23(x) provides as follows: "23. The following income shall be exempt from income tax:- (xr) income derived by a non-resident from sources wholly out of Australia; ..." tesla Rattaneme me eheslath Least Ninian ene t ai ahe meta i is asia Rt This provision appears to add nothing to the provisions contained in s.25(1)(b) of the Act. The interpretation section of the Act provides: ~ nape vanes "6.(1) In this Act, unless the contrary intention appears - _ 34 ork '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, wnless the Commissioner is satisfied that his permanent place of abode is outside Australia; {ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that his usual place of abode is outside a Australia and that he does not intend to 4 take up residence in Australia; or ..." The extension of the definition of "resident" contained in paragraph (a) (ii) does not apply to the facts of this appeal but the paragraph is set out because of the need to contrast the terminology in that paragraph with that in paragraph (a) (i). From 8 November 1971 to 30 June 1972 the income received by the taxpayer was derived from sources wholly out j of Australia. During that period the taxpayer was domiciled in Australia. Thus the issue to be decided 1s whether during a that period the taxpayer was a non-resident, 6. aa Cerda eet dee! ae eet at ea oy Staite os MaKe ater Eas Denon Beal ad Sinatra nb te ee set we cere wah we Beate cate deca ath eh c ae Leek. : 6. This involves deciding whether during that period he was a "resident" as defined in the Act there being, no contrary intention appearing in s.25(1) or s.23(r) of the Act. This issue was the issue raised in the appeal from the Board of Review and decided by the decision of the Supreme Court of New South Wales. In seeking leave to appeal to the Federal Court, s.196 of the Act, the Commissioner relied inter alia, upon the following grounds: "Leave is sought to appeal against the whole of the said judgment, The grounds upon which such application is made are:- 1.(a) That the appeal will involve important questions of law of general application of the provisions of Sections 6(1), 23(r) and 25 of the Income Tax Assessment Act 1936 including:- (i) The principles to be applied in determining when and in what circumstances a person acquires a permanent place of abode outside Australia within the meaning of the said Act. (ii) ° The principles to be applied in determining when and in what circumstances a person ceased to be a resident of Australia within the meaning of the said Act. (iii) The principles to be applied in determining when and in what circumstances income derived by a resident from sources out of Australia is exempt from income tax. (b) Numerous other taxpayers have derived income in circumstances substantially similar to those of the Respondent and it is important that the principles applicable to the assessability or otherwise of such income and the meaning to be ascribed to the words 'permanent place of abode' be finally determined." On 15 June 1978 a Full Court of the Federal Court of Australia granted leave to the Commissioner to appeal from the judgment of the Supreme Court of New South Wales, but on condition that the Commissioner pay the taxpayer's costs of the appeal in any event. In the subsequent Notice ol Appeal, the Commissioner raised the same issue for decision by this Court as was before the - , ' 7. we Bee et nee ct Sk tie teeta al! iin Pl i erator tT a! EE le ao Ef he methine 7. Supreme Court of New South Wales. When the appeal came on for hearing before the Federal Court, Senior Counsel for the Commissioner sought leave to amend the Notice of Appeal to include a ground that the Supreme Court of New South Wales should have dismissed the appeal from the Board of Review on the ground that there was evidence to support the conclusions of fact of the members of the Board in their application of the relevant principles of law. This was the first time that an issue of this kind was raised, and the application was refused. The proposed new ground depended upon the exercise of the discretion conferred upon the Commissioner, or rather in this case, the Board of Review, see s.193 of the Act, by the words "unless the Commissioner is satisfied" appearing in paragraph (a) (i) of the definition of "resident" and would have required this Court to examine the exercise of that discretion conferred on the Commissioner, see Avon Downs Pty. Ltd. v. Federal Commissioner of Taxation (1949) 78 C.L.R. 353 per Dixon J. at p.360, Commissioner of Taxation v. Brian Hatch Timber Co. (Sales) Pty. Ltd. (1971) 128 C.L.R. 28 and the other cases cited in Melbourne Home of Ford Pty. Ltd. and Ors. v. Trade Practices Commission and Anor; Full Court, Federal Court of Australia judgment 28 March 1979 per Franki and Northrop JJ. at pp.34-5. Since the new ground attempted to raise an issue of a kind different from that raised in the Supreme Court of New South Wales and different from that for which leave to appeal from that Court was granted, the application for leave to amend the Notice of Appeal in this respect was refused. Any person who resides in Australia is, by definition, a resident within the meaning of the Act. The word "reside" has a verv wide meaning. see Commissioner for Taxation v. Miller (1946) 73 C.L.R. 93 per Latham C.J. at pp.99-100. One of the dictionary meanings of the word "resid@ is "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live, in or ata particular place". A person may reside in more than one country at any one time, see Robertson v. Federal Commissioner of Taxation (1937) 57 C.L.R. 147 per Dixon J. at p.163 and Gregory v. Deputy Federal Commissioner of Taxation(Western Australia}(193 ~ 8. ae ae ee dee ne RR ane TE ie nena OT hte BT a at ln nik te MR ee a al eat nettle Le eaten Ra me a Me pete a 8. 57 C.L.R. 774 per Dixon J. at pp.777-8. From 8 November 1971 to 30 June 1972 the raxpayer resided at Vila but not at the one house, On no view of the facts can it be said that during that period he resided in Australia. The extended definition of "resident" contained in paragraph (a) (ii) cannot apply since the taxpayer had not "actually been in Australia, continuously or intermittently during more than one half of the year of income", This paragraph appears to draw a distinction between "usual place of abode" and "residence" but it is not necessary to consider that matter further. Under paragraph (a) (i) of the definition, the meaning of "resident" 1s extended to include persons, subject to one qualification, whose domicile is in Australia. This includes persons whose domicile of origin is in Australia as well as persons who have acquired a domicile of choice in Australia. The one qualification to this extended meaning of "resident" is that of a person whose domicile is in Australia but "his permanent place of abode is outside Australia". This qualification must relate to the year of income during which the income has been derived. The contention made by Senior Counsel for the Commission was that in the extended definition of "resident" the phrase "his permanent place of abode is outside Australia" should be construed as applying to a person who "intends to live outside Australia indefinitely, without any definite intention of ever returning to Australia in the foreseeable future, except at some remote albeit specific point of time". He then submitted that since the taxpayer possessed a definite intention to return to Australia in the foreseeable future, he did not come within the qualification contained in paragraph (a) (i) of the definition of "resident". In my opinion that contention should be rejected. The qualification applies to persons who although domiciled in Australia, do not reside in Australia within the accepted meaning of the word "reside". The qualification isstated in 9. Ao tne bea ak SURES. tied acorn Deu ie Seat Eras rr Titell let 1 keel dae actin RRL e es add, 1s Oeste adn tee oO oF ant 7 a ree a » Mami 2 Ke Wea d 9. an affirmative form, namely, where the person has his permanent place of abode outside Australia. The qualification is not concerned with whether a person has abandoned his Australian domicile or has acquired a new domicile or not. The qualification is concerned with the persons' permanent place of abode. The phrase "place of abode" may have many meanings, it can refer to the building or place where a person sleeps and it can refer to the building or place where he is usually found, for instance, "his place of business", see Price v. West London Investment Building Society [1964] 2 All E.R. 318 per Danckwerts L.J. at p.321. The phrase is often used as being synonymous with the word "residence" see, for example, Levene v. Commissioners of Inland Revenue [1928] A.C. 217 and Commissioners: of Inland Revenue v. Lysaght [1928] A.C. 234. In the present case there can be no doubt that whatever meaning is given to the phrase, during the period in question the taxpayer's "place of abode" was outside Australia, During that period he:(!did not reside in Australia, He had no residence in Australia. He had no home in Australia. He did not carry on business or work in Australia. He received no income from sources within Australia. It follows, therefore, that the real issue is whether, during the period in question, the taxpayer's Place af abode outside Australia was permanent or not, The word "permanent" can have many shades of meanings. This is illustrated by a reference to the Shorter Oxford Dictionary. And as was said by du Parcq L.J. in Henriksen (Inspector of Taxes) v. Grafton Hotel Ltd. [1942] 2 K.B. 184 at p,196: "'Permanent' is indeed a relative term, and is not synonymous with 'everlasting'". The word "permanent" must be construed according to the context in which it appears, see per Lord Evershed in McClelland v. Northern Ireland General Health Services Board [1957] 2 All E.R. 129 at p.140. In the present case the phrase "permanent place of abode appears in a taxing statute by which income tax is levied on income derived during a financial year. Where a taxpayer resides in Australia, che assessable income 10. tent ol ttn ant eT ear ee tr a ete oe iP ete me ee Nm tt lng tml EN | { i | 10. of that person includes the gross income derived from all sources but where the person does not reside in Australia, then subject to the extended meaning given to the word "resident", the assessable income of that person includes the gross income derived from all sources in Australia only, it does not include the gross income derived from sources outside Australia. The tax is assessable on gross income received on an annual basis and is assessed on an annual basis. The word "permanent" as used in paragraph (a) (i) of the extended definition of "resident", must be construed as having a shade of meaning applicable to the particular year of income under consideration. In this context it is unreal to consider whether a taxpayer has formed the intention to live or reside or to have a place of abode outside of Australia indefinitely, without any definite intention of ever returning to Australia in the foreseeable future. The Act is not concerned with domicile except to the extent necessary to show whether a taxpayer has an Australian domicile, What is of importance is whether the taxpayer has abandoned any residence or place of abode he may have had in Avstralia. Each year of income must be looked at separately. If in that year a taxpayer does not reside in Australia in the sense in which that word has been interpreted, but has formed the intention to, and in fact has, resided outside Australia, then truly it can be said that his permanent place of abode is outside Australia during that year of income. This is to be contrasted with a temporary or transitory place of abode outside Australia. In any event the extended meaning of "resident" becomes relevant only when, during the year of income under consideration, the taxpayer does not reside in Australia. Paragraphs (a) (i) and (ii) of the definition are complementary provisions enlarging the group of persons who do not reside in Australia but become liable to pay income tax in Australia. The facts of the present case show clearly that during the period 8 November 1971 to 30 June 1972 of the year of income ended 30 June 1972 the taxpayer's permanent place of abode was outside Australia. At the commencement of 11. awe oe . — terre Be -— - os I pin eae en a IE? REY chara eiee hd vaulted alee eb einai Salma Nhe Rocke ath GAS LT eta anti eae lhteite Mtl eDiets me Whee ne emer ee abi ons, OTE Gaeta, RGR ¢ TSS nt pie (GRE ot 11. that period he had the requisite intention to abandon his Place of residence in Australia and to establish a place of residence outside Australia. During the whole of that period he in fact resided outside Australia, he did not reside in Australia. In my opinion, the appeal should be dismissed with costs. YE eee poe a5 a Lote eee ett ee eee oF IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G31 cf 1978 ) ) GENERAL DIVISION IN THE MATTER OF THE INCOME TAX ASSESSMENT ACT 1936 BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant - and - GEOFFREY DAVID APPLEGATE Respondent CORAM: Franki, Northrop and Fisher JJ. 29 June 1979 REASONS FOR JUDGMENT FISHER J.: This 1s an appeal brought by the Commissioner of Taxation ("the Commissioner") against a decision of the Supreme Court of New South Wales in its Administrative Law Division. By 1ts decision that Court allowed an appeal against the decision of Board of Reviow No. 1. The Board had confirmed the disallowance by the Commisszroner of an objection by Geoffrey David Applegate ("the taxpayer") against an income tax assessment issued by the Commissioner against the taxpayer in respect of the year of znecome ended 30 June 1972. In his return for that year the taxpayer claimed that he had established a permanent place of abode outside Australia and accordingly was not liable to Australian income tax 1n respect of salary earned after 1 November 1971. The Commissioner in making his assessment added to the assessable income as returned by the tarnpayer the salary carned by the taxpaycr in his employment subsequent to 1 November 1971. The taxpayer objected on the ground that the Commissioner was 1m error in ineluding in his taxable income 2ncome carncd during the period 1 November 1971 to 30 June 197? because such income was earned by him as a non- resident from sources outside Australia and accordingly net liable to ine]usion as assessable income, The Commissioner disallowed the objection, which disallowance was at the tanpayer's request roferred te the Board of Review. The Board upheld the assessment for the year oF income but on appeal the Supreme Court of New South Wales upheld the taxpayer's appeal. The question ter determination by this Court is the correct construction ta place upon the definition of "resident" wh:ch 1s contained in s.6 (1) of the Income Tax Assessment Act 1936 ("the Act") as follows: "resident or 'resident of Australia' means - (a) a person, other than a company, who resides 1n Australia and ancludes a person ~ (1) whose domicile 1s in Australia, unless the Commissioner 1s satisfied that his permanent place of abode 1s outside Austrailia; (11) who has actually been in Australia, continuously or antermittently, during more than one half of the year of income, unless the Commissioner 1s satisf1red that his usual place of abode is outside of Australia and that he does not intend toa take up residence in Australia; or (221) who 1s an eligible employee for the purposes cf the Superannuation Act 1976 or is the spouse or a child under 16 years of age of such a son, ard (b) a company ..." The Comnuzssioner's contention 1s that the taxpayer was during the relevant period a resident of Australia in that he was a person who was domiciled in Australia but 1n respect of whom the Commissioner was correctly not satisfied that his permanent Place of abode was outside Australia. The taxpayer for his part concedes that his domicile 1S in Australia, but submics that upsn the true construction of the definition the Commissioner should have been satisfied that his permanent place of abodc was at the relevart time outside Australia. It 1S accepted that the income under consideration was derived from sources wholly out of Australia. The facts are not in dispute and having been set out in detail by the members of the Board need not be stated exhaustively here. The taxpayer 1s a solicitor who throughout the relevant time was employed by a large firm cf Sydney solicitors, Sly and Russell. During the year of income the firm opened a branch Office in the New Nebrides at Vila. The taxpaycr who had been admitted to practice in 1968 was in 1971 invited to undertake the management of the new branch on behalf of the firm. At the time he was not a partner in the farm but an "Associate", having been employed for up to three years. He left Sydney for Vila with has wife on 8 Noverber 1971 for the purpose of opening the new branch on behalf of his employer and remained 1n Vila for the remainder of the year cf income. On leaving Sydney the taxpayor yavo up the tenancy of the flat in which he and his wife were living. Ile left no assets in Australia apart from a life policy which he kept up whilst in the New Hebrides. Upon arrival in Vila he and his wife lived for two wecks 1m a hotel and then obtained the lease of a dwelling house in Vila. The term of the lease was initially twelve months with a right of renewal For a further like period. He opened the branch office on behalf of the firm, the staff consisting initially of a secretary, but gradually increasing until it comprised four persons 1n additiom to the appellant by the time of his departure. He was admilted as a practitioner in Now Hebrides and acquired a residency permit for the period of twelve months which he subsequently renewed for a second tcrm of two years. The taxpayer's wife was expecting their first child at the time of their departure from Sydncy. They had intended that she would be confined in Vila but being unhappy with the quality of medical treatment available there, she returned to Sydney for the birth of her child which occurred in rebruary 1972. The taxpayer joincd her in Sydney prior to Christnas and remained there on holiday for three weeks. He also came to Sydney for 3 days in March 1972 to collect his wafe and chiid and return them to vila. Apart from these two visits he and his wife and child remained an Vila for the balance of the year of income. Thiroughout that time and thereaftcr they lived in the leased dwelling house. Shortly after the barth of her child the wite of the taxpayer applied in Sydney for child endowrent. The amount thereof was paid into the wite's mother's bank account ak Weljington, New South Wales. The taxpayer was not aware either of his wife's ul application for or her receipt of child endowment. Over Christmas 1972 the taxpayer and his wife and child holidayed for just over a month in "New Scuth Wales, otherwise remained in Vila throughout the year of income ended 30 June 1973. However about the middle of the calendar year 1973 the taxpayer became i111 with what was ultimately diagnosed as typhoid fever. He was in hospital in Vila bat went to Sydney for a week in July 1973 for specialist medical attention. His Sydney advisors recommended that "he should take it casy", and he was himself disinclired to return to Vala and live permanently in the tropical clainate. The firm agreed that he should be replaced and he returned to Vila on 20 July 1973 for just over two months. On 29 Septcmocr 1973 he, together with his wife and child returned to Sydney. It 1s not disputed that bet for his illness he would not have xyeturned to Syaney at this time, being happy and prepared to stay in Vila "as long as necessary". His position was taken by another employee of the firm, bat the branch was closcd down an 1975 an consequence of a falling cff in international business. Great slagnificance was attached by the Commissioner to the taxpayer's state of mind, and in particular to his intentions in respect of returning to Australia. In his argument before the trial judge he submitted that because the taxpayer had the intention oventually to return to Australia, he couid not qualify as a non-resident under the definition. This was, he said, because on 1ts proper construction the particular sub-section of the @efinition only applied wuere a taxpayer formed a firm intention to leave Australia forever but although he might live in another country, he had not formed the intention to make that other 6. country his home. Th2s subirission was rejected, and in my vlow correctly rejected by the trial judge. Bofore us the Commissionexs's submission again placed great emphasis on the taxpayer's iantenticons in respect of his return to Australia. Wo person who was domicilcd in Australia, he said, ct could be a non-vsesident unless he iantended to live outside Q n Australia indefinitely, without any cefinite intention of ever @ returning to Australia in the foresocable future except at some remote alboit specific point of time. It was only in these clrcumstances that a person cculd be said to have his permanent place of abode outside Australia. Both of these tests to my mind attach too mach significance to the taxpayer's subjective stato of mind with reference Lo returning to Australia to be appropriate for present purposes. Moreover such a degree of subtlety is hardly warranted in the present context, namely of seeking to determine a taxpayer's residence, itself primarily question of fact. It would be a different matter if the 1ssuc was to his domicile with its attendant consequences for the pessonal law and status of the taxpayer. Yo my mind the trial judge correctly fcund against the Commissioner, The taxpayer contended, and in that Judge's view and in my view correctl:s' contended, that the wnquiry was whether there was a permanent place of abode outside Australia. Such an enquiry was to be detcrmined upon objective consideration of the facts, one of which was the expressed intention of the tax- payer as to the length of time he will be outside Australia. Of crucial significance were not only the facts concerning his acquisition of a hcuse in Vila, but also that he was intending and intended by his firm to remain indefinitely, albeit for a Limited time. The section 1s difficult to apply particularly if the emphasis 1S on subjective intention. It 1s made doubly diffacult by the indiscriminate use of the differing concepts of dorucile, cesidence, permanent place of abode and usvel place of abode. Moreover the concept of permanence 1s used in a context in which it does not, and could not, bear its primary meaning of "everlasting". It would amount to a contradiction in terms to suggest that an tndependent person could be domiciled in Australia but with his permanent residence outside Australia, if permenent bears its ordinary :neaning. But it 1s clear that the meaning of permanent is far from antractable, and very much takes its colour from its context. As the Master of the Rolls, Lord Evershed said in McClelland v Co North jreland Health Board 1957 2 AL1L.E.R. 129 at p.lLaé "The word (permanent) 15 clearly capable, according to the context, of many shades of meaning." In that case an advercisement offering "permanent employment" was not construed as employment for 1:f£¢ but cmployment on the fy "general" as opposed to the temporary staff. The word "permanent" 1s a relative term and not necessarily synonymous with ever- N lasting, (see Henriksen v Grafton Hotel Ltd. 1942 2 K.B. 184 at p.196 du Pareg L.Jd.). Lord Clyde in lnland Revenue Commissioners v Adam 1928 S.C. 738 spoke of a xight which had been acquired for a period of cight years as having "a relatively permanent charactcr." In McCelland's case, supra Lord Keith andicated that he considered that a statement that a persen hcelds a permanent post as very imprecise, Saying at p.136; "it contains no indication of the degree of permanence. Lord Denning M.R. also accepts that there are varying degrees of permanence helding in Fo.: v Stark 1970 2 Q.B. 463 at p.470, an electecral case, that "a person may properly be said to bo 'resident' in a place when his stay there has a considerable deqree of permanence." Piper J. in Tyers v Barmera Packing Company Limited 1930 S.A.S.R. 123 at p.125 held that in a contract of hiring, the word "permanent" was used by way of contrast with an "occasional or seasonal haring" bit that it did not bind e1lther party for any term. To my mind 1t is signifieant that the word "permanent" 1s used to qualify the cxpression "place of abode" 1.e. Ehe physical surroundings im which a person lives, an] to describe that place. t does not necessarily direct attention to the taxpayer's state of mind in respect of that or ary other plece. Such a state of mand 15 crucial to the deteriination of his domicile 2.2. his permanent "home", and if he retains his Australian domicile he is considered a resident of Australia until he acquires a place of abode of a particular character elsewhere. Such a place of abode may be his "home" for the time being but 1t as not his permanent home 1f he proposes ultimately maxing his home clsewhere. Should he, whiist living in his permanent place of abode, abandon his intention ultimately to make his home ¢lsowhere, his permanent Place of abode will become his permanent home. He will in consequence be held to have abandoned his Australian domicile and to have acquired a domicile of choice in the country of his home. t follows that it 18 in my view proper to pay greater regard to the nature and quality cf the use which a taxpayer makes of a particular place of abode for the purpose of determining whether 1t qualifies as his permanent place of abode. His antentions with respect to the duration of his residence 1s just one ef the factors which has relevance. Obviously if his stay =s purely temporary and he antends to move om or return to Australia at some a dcfinite point of timo this denies the place of abode an essential if characteristic of a4 home, namely durability. Moreover 2t seems apnropriate to \lew objcctively the nature and quality of the use whici the taxpayer makes or the place cf abode to determine whether it has the characteristics of his fixed place of abode, his home. It 13 to my wind perfectly consistent with the estadlishing of a home in a particular place Liat the taxpayor 18 aware that the guration of his eryoyment of the home, although indefinite in length, wril be only for a limited period. 'The knowledge that eventually he wiil return te the country of his domicile does not in my opinion deny him a capacity to make his home outside of h2s country domicile. Such a conciusion 1s particuleriy open in the present circumstances where the taxpayer was not a completely frec agent in the choice of when to return, it being a matter for negotiation between him and his employers. To my intnd tne proper construckion ta place upon the phrase "permanent place of abode" 1s that. 1t 318 the taxpayer's fixed and habitual place of abode. Jt 1s his home, but not his permanent home. It connotes a more enduring telatronship with the particular Place of abode than that of a person who 1S ordinarily rosident there ot who has there his usual place of abode. Material factors LO. ry for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his asscciation with the particular place. Tt follows then that in my opinion the intention of the taxpayer as far as returning to Austral3a 1S concerned 1S just one of the factors for consideration. But it 1s a factor which I consider has less significance than the taxpaycr's intention in relation to his place of abode cutside Australia. Intention to return to Australia 18 a crucial] feature in considering whether the taxpayer has retained an Aistralian domicile. Intention to make his home for the being time in his place of abode cutside Australia 1s an important clement in characterising that place cf abode as his "permanent" place of abode. In the present matter I am of opinion that notwithstanding the fact that he intendcd ultimately to return to Australia, he was capable of establishing a permanent place cf abode in the sense abovementioned outside of Australia. f have further formod the view that he did in fact establish such a permanent place of abode during the year of unccme. In the circumstances therefore he 1s a "non-resident" withzn the definition and exempt from Australian tax on his income derived frcm sources outside of Australia. The appeal should be dismissed with costs. | certty that this and the ? preceding Pages are a true copy of the Reason~ jodgment of Mr Justice a, 1S Agéociate Dated 21-6-74