Taxation law final assignment
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Jan 9, 2024
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1
1 Executive Summary
In the case of Federal Commissioner of Taxation v. Applegate (1979) 9 ATR 899, the court
had to determine whether the taxpayer, Geoffrey David Applegate, qualified as a resident or
non-resident for tax purposes under the Australian Income Tax Assessment Act 1936. The
specific issue revolved around the interpretation of the definition of "resident" as stated in
sec. 6(1) of the Act. A significant Australian tax case entitled "Federal Commissioner of
Taxation v Applegate (1979) 9 ATR 899" deals with the crucial problem of ascertaining a
person's resident status for taxes purposes when they have a permanent residence abroad.
This case is crucial in defining the standards used to categorise people as residents or non-
residents and in determining how their income is taxed in Australia while they are temporarily
residing abroad.
2 Table of Contents
1
Executive Summary
......................................................................................................
2
2
Table of Contents
..........................................................................................................
2
3
Introduction
...................................................................................................................
3
4
Case
Facts……………………………………………………………………………………….3
5
Legal issue(s)
................................................................................................................
4
6
Finding
...........................................................................................................................
4
7
Conclusion and Recommendations
.............................................................................
5
8
References
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6
2
3 Introduction:
"Federal Commissioner of Taxation v Applegate (1979) 9 ATR 899" is a landmark Australian
tax case that deals with the crucial problem of ascertaining a person's resident status for
taxes purposes when they have permanent residence abroad. This case explores the
concept of a "permanent place of abode" and its implications on tax residency status in
Australia.
The court had to decide whether the taxpayer, Geoffrey David Applegate, qualified
as a resident or non-resident for tax purposes under the Australian Income Tax Assessment
Act 1936 in the case of Federal Commissioner of Taxation v. Applegate (1979) 9 ATR 899.
The specific question was how to interpret the meaning of "resident" as specified in Section
6(1) of the Act.
4 Case Facts:
The key issue in this case was the tax resident status of persons who had established a
permanent residence abroad but had temporarily migrated overseas for a variety of reasons,
such as employment or personal situations. The case involves a Taxpayer (TP) who was
working as a lawyer in Sydney when his employer assigned him to create and run a branch
office in Vanuatu. To undertake this task, Applegate gave up his Sydney apartment lease and
moved to Vanuatu with his wife in November 1971. Taxpayer secured a house lease and
was admitted to practice as a solicitor in Vanuatu. He acquired residence in Vanuatu.
However, Applegate became sick in June 1973 and returned to Sydney for medical
treatment. In September 1973, he returned to Australia after a brief visit to Vanuatu. As a
result, the Vanuatu office was closed. Even though no precise timeline was given, it was
always the desire of Applegate and his employer that he would return to Australia for an
extended length of time. The major question in this case was whether Taxpayer had a
"permanent place of abode" outside Australia during his time in Vanuatu, which would affect
his tax residency status.
The relevant Australian tax regulations took into account a number of elements to determine
tax residence, including:
1. Ordinary Concepts of Residence: Whether an individual's ordinary concepts of residence
were aligned with Australia.
2. Domicile: The individual's permanent residence or domicile.
3. 183-day test: It measures an individual's physical presence in Australia over the fiscal
year.
3
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4. Commonwealth Superannuation Fund Test: A person's involvement with Australian
superannuation funds.
5 Legal issue(s):
The fundamental legal problem in "FCT v Applegate" was to develop a clear framework for
assessing the tax resident status of persons who had established permanent residences
abroad but were temporarily staying in another country for a variety of reasons.
1)What does the word "permanent place of abode" mean in the context of determining tax
residency?
2)Should the term "permanent" refer to something eternal or to a person's place of
residence?
3)Can a temporary absence from Australia be viewed as having a permanent address
outside of Australia?
4) What criteria should be taken into account when evaluating an individual's usual ideas of
residence, domicile, and presence in Australia?
5) How does the desire to return to Australia, knowledge of a permanent domicile outside of
Australia, and abandonment of an Australian place of residence influence tax residency
determination?
6 Finding:
In its decision, the Federal Court gave crucial direction on these issues. The court
emphasised the need of considering a person's ordinary concept of residence, domicile,
and the 183-day test when figuring out their tax residency status. Several key findings
emerged:
Ordinary notions of Residence: The court made it clear that for someone to be
regarded a resident for tax purposes, their ordinary concepts of residence must be
consistent with Australia.
Domicile and Intention to Return : A person's domicile and intent to return to Australia
were key factors in assessing their tax residency. A firm plan to move back to
Australia can influence the judgement in favour of tax residence.
knowledge of Permanent Abode: where determining resident status, knowledge of a
permanent abode in another nation was taken into account, especially where it
suggested a considerable shift away from Australia.
Abandonment of Australian Residence: The court considered a person's capacity to
maintain a connection to any Australian location as well as whether they had
abandoned their Australian residence. The idea of abandonment implied a change in
residential status.
The Full Federal Court found that TP resided outside of Australia. The court
emphasized that the term "permanent" should not be interpreted as something
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everlasting or lasting forever. Instead, its meaning should be inferred from the
circumstances of the case, paying special attention to a person's maintained
domicile.
Additionally, the court made a distinction between "permanent" and "temporary" or
"transitory." It came to the conclusion that Applegate did not qualify as an Australian
tax resident since he maintained a permanent residence outside of the country.
The court's decision was influenced by TP's desire to return to Australia and the
absence of a fixed timetable for his return. A two-year absence was deemed
significant by the court, supporting its judgement.
7 Conclusion and Recommendations:
In this case "Federal Commissioner of Taxation v Applegate (1979) 9 ATR 899," the Federal
Court offered crucial clarification on how to determine tax residency for those who had
permanent residences overseas. The case served as a reminder of how crucial it is to prove
tax residency by taking into account a person's common ideas of residence, domicile, and
intention to return to Australia.
The court found in favour of Applegate, emphasising an objective evaluation of the nature
and quality of his use of his Vanuatu residence. The court weighed considerations such as
the consistency of his presence, the length of his stay, and the longevity of his affiliation with
the location. Despite Applegate's desire to return to Australia in the future, the court
determined that he had established a permanent place of habitation in Vanuatu during the
tax year in question.
Finally, the Applegate decision clarified that the determination of residency for tax purposes
should be based primarily on objective factors related to the taxpayer's place of abode rather
than solely on the taxpayer's subjective intentions regarding their return to Australia.
Applegate was classified as a non-resident, and any money made outside of Australia was
free from taxation in Australia.
.
.
5
8 References:
https://www.ato.gov.au/law/view/document
https://www.ato.gov.au/law/view/document?docid=JUD/79ATC4307/00003
Federal Commissioner of Taxation v Applegate (1979) 9 ATR 899.
Thorpe, G. (2012).
Tax Residency in Australia
. Sydney University Press.
Renton, P. (2005).
Taxation of Non-residents and Foreign Source Income: A Comparative
Study of the Commonwealth, the United Kingdom, and Germany
. Kluwer Law International
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., & Krever, R. (2014).
Principles of
Taxation Law 2021
. Thomson Reuters.
Ross, V. (2009).
Australian Taxation Law
. CCH Australia Limited.
6
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