Federal Court backs ATO on tax residency dispute

The case before the ART, and reviewed by the Federal Court, turned on whether Quy was an Australian resident for the purposes of section 5-6 of the Income Tax Assessment Act 1997 (Cth) and the Income Tax Assessment Act 1936 (ITAA) during the five-year period.

Having examined the ordinary concepts test in subsection 6(1) of the ITAA, the ART determined Quy was not an Australian resident at the time, but was a person with a domicile in Australia and did not have a “permanent place of Abode” outside Australia.

In coming to this decision, the ART made a number of “adverse findings”, including that Quy retained ownership and registration of motor vehicles in Australia, retained personal belongings at an Australian address, and had “moved to various locations within and outside Australia” for work assignments with a long-term employer.

In the Federal Court appeal, Quy raised three questions of law that asked whether the tribunal was satisfied he had a permanent place of abode outside the country.

In his 4 September decision, Justice Christopher Horan found the ART proceeded on a “correct understanding” of the statutory definition of “resident of Australia”, and said it was open to the ART not to be satisfied his permanent place of abode was elsewhere.

Justice Horan added the ART placed weight on Quy’s ongoing connections with Australia and the nature of his international work assignments from his Australian employer, maintained “through locally-based ‘host’ entities within the corporate group”.

The ART found the work assignments did not demonstrate Quy had abandoned residence in Australia, nor that he was “residing” permanently – rather than temporarily – in any other country.

“In my view, the applicant has not established that the tribunal’s failure to be satisfied was due to any ‘misapprehension, mistake, conception, unreasonableness or miscarriage of judgment’ that would authorise this court to interfere and set aside its conclusion,” Justice Horan said in his written reasons.

Quy’s contention that the ART failed to perform its function according to law was also shut down, with Justice Horan finding its conclusion did not give rise to the inference it misunderstood the statutory test or otherwise erred in law, “particularly in circumstances where its reasons for decision do not reveal any legal error”.

The engineer also claimed the only course “legally open” to the tribunal was to be satisfied his permanent place of abode was outside Australia during the relevant years, and the orders should be made allowing the objection to the notices of assessment.

Given his earlier conclusions, Justice Horan could not accept “that only one conclusion was legally open to the tribunal”.

“Accordingly, even if the applicant had been able to establish an error of law that vitiated the tribunal’s failure to be satisfied that his permanent place of abode was outside Australia, the appropriate outcome would have been to remit the matter to the tribunal.

“However, as I have concluded that the tribunal’s decision was not affected by any such legal error, the question of relief does not arise,” Justice Horan said.