The AAT has allowed a taxpayer’s objection to amended assessments issued to him for the 2009 and 2010 income years after finding the taxpayer was not a “resident” of Australia as that term is defined in s 6(1) of the ITAA 1936.
- The Commissioner had issued amended assessments to the taxpayer increasing his assessable income for the 2009 and 2010 income years by $200,540 and $305,516, respectively.
- The increases were the result of the Commissioner’s inclusion of income derived by the taxpayer from his employment in the Kingdom of Saudi Arabia during each of the income years in question.
- The taxpayer had prepared and lodged his income tax returns for the 2009 and 2010 years on the basis that he was a foreign resident.
- It was common ground that the taxpayer was domiciled in Australia for each of the income years in question.
The Tribunal largely accepted the taxpayer’s evidence. The Tribunal said the taxpayer’s presence in Saudi Arabia “was hardly casual or passing. So far as intention is relevant, [the taxpayer] had, at the time when he first left Australia for the Kingdom, a reservation as to whether he would make Saudi Arabia his home for the duration of the [project] and beyond”. The Tribunal accepted the taxpayer had intended to make Saudi Arabia his home for the duration of the project and beyond into the indefinite future.
The Tribunal concluded the taxpayer resided in Saudi Arabia in the 2009 and 2010 income years.
It was also satisfied the taxpayer’s permanent place of abode was in Saudi Arabia for the years in question.
(AAT Case [2014] AATA 335, Re Dempsey and FCT, AAT, Ref No: 2013/4861; 2013/4862, Justice Logan PM, Hack DP, Kenny SM, 29 May 2014.)
[LTN 98, 23/5/14]
Extract from [2014] AATA 335
28. On the Saudi Kayan project, Mr Dempsey had 12 engineers who reported directly to him. In the course of the project, he came to be in charge of approximately 800 employees. He reported directly to the Project Manager, a Mr Mal Noe. The Saudi Kayan project involved construction work over a 640 acre site. It was technically demanding with very limited margins for error. Mr Dempsey described it as, and we accept that it was, “one of the most professionally challenging projects that I have worked on over a long career”.
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30. In Saudi Arabia, Mr Dempsey lived in an apartment in a secure residential compound built and maintained for the use of various companies’ senior staff from developed countries. He lived in two such apartments; one for nine months, the other for the balance of the term of his employment by Fluor Arabia Ltd. Each apartment which he occupied was rented by Fluor Arabia Ltd for his use. Each was furnished but Mr Dempsey was able to and did acquire such additional items as he deemed necessary to suit his needs. To that end, he acquired an additional refrigerator. Mr Dempsey also supplied his own cutlery, crockery, bedding, linen, towels and the like. He also engaged and paid for local cleaners to clean the apartment three times a week.
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36. This living arrangement prevailed for the whole of the period from September 2007 to May 2010 in which Mr Dempsey was in Saudi Arabia. He did not have to, and did not, share either of them with anyone.
37 Mr Dempsey worked long hours on the Saudi Kayan project. His typical working week was of six 12 hour days’ duration with Friday being a rest day. Occasionally, in periods of peak demand in the progression of the project, he also worked on Friday. A typical working day for Mr Dempsey in Saudi Arabia commenced at approximately 4:30 am when he left for work and concluded at about 6:00 pm when he returned home. He drove to work in a Fluor Arabia Ltd vehicle supplied for his exclusive use in company with at least one other passenger. It was a company requirement that he drive with at least one other person at all times. This was because it was not unknown in the Kingdom for persons travelling alone to be attacked. Because he was supplied with a vehicle by his employer, there was no need for him to acquire a vehicle himself.
38. To enable him lawfully to drive within the Kingdom, Mr Dempsey obtained and, for the duration of his time there, maintained a Saudi Arabian driver’s licence.
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41. Mr Dempsey received two weeks holiday every eleven weeks. He received a holiday travel allowance in addition to his salary. It would have been possible for him to spend his holidays at his apartment in the residential compound but this would have entailed remaining within the compound. It was not possible, for example, for him to use his apartment there as a base for local touring within the Kingdom because such touring was not permitted. Unsurprisingly, he chose to take his holidays abroad. Fluor Arabia Ltd imposed no restriction as to where he might travel using his travel allowance. An analysis of the duration and location of his holiday travel over the duration of his employment in Saudi Arabia discloses that he favoured two destinations, Thailand and Australia, with the greater time being spent in Thailand.
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43. In 2004, Mr Dempsey purchased a house in a residential compound at Mudgeeraba on the Gold Coast. The Mudgeeraba house was then in a reasonably new condition, having been built in 2002. It had had but one previous owner. Mr Dempsey purchased the house with the assistance of a loan, secured by a mortgage over the property.
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45. Prior to leaving for overseas, Mr Dempsey cleaned the house, cleaned and emptied his refrigerator, made the beds and put sheets as dust covers over his furniture. To add extra security, he put wooden dowels in the tracks of sliding windows and doors at the house and, in addition, he drilled holes in the sides of his garage door and its surrounds so as to secure that door with bolts which would prevent it being forced up. Mr Dempsey turned off his hot water and mains power but not power to household lighting. He put a timer on the household lights for security reasons. He also made an arrangement with a neighbour whereby, in return for a payment of $300 to $400 every six months, that neighbour agreed to mow the lawn and to cut the hedge at the house.
46. Mr Dempsey left in his garage a Mercedes Benz motor car. He prepared this for extended immobilisation. During one of the holiday visits which he made to Australia, Mr Dempsey acquired a late model, well equipped four wheel drive vehicle. This, too, he kept in his garage at the house. Unlike the Mercedes Benz, the four wheel drive had electronics which required that it be stored with the vehicle electrics connected. He placed this vehicle on trickle charge, leaving a power circuit on for this purpose. He kept up the registration on each vehicle.
47. Mr Dempsey chose not to sell the Mudgeeraba house while he was employed in Saudi Arabia. Since his return to Australia at the end of that employment, that house is where he has lived.
48. Initially, Mr Dempsey’s decision to retain the house was grounded in an uncertainty on his part as to what he would encounter when he took up his employment in Saudi Arabia. His reasons for retaining the house changed once he found that he enjoyed the employment. He could not put a precise time as to when this occurred but the reasons why he retained the house did change. They became a combination of just not being bothered and the lack of an attractive alternative financial return. Related to the latter was also the impact on house prices of the 2008 “Global Financial Crisis”. Nonetheless, the longer that Mr Dempsey stayed in Saudi Arabia, the more the possibility of selling that house loomed in his thinking. Had prospective successor employment there come to pass, he believes that he would have sold it in the course of that term of employment.
49. Mr Dempsey also made a deliberate decision not to rent out the Mudgeeraba house while he was in Saudi Arabia. He had had the earlier experience of renting out a house which he owned in Nerang while engaged for a year on project work in Cape York. He had found this to be “a waste of time financially”, quite apart from the wear and tear on the property. This experience also intruded on his decision not to rent out the Mudgeeraba house. On his calculation, the benefit which he would derive from renting out the property would be about $50.00 to $60.00 per week by the time that he deducted agent management fees, rates and water charges, property maintenance costs and the costs of alternative storage for his furniture and vehicles. This was not to mention the anticipated wear and tear on the property. All in all, he decided that it was not worth the trouble.
50. Mr Dempsey’s reasons for retaining and not renting the Mudgeeraba house while he was in Saudi Arabia make perfect sense to us. In expressing this view, we have also taken into account that Mr Dempsey could well afford to make such a choice. He was well paid. He had neither need nor ability to purchase accommodation in Saudi Arabia. He did not need the capital tied up in the house for any other purpose. He had ready access to other capital to satisfy his other wants of life, as indicated by his being able to deploy a substantial sum for the advantageous purchase of the four wheel drive vehicle or to purchase weapons and equipment associated with his hobby of shooting. Mr Dempsey also did not need the relatively modest net additional income, which it might generate if rented.
51. As to this hobby, Mr Dempsey maintained a diverse collection of pistols and rifles and related equipment in a secure armoury at the Mudgeeraba house. He enjoyed range shooting. At the time when he first left for Saudi Arabia, he held both the requisite weapons licences under Queensland legislation as well as a membership of the Gold Coast Gun Club. He kept each of these current for the duration of the time when he was in Saudi Arabia.
52. At least so far as Mr Dempsey’s pistols (which we infer were concealable weapons) were concerned, Queensland residency was a relevant consideration in relation to the operation of the concealable weapon licencing provisions of the Weapons Act 1990 (Qld)[6]. That Mr Dempsey must have put forward to Queensland authorities that he was a Queensland resident in order to hold or renew such a licence was a feature of the submissions made to us in defence of the amended assessments and related objection decision. We address that submission and others like it based on statements in tax returns and incoming and outgoing passenger cards below.
53. We infer from Mr Dempsey’s hobby and his reference to storage costs being one consideration telling against his renting out the Mudgeeraba house that the existence of his home armoury and the apprehended cost of alternative, legislatively compliant weapons storage was included in his decision not to rent out the property.
54. On those occasions when he visited the Gold Coast when he decided to make Australia a leave destination, Mr Dempsey stayed at his Mudgeeraba house. On such visits, he took the opportunity to pursue his hobby by using his firearms on a range.
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56. In 1987, when he was living in Canberra, Mr Dempsey met and formed an intimate relationship with a woman. Out of respect for her privacy we shall call her Ms C. Though they never lived together, the relationship produced two children, a son born in 1988 and a daughter born in 1991. The intimate relationship ceased about a year after the daughter’s birth. It was then that Mr Dempsey moved to the Gold Coast, acquiring the Nerang property already mentioned. Ms C remained in Canberra with the children, together with a child from an earlier relationship of hers. Thereafter, Mr Dempsey provided financial assistance to Ms C for the education and living expenses of his two children. He also, in 1994, bought a car in his name but which was used by Ms C in Canberra. He kept up the registration of that car until recently.
57. Until about 1996, relations between Mr Dempsey and Ms C were, as he put it, “strained”. Since then, they have become and remain good friends, though they have not resumed an intimate relationship.
58. After Mr Dempsey moved to the Gold Coast in 1992, it became his habit to visit Canberra for a fortnight about every six months to see the children with them, and Ms C, in turn, visiting him at the Nerang property on the Gold Coast about every six months. In the interval between when he acquired the Mudgeeraba house in 2004 and when he first left for Saudi Arabia, Ms C visited Mr Dempsey there on three occasions, twice with the children and once by herself for about three weeks in the course of a return journey by her from Malaysia to Canberra.
59. By 2008, Mr Dempsey’s son was in Melbourne studying at university and his daughter had commenced studies at university in Canberra.