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The ATO has published a Decision Impact Statement in relation to the decision of the AAT in Dempsey and FCT [2014] AATA 335; 2014 ATC 10-363.

The case concerned whether the taxpayer was a "resident of Australia" as defined by section 6(1) of ITAA 1936 in the 2009 and 2010 years.

The question considered by the AAT was whether Mr Dempsey was a resident of Australia in the 2009 and 2010 income years so that his assessable income included income derived by him from employment in Saudi Arabia in those years. In making this determination, the AAT considered the following questions:

  • Did Mr Dempsey "reside" in Australia in those years? and
  • Given he was domiciled in Australia in those years, were they satisfied that his permanent place of abode was outside Australia?

After weighing the facts presented to it at the hearing, the AAT concluded that Mr Dempsey did not reside in Australia in the 2009 and 2010 years and also that his permanent place of abode was outside Australia.

The Decision Impact Statement states:

"In making its decision the AAT considered a number of the relevant authorities on residency including Federal Commissioner of Taxation v Miller [(1946) 73 CLR 93]. It noted that in Miller the High Court found that the word "resides" was "not a term of art denoting a field with precisely defined boundaries" and also that it "is an ordinary English word extending over a field the boundaries of which constitute a broad limbo with blurred edges". In Miller, the High Court also found that the question as to where someone resides, "therefore entails questions of degree and is one of fact". The AAT noted that this is one reason why "not all outcomes on particular facts on the subject of residency are readily reconcilable". In considering Miller, the AAT noted that the word "resides" bears its ordinary meaning, not some broad meaning. In considering the authorities the AAT also noted that each case turns on its own facts, taking into account not just both the physical elements (such as physical presence) but also the taxpayer's intention (paragraphs 89 to 100).

The AAT concluded that Mr Dempsey's "presence in Saudi Arabia was hardly casual or passing". It noted that his apartments were neither transient nor temporary accommodation. They were where he settled as a matter of deliberate choice. It also noted that on his trips to Australia in that period he was 'but a casual visitor'. Viewing all the facts presented to it as a whole it reached the conclusion that Mr Dempsey had made Saudi Arabia his home for the indefinite future (paragraphs 104 to 122).

It also noted that while statements made by Mr Dempsey on his immigration passenger cards and income tax returns were relevant, they were not determinative of residency and had to be considered within the whole of the facts and circumstances. The AAT also considered that the reasons given by Mr Dempsey were plausible and did not indicate he regarded himself as an Australian resident for taxation purposes (paragraph 119)."

The ATO view of the decision is as follows:

"The ATO accepts that the decision was reasonably open to the AAT...The approach taken by the AAT in reaching its decision is consistent with the ATO's approach to issues of residency, including the ATO view expressed in IT 2650. This approach is that the question requires a weighing of all the relevant facts and circumstances and an application of the statute and authorities to those facts. We consider the outcome of the case is confined to its facts and creates no new law in this area. This is because, as stated by the AAT, each case is a matter of fact and degree."

And, under the heading "Administrative Treatment", the ATO states:

"The decision of the AAT does not change the ATO's approach to residency cases. As concluded by the Tribunal, these matters involve questions of fact and degree and different facts may result in different conclusions as to residency. The ATO will continue to approach residency cases by weighing all the relevant facts and circumstances and applying the relevant tax law and authorities to those facts."

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