Commissioner of Taxation v Executors of the Estate of Santha Thevy Subrahmanyam

The facts the subject of the ruling request 10 In setting out the facts which were the subject of the ruling request I have included, where relevant, material to which the Tribunal made no reference but which the Commissioner submitted to be relevant. Although I have done so, this should not be taken as being in any way a criticism of the factual summary made by the Tribunal or as being an acceptance of the submission that the Tribunal had omitted factual material which was relevant. 11 The taxpayer was a medical practitioner who was a citizen of Singapore from birth and who resided there until at least September 1994 when she came to Australia on a three month tourist visa to visit her brother who lived in this country and, as will be seen, for medical treatment. She had an extensive family including brothers and sisters who lived in Singapore, Malaysia, the United Kingdom and Australia. 12 She suffered from bad health in Singapore because of a renal condition. Her medical condition, it may be presumed, precipitated her retirement at age 64 from medical practice in August 1994. Indeed, it would seem that she had had some difficulty practising medicine in the period leading up to her retirement and had found it necessary while in Singapore to borrow funds from her bankers to pay for her living expenses. The monies she borrowed were secured by a mortgage over her home in Singapore. According to the taxpayer's brother, Dr Iswaran, who lived in Adelaide, the taxpayer believed that she would get better medical treatment in Australia and it was for that reason that she came to this country. He said that it was his sister's intention that when her medical condition was stabilized she would return to Singapore and recommence her medical practice. Certainly she kept up her registration as a medical practitioner in Singapore and her membership of the Singapore Medical Association and gave to the relevant Singapore authorities as and from 1 June 1997, as her address, the address of an uncle who lived in Singapore. She read medical journals regularly and had videos sent to her in Australia from the United Kingdom in order to keep abreast of medical developments. 13 The taxpayer within twelve days of her arrival in Adelaide had consulted a doctor and was under specialist care which included daily dialysis treatment as and from 13 September 1997. 14 However, it seems that even before arriving in Adelaide from Singapore the taxpayer had on 5 September 1994, through Dr Iswaran, commenced arrangements for the sale of her home in Singapore through estate agents there. These initial arrangements culminated in a contract to sell the home which was dated 14 October 1994 and which was a result of the exercise of an option contract entered into on 1 October 1994. It was said by Dr Iswaran that the sale of the home was activated by the need to reduce the borrowings secured on it and to provide funds for living and medical expenses. After deducting the secured borrowings and costs the taxpayer was left with a balance of $A3.65 million which was transmitted to an Australian bank account. It is the interest from the investment of this money which, if the taxpayer was a resident of Australia (but subject to the double tax agreement), would be assessable income to her in the years of income in question. Withholding tax of 10 per cent was deducted from the interest income she received pursuant to Division 11A of the 1936 Assessment Act. 15 After selling her home the taxpayer stored her household effects which had "sentimental and functional rather than any commercial value" in Johor, Malaysia. They were ultimately disposed of to charities and a Hindu temple in August 1996. 16 The taxpayer undertook several overseas trips during her stay in Australia on which she was accompanied by either her brother or his wife. In total she made some eight trips of relatively short duration. Her total absence from Australia from her first arrival here until her death was 70 days. With the exception of a trip to South India on a pilgrimage, all other trips were to either Singapore or Kuala Lumpur where she had friends and relations. On these seven trips, taking place during a period of some 45 months, she was out of Australia 55 days. When staying in Singapore she stayed at the home of the uncle whose address she had given to the Singapore authorities. She also contacted real estate agents while in Singapore regarding the possible acquisition of a unit for her occupancy upon returning there from Australia. On her return from each of the initial four trips her tourist visa was renewed. On her first return visit to Singapore in November 1994 she had closed up her home, sent her maid back to Sri Lanka, handed over her dog to a carer and, as noted earlier, arranged for storage of her household effects. One purpose of each of these first four trips was her need to renew the temporary visa she had. Of the remaining trips, one was to Singapore for the purpose of attending her uncle's son's wedding and visiting relatives and friends there. An August 1996 trip was undertaken to attend a religious ceremony and dispose of her household furniture and effects as well as to visit friends and relatives. An eight day trip in May 1997 was again undertaken to attend the wedding of a close relative of her sister-in-law as well as to visit relatives and friends. 17 Following upon her return from overseas on 17 July 1995 (her fourth trip) she was advised that she would not be allowed to re-enter Australia during the next twelve months on a tourist visa. She then lodged on 2 August 1995 an application for a temporary retirement visa. If granted, the visa for which she applied would have allowed her to stay in Australia for four years. In her application she said that she was "convinced" that she would like to retire in Australia and that she had been assessing Adelaide for her retirement. She said that she always had the wish to spend her retirement with the children of her deceased brother who also lived in Adelaide. 18 At the time of making the application for the temporary retirement visa she was receiving treatment at the Royal Adelaide Hospital. Without the ability to return to Australia she would not have been able to continue to receive treatment there. Somewhat untruthfully she said in her visa application that she had no serious disease, condition or disability. The application was refused and she sought review of the decision to do so. Correspondence in connection with that review repeated her preference to be with relatives and friends in Adelaide. She said that if her condition deteriorated within the four year period she would consider returning to Singapore, the country of her citizenship, where care and facilities were "excellent, cheaper and more readily available". However, she also said that she continued to enjoy good health and would prefer to be with her close relatives and friends in Adelaide who loved and cared for her and who encouraged her to enjoy her retirement and holiday in Australia. She sought help in obtaining the visa from the specialist doctor at the Royal Adelaide Hospital who was treating her. Ultimately on 26 June 1996 the visa was granted to her for four years. It was at this time that she gave away the household effects that she had kept in storage in Johor. 19 While in Australia she lived with her brother at his home. He nightly assisted her with attachment to the dialysis machine. Her medical condition prevented her from engaging in a normal social life in Australia. Nevertheless she had close friends and relatives in Adelaide, with whom she expressed the view that she preferred to be with. She kept close and frequent telephone contact with her intimate friends in Singapore and corresponded regularly with her maid in Sri Lanka indicating her intention to regain her services when the taxpayer returned from Australia. On one occasion in December 1994 the taxpayer's brother forwarded a wage cheque to the maid noting that his sister was "currently with me in Adelaide on a short holiday". 20 The taxpayer died on 17 June 1998.

The statutory test of residency 21 Section 6(1) of the 1936 Assessment Act defines a "resident" or "resident of Australia" as follows: "(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; (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 Australia and that he does not intend to take up residence in Australia; or

The Tribunal's reasons 22 The Tribunal accepted, correctly, that its task was to determine the question of residency of the taxpayer for each relevant year of income. It also said that if the taxpayer was a resident in the ordinary sense of the word it would have no need to consider whether either or both of paragraphs (i) and (ii) of s 6(1)(a) also applied to render the taxpayer a resident of Australia. Hence the Tribunal considered first whether the taxpayer was a resident of Australia in the ordinary sense. 23 The Tribunal said, and with respect, correctly, that in deciding whether the taxpayer was a resident of Australia in the ordinary sense of those words it was necessary for it to have regard to all identifiable facts relevant to the question. It referred to various indicia of residency set out in Taxation Ruling 98/17 issued by the Commissioner which it regarded as "helpful". Those indicia included "[t]he quality and character of an individual's behaviour while in Australia". This apparently encompassed matters such as intention, family and business ties, maintenance and location of assets and social and living arrangements. The Tribunal then offered "comments" on these factors as follows: "(1) The circumstances outlined in relation to the deceased's medical condition and need of hospital treatment point to her presence in Australia being for the prime purpose of receiving attention for that condition. (2) Although the period in Australia extended over a duration of forty five months, it was inextricably linked to the deceased's medical condition and the treatment thereof. (3) Similarly, but subject to the proviso that the worsening of the sickness dimmed her expectations, the identified facts indicate that the deceased at all times intended to return to Singapore and her former life. (4) The deceased had no business or employment ties in Australia. Throughout her stay in this country, the deceased lived with her brother and family while undergoing medical treatment. Although she had little, if any, social life in Australia, the deceased constantly communicated with her intimate contacts in Singapore. Dialogue was also maintained with her sharebroker in Singapore and personnel associated with the medical clinic of which she was formerly a member. The deceased also kept current her Singaporean medical registration. (5) With the exception of a few personal items and the house proceeds, all other possessions and assets remained either in Singapore or Malaysia."

24 The Tribunal then concluded that having regard to the taxpayer's overall behavioural pattern as demonstrated within the "identified facts" it would not reflect the quality or character of the idea of residence to conclude that the taxpayer was a resident of Australia as that expression is ordinarily used. 25 The Tribunal then turned to the question of domicile and concluded that the taxpayer had not at any time intended to make Australia her home indefinitely such as to permit the conclusion that she had obtained a domicile of choice in Australia. 26 Finally the Tribunal considered the second statutory test (paragraph (ii) of the definition in s 6(1)(a)). Having regard to the criticism which is made by counsel for the Commissioner of the Tribunal's reasons it is convenient to refer to them in their entirety so far as they go to this second test. The Tribunal, after considering the meaning of the word "abode", continued: "Although conceding that the deceased's place of abode was Australia during the relevant period, the applicant's representative submitted that, throughout that same period, the deceased's usual place of abode was Singapore. It was contended that the deceased's lifestyle in Australia had been severely restricted because of her health problems and that, during that time, she had not been living a normal and usual life. The claim was that the lack of quality and character of lifestyle should be recognised when distinguishing between 'abode' and 'usual place of abode'. The Tribunal is of the view that the nature and quality of the use which a person makes of a particular place of abode is a relevant factor when considering whether that abode qualifies as his or her usual place of abode. To this extent there is some overlap between the elements falling for consideration under the meaning of 'resides' in s.6(1)(a) as defined by this Tribunal and the inclusive provisions of paragraph (ii) of s.6(1)(a) of the Act [the 1936 Assessment Act]. It is the Tribunal's opinion that the deceased's use of her brother's home in Australia was at the bottom end of the quality and character of life scale. Indeed, it seems that, during the whole of the period, the deceased's attendance in Australia approached that of a patient presenting herself for medical treatment. In the final analysis, the Tribunal concludes that the deceased's use of the abode in Australia did not possess the characteristics necessary to classify that abode as her usual place of abode. For this and other reasons stated elsewhere, the Tribunal is satisfied that the deceased's usual place of abode was outside Australia and that she did not intend to take up residence in Australia."

27 In the result the Tribunal found that the taxpayer was not a resident of Australia within the meaning of s 6(1)(a) of the 1936 Assessment Act at any time during the years of income in question.

The Submissions of the Commissioner 28 It was submitted by the Commissioner that the Tribunal had, in considering the second statutory test contained in the definition in s 6(1)(a) of the 1936 Assessment Act, erred in two respects. First, it was submitted that the Tribunal had erred in law in considering the wrong question in its analysis of whether the second statutory test was satisfied. It was submitted that the Tribunal had merely considered whether the taxpayer's usual place of abode was in Australia rather than the correct question, namely whether it was satisfied that the taxpayer's usual place of abode was outside Australia. Secondly, it was submitted that the Tribunal erred in law in coming to a conclusion that simply was not open to it on the evidence before it. Rather it had arrived at a conclusion that was so unreasonable that no reasonable person would, on the evidence before the Tribunal (that is to say here the material in the request, correspondence and attachments), reach it and as such could be inferred to have erred in law.

The application of the second statutory test 29 The submissions of the Commissioner on the appeal were directed solely to the second statutory test and not to the questions whether the taxpayer was a resident of Australia in the ordinary sense of the word "resident" or whether the taxpayer was a resident of Australia having regard to the first statutory test of domicile and permanent place of abode. It is difficult to see how it could be submitted that there was any question of law involved in what were essentially factual findings of the Tribunal on these matters such as to enliven the Court's jurisdiction on appeal. Further, no submission was advanced to the effect that the Tribunal had in any way erred in law in concluding for the purpose of the second statutory test that the taxpayer had not intended to take up residence in Australia. There was, further, no disagreement between the parties that the taxpayer had been actually in Australia, continuously or intermittently, during more than one-half of each year of income. 30 The structure of the second statutory test is to treat a person as prima facie a resident where that person has in a year of income been actually in Australia for more than one-half of the year of income. The prima facie position will be displaced, however, where the person satisfies the Commissioner (or in the event of a review, the Tribunal) that his or her usual place of abode is outside Australia and that the person has not the intention of taking up residence in Australia. 31 Accordingly, in a case such as the present the task for the Commissioner (or, on a review, the Tribunal) will be to determine where the taxpayer's usual place of abode is. If that usual place of abode is in Australia or if the Commissioner (or, on the review, the Tribunal) is unable to be satisfied that the usual place of abode is outside Australia the consequence will be that the prima facie position has not been displaced and that accordingly the person will be a resident of Australia. A reading of the Tribunal's reasons set out above show that the Tribunal considered the question whether the taxpayer had a usual place of abode in Australia and decided that she did not. But, that was not the end of the enquiry which the Tribunal was bound to undertake. It was necessary for the Tribunal to continue and inquire whether the taxpayer had a usual place of abode somewhere outside Australia. Logically, the fact that a taxpayer does not have a usual place of abode within Australia does not mean that the taxpayer necessarily has a usual place of abode somewhere else. To use the language of an English authority, the taxpayer might be a "bird of passage", moving from place to place with no usual place of abode anywhere: Levene v Commissioners of Inland Revenue (1928) 13 TC 486 at 501. Prima facie, if such a person were in Australia more than one-half of the relevant year of income, but had not established a usual place of abode here, that person would still be a resident of Australia. The prima facie position would not have been displaced because the Commissioner could not be satisfied that such a person had a usual place of abode outside Australia. Accordingly, the person would be a resident of Australia as a consequence of the second statutory test. 32 The need to consider whether the taxpayer had a usual place of abode outside Australia would seem, at least implicitly, to have been accepted by counsel for the executors in the Tribunal. He submitted there that the taxpayer had a usual place of abode in Singapore. 33 The Tribunal clearly considered and rejected the position that the taxpayer had a usual place of abode in Australia. However, the Tribunal appears to have concluded from that, that the taxpayer, therefore, had a usual place of abode outside Australia. No doubt there could be some cases where, the choice being between two obvious alternative places of abode, a conclusion that a person has not a usual place of abode in Australia would necessitate a finding that the person had his or her usual place of abode at the alternative place. However, the present was not a case where there was merely a need to consider which, of two alternative places where the taxpayer had a place of abode, was the usual place of abode. Rather there was a real question here whether the taxpayer in fact had a place of abode outside Australia at all, let alone a place of abode that would qualify as a usual place of abode. 34 At no point in its reasons did the Tribunal consider whether the taxpayer had a place of abode in some place outside Australia and, if so, whether that place of abode was the taxpayer's usual place of abode. In failing to consider whether the taxpayer's usual place of abode was in fact Singapore (no other place appears to have been suggested as qualifying as a possible place of abode) the Tribunal failed to ask itself the correct question. In so failing it erred in law and its decision must accordingly be set aside. 35 It is therefore unnecessary to consider whether it was open to the Tribunal on what it referred to as the "identified facts" to be satisfied that the taxpayer's usual place of abode was in fact in Singapore.

Was there jurisdiction in the Tribunal to review the objection decisionS? 36 Neither the Commissioner nor the executors sought to submit that the Tribunal lacked jurisdiction to review the Commissioner's objection decisions in the present circumstances. Obviously, both wanted the question decided. When the appeal was listed, however, the listing judge raised the question whether the system of private rulings contemplated the Commissioner being required to rule on the question of residency of a taxpayer in past years of income. Where there may be doubt as to jurisdiction, that doubt must be considered by the Court even if the question is not at issue between the parties. The parties cannot confer upon the Tribunal (or, for that matter, the Court) jurisdiction where none exists. I acknowledge the difficulty this creates where there is no real contradictor and in particular the question whether the Court is really deciding a "matter" within Chapter III of the Constitution. Nevertheless, I propose to consider the scheme of the legislation so far as it concerns private rulings in an attempt to resolve the question whether the present was a case where the Commissioner was bound to give a ruling and in consequence whether the Tribunal had jurisdiction to review the objection decisions. 37 Section 14ZAF of the Administration Act permits a person to apply to the Commissioner "for a ruling on the way in which, in the Commissioner's opinion, a tax law or tax laws would apply to the person in respect of a year of income in relation to an arrangement". The year of income may be a past year of income (as here), the current year of income or a future year of income: s 14ZAH of the Administration Act. A "tax law" may, as in the present case, be an "income tax law", which expression means a law under which there is "worked out" the "extent of liability to income tax": s 14ZAAA of the Administration Act. 38 The formation of an opinion by the Commissioner or, inter alia, the attaining of a state of mind by him is taken to be an exercise of discretion (s 14ZAD) and s 14ZAE specifically states that a "ruling on the way in which a tax law applies may be a ruling on the way in which a discretion of the Commissioner under that law would be exercised". Hence it is not in dispute that a ruling could, in a case such as the present, relate to the formation by the Commissioner of a state of mind as to whether the usual place of abode of a person is outside Australia. 39 The expression "arrangement" is defined in s 14ZAAA for the purposes of Part IVAAA, which deals with public rulings, and this definition is incorporated into the provisions dealing with private rulings by s 14ZAA(2). It includes: "(a) scheme, plan, action, proposal, course of action, course of conduct, transaction, agreement, understanding, promise or undertaking; or (b) part of an arrangement;"

40 For present purposes it would seem that, if there were an arrangement upon which a ruling was sought, that arrangement would not be an arrangement in the ordinary sense of the word, but rather a course of conduct or course of action. The word "arrangement", admittedly in a somewhat different context, was said by the High Court in Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434 at 443 per Gibbs and Mason JJ to be an arrangement that is "bilateral or multilateral". It is unnecessary to consider whether that is the meaning of the expression in the present context, although as presently advised I see no reason why it is not. 41 By force of s 14ZAI an arrangement to which an application for ruling may apply may, if not a proposed arrangement, be either an arrangement that "has been carried out" or one that is "being carried out". These references to the arrangement having in the past been carried out or at the time of application having been being carried out are repeated in s 14ZAN which authorises the Commissioner not to comply with an application for a ruling in certain circumstances, which include the case where the "arrangement to which the application relates has neither been, nor is being, carried out and is not seriously contemplated" to be carried out: s 14ZAN(h). Except in the cases to which s 14ZAN applies (and subject to s 14ZAQ), the Commissioner must comply with the application for ruling: s 14ZAL(1). The ruling itself must identify, among other things, the arrangement to which the ruling relates: s 14ZAS(1). 42 The expression "carry out" and other versions of it is apt to cover the doing of all things that may be necessary to give effect to a plan of conduct. So, for example, it would cover the giving effect to of the arrangement considered by a full court of this Court in Bellinz v Commissioner of Taxation (1998) 84 FCR 154. Indeed, a ruling on the tax consequences of such an arrangement would seem to be the normal case contemplated by the provisions. Conversely, where there is a factual question concerning the state of mind of a taxpayer, critical to a question of relevance, it is both difficult to talk of that as an action, course of action or course of conduct and to describe is as something that is "carried out". It may, however, be a fact relevant to the tax consequences of what otherwise is a course of conduct. 43 As Gummow J pointed out in his judgment in this Court in CTC Resources NL v Commissioner of Taxation (1994) 48 FCR 397 at 401 ("CTC Resources"), prior to the insertion of the present provisions dealing with private and public rulings, rulings given by the Commissioner were, in general, not legally binding upon the Commissioner. However, as a consequence of s 170BB of the 1936 Assessment Act the Commissioner must assess a taxpayer in accordance with a ruling favourable to the taxpayer, so that the assessment and tax payable will be that which would be the case if the income tax law applied in the ruled way. If there is an objection by the taxpayer against the ruling, then when the order in relation to that objection, whether made by the Tribunal or the Court, becomes final (that is to say, in general terms, when appeals have been decided or abandoned) the income tax law will apply to the taxpayer in accordance with the ruling as affected by that order even if the ruling is unfavourable to the taxpayer: s 170BH(2). And the income tax law will apply in that way "despite any other order or decision of a court about any application of that law": s 170BH(3). The effect of s 170BH was described by Gummow J in CTC Resources at 402 as follows: "… The effect of s 170BH is that the earlier decision of the Court in a proceeding upon the private ruling in relation to a particular person is treated as the factum upon which the legislation, in relation to the particular arrangement, operates upon that person in respect of the year of income in question. In that sense the operation of the general law is modified with respect to a particular taxpayer. …"

44 In my opinion the course of conduct of a taxpayer (ie what the taxpayer does) can be seen as an arrangement and in a case where that course of conduct is complete it can be said to have been carried out. In that sense, therefore, there is an arrangement upon which the Commissioner may be asked to rule, that is to say, to state how the income tax law works itself out in respect of that course of conduct. Where the course of conduct includes the derivation of interest income, as here, that suffices to empower the Commissioner to rule on whether having regard to the course of conduct (e.g, in the present case, the arrival of the taxpayer in Australia, her departure and return, her living here, receiving medical treatment here and deriving income) the taxpayer derived assessable income upon which income tax was payable. In other words, it is my view that the Commissioner was obliged to rule on the taxpayer's course of conduct, as constituted the arrangement, and the Tribunal had jurisdiction to review the Commissioner's objection decisions where a timely objection was lodged by the executors in respect of the ruling. That, however, does not dispose of the problem where the facts put before the Commissioner are in conflict and where the issue involves the state of mind of a taxpayer. 45 It is clear that in making a ruling the Commissioner is entitled to have regard to "information" and "documents" supplied to him. Indeed, the Administration Act authorises the Commissioner to request the applicant for ruling to supply information (s 14ZAM) and requires the application for ruling to both give such information and be accompanied by such documents as are required by the Commissioner (s 14ZAJ). 46 These things having been said, however, there is an obvious difficulty and in some cases at least a possible inutility in a ruling being requested and that request being complied with where information provided is conflicting. Because the scheme of the legislation requires the Commissioner when making the ruling to take the arrangement as it is and rule, in respect of it, how the tax law applies, the contemplation of the scheme of the legislation may well be that the facts constituting the arrangement are not in dispute. 47 There will be cases where the facts supplied are incomplete. In such cases the Commissioner is empowered to make such assumption or assumptions as he considers appropriate in making the requested ruling: s 14ZAQ(b). The Commissioner is not bound to make assumptions and if the ruling depends upon the making of an assumption about some matter the Commissioner may decline to make the ruling: s 14ZAQ(a). Where the ruling depends upon an assumption, the notice of ruling must set it out: s 14ZAS(2). 48 It may well be that, in a case where the Commissioner is asked to rule upon an arrangement where the subject matter of the arrangement ruled upon depends upon conflicting information as to factual matters, the acceptance of one view of the facts involves the Commissioner assuming which version of the facts is correct. In such a case the Commissioner, if he does not wish to decline to rule altogether, must then indicate the assumptions upon which the Commissioner has ruled, that is to say the assumptions he makes as to which information is true and which not. In other cases the better course might well be to decline to make the ruling altogether, relying upon s 14ZAQ(a). 49 Where the issue ruled upon, for example, as here, residence, depends upon forming a view as to the state of mind of a person, the Commissioner can no doubt give a ruling which assumes that if he is correct as to the state of mind of a taxpayer, then the tax law works itself out in a particular way. But one may wonder at the utility of such a ruling. Assuming that in due course an assessment issues and an objection is determined adversely to the taxpayer following a ruling favourable to the executors (and there is no reason why the Commissioner should not issue an assessment inconsistent with a ruling where the assessment proceeds upon a different state of facts or depends upon a different assumption), the question on a review by the Tribunal or appeal to the Court in respect of an objection decision relating to that assessment will turn upon whether the taxpayer satisfies the burden of showing that the assessment is excessive. The real facts will then fall for decision. The Tribunal or Court may then take a quite different view of the relevant facts from those upon which the Commissioner has ruled or which have been the subject of assumption. The certainty, which the ruling system was designed to achieve, will have been lost. 50 The above comments do not require, however, the conclusion that the Commissioner had no power to make the ruling or that the Tribunal in consequence had no jurisdiction to review an objection decision relating to it. In my view each had power and jurisdiction.

51 I would accordingly allow the application with costs and remit the matter to a Tribunal differently constituted to reconsider the Commissioner's objection decisions in accordance with law.

I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

REASONS FOR JUDGMENT TAMBERLIN J: 52 I have read the reasons for judgment of Hill J. I agree with his Honour that the Administrative Appeals Tribunal ("the Tribunal") erred in addressing only the question whether the taxpayer had a usual place of abode in Australia and failing to determine whether the taxpayer had a place of abode outside Australia and, if so, whether such abode was a usual place of abode and where such abode was situated. I also agree, for the reasons given by his Honour, with the conclusion that the Tribunal had jurisdiction to review the objection decision. 53 In my opinion, particularly taking into account that the question raised relates to several years of income, the matter should be remitted to the Tribunal for reconsideration in accordance with these reasons, having regard to the failure to address the central issue. 54 Accordingly, the application should be allowed and the decision of the Tribunal set aside. The matter should be remitted to the Tribunal, differently constituted, for reconsideration in accordance with law. The respondent should pay the applicant's costs. I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

AND: EXECUTORS OF THE ESTATE OF SANTHA THEVY SUBRAHMANYAM

REASONS FOR JUDGMENT EMMETT J: 55 The respondents ("the Executors") are the executors of the estate of the late Santha Thevy Subrahmanyam ("the Deceased"), who died in Australia on 17 June 1998. The Executors lodged a request for private rulings with the applicant, the Commissioner of Taxation ("the Commissioner"), on the question whether interest income derived by the Deceased for the years of income ended 30 June 1995, 1996, 1997 and 1998 was assessable under either s 25(1) of the Income Tax Assessment Act 1936 ("the 1936 Assessment Act") or s 6-5 of the Income Tax Assessment Act 1997 (Cth) ("the 1997 Assessment Act"), as the case may be. The answer to the question depends upon whether the Deceased was a resident of Australia for any part of the period from 7 September 1994 to the date of her death. 56 The Executors, being dissatisfied with the private ruling issued by the Commissioner, lodged notice of objection against the private ruling. When the Commissioner disallowed the objection, the Executors applied to the Administrative Appeals Tribunal ("the Tribunal") for review of that decision. On 14 May 2001, the Tribunal set aside the Commissioner's decision on the objection and, in substitution therefor, held that the Deceased was not a resident of Australia at any time. Pursuant to the s 44 of the Administrative Appeals Tribunal Act the Commissioner now appeals from the Tribunal's decision to the Federal Court of Australia. The Chief Justice determined that the appeal be heard by a Full Court.

STATUTORY FRAMEWORK 57 Section 14ZAF of the Taxation Administration Act 1953 (Cth) ("the Administration Act") provides that a person may apply to the Commissioner for a ruling on the way in which, in the Commissioner's opinion, a tax law or tax laws would apply to the person in respect of a year of income in relation to an arrangement. By the operation of s 14ZAA(2) and 14ZAAA of the Administration Act, the expression "arrangement" includes: "(a) scheme, plan, action, proposal or course of action, course of conduct, transaction agreement, understanding, promise, or undertaking; or (b) part of an arrangement…"

Under the same provisions, the term "tax law" includes the 1936 Assessment Act and the 1997 Assessment Act.

58 Section 14ZAR(1) of the Administration Act provides that the Commissioner makes a private ruling by preparing a written notice of it and serving the notice on the applicant. Under s 14ZAS(1) a notice of a private ruling must set out the matter ruled on and, in doing so, must identify the person, tax year, year of income and arrangement to which the ruling relates. 59 A person who is the subject of a ruling is referred to in the Administration Act as the "rulee". Under s 14ZAZA(1), a rulee who is dissatisfied with a private ruling may object against it and such a ruling is a "taxation decision" for the purposes of Part IVC. Part IVC deals with taxation objections, reviews and appeals. Under s 14ZY(1), where an objection has been lodged within the time specified, the Commissioner must decide whether to allow it, wholly or in part, or to disallow it. Such a decision is an "objection decision". Under s 14ZZ, if the person is dissatisfied with the Commissioner's objection decision, the person may apply to the Tribunal for review of the decision. 60 Under s 170BB(3) of the 1936 Assessment Act, if: · there is a private ruling on the way in which an income tax law applies to a person in respect of the year of income in relation to an arrangement (defined as "ruled way"); and · that law applies to that person in respect of that year in relation to that arrangement in a different way; and · the amount of final tax under an assessment in relation to that person would exceed what it would have been if that law applied in that ruled way; the assessment and amount of final tax must be what they would be if that law applied in the ruled way. 61 Under s 170BG(2) of the 1936 Assessment Act if, on the review of an objection decision about an objection against a private ruling, the Tribunal decides that an income tax law would apply to a person in a particular way in respect of a year of income in relation to an arrangement and that decision becomes final, then, for the purposes of the 1936 Assessment Act, that law applies to that person in that way in respect of that year in relation to those arrangements. There are provisions of the 1997 Assessment Act that correspond, in their effect, with ss 170BB and 170BG of the 1936 Assessment Act. 62 Thus, where a taxpayer has the benefit of a private ruling, the taxpayer may not be assessed for tax in an amount in excess of the tax applicable in accordance with the ruling. On the other hand, under s 14 ZVA of the Administration Act, if there has been a taxation objection against a private ruling, then a right of objection against an assessment relating to the matter ruled is limited to a right to object on grounds that neither were, nor could have been, grounds for the taxation objection against the ruling. That is to say, it is not open to a taxpayer who has objected against a private ruling to ventilate in connection with an objection against an assessment, the same question that was ventilated in connection with the objection against the ruling. 63 Under s 14ZAH, a year of income to which an application applies may be a past year of income and under s 14ZAI, an arrangement to which an application applies may be an arrangement that has been carried out.

FACTUAL BACKGROUND 64 The Deceased, who was a medical practitioner in Singapore until her retirement in August 1994 when she was aged 64, was a citizen of Singapore, having been born there in December 1930. The Deceased never married but had an extensive family, including brothers and sisters and their families, who lived in Singapore, Malaysia, the United Kingdom and Australia. For some time prior to her retirement, the Deceased suffered ill health, principally related to a renal condition. The ongoing nature of that condition brought about her retirement. 65 On 7 September 1994, the Deceased arrived in Australia on a three month tourist visa and stayed at the home of her married brother, Dr Iswaran, who resides in Adelaide. Within 12 days of her arrival, the Deceased had consulted with a general practitioner and specialist medical practitioner located at the renal unit of the Royal Adelaide Hospital. The specialist commenced administration of care that continued until the death of the Deceased. That care included daily dialysis treatment from 13 September 1997. 66 In early October 1994, the Deceased decided to sell her home in Singapore. That decision was precipitated by the need to reduce a bank overdraft and to provide funds for living and medical expenses. An option granted by the Deceased in respect of her home was exercised on 14 October 1994 and settlement of the sale took place on 6 January 1995. The balance of the proceeds of sale, after deducting monies secured by a mortgage over the Deceased's home, of $A3.65 million, was transmitted to an account in the name of the Deceased with an Adelaide branch of an Australian bank. 67 Those funds yielded interest in the following amounts: · year ended 30 June 1995: $560.00; · year ended 30 June 1996: $383,802; · year ended 30 June 1997: $300,384; · year ended 30 June 1998: $236,405.

The issue raised by the application for a private ruling was the assessability of that interest under the 1936 Assessment Act in respect of the first three years and under the 1997 Assessment Act in respect of the last year. 68 After her first arrival in Australia, the Deceased undertook several overseas trips prior to her death. In total there were eight trips, all of which were for relatively short periods of time. With the exception of a trip to South India, where the Deceased went on a pilgrimage and attended the birthday celebrations of a spiritual leader, all other trips were either to Singapore or Kuala Lumpur, where the Deceased had friends and relations. 69 In each of the four years of income in question, the Deceased was in Australia for a substantial part of the year as follows: "Year Dates in Australia No. of Days Total Y/e 30.6.95 07/09/94 - 06/11/94 60 23/11/94 - 02/02/95 71 08/02/95 - 18/04/95 69 24/04/95 - 30/06/95 66 266 Y/e 30.6.96 01/07/95 - 08/07/95 6 17/07/95 - 09/11/95 115 25/11/95 - 14/03/96 110 20/03/96 - 30/06/96 101 332 Y/e 30.6.97 01/07/96 - 16/08/96 45 25/08/96 - 31/05/97 275 09/06/97 - 30/06/97 20 Y/e 30.6.98 01/07/97 - 17/06/98 350 350 (date of death) "

THE ISSUE 70 The private ruling issued by the Commissioner on 24 February 2000 was in the terms set out in the appendix to these reasons. In the explanation that accompanied the notice of private ruling, but which did not form part of it, the Commissioner said, inter alia, as follows: "From when was Miss Subrahmanyam a resident? Based on the following information it is considered that she was a resident from the day she first arrived in Australia ie 7 September 1994: · In her application for a visa she indicated that she 'always had this wish to spend my retirement with my late brother's children.' This indicates that her travel to Australia was premeditated and with the intention of remaining for a lengthy period and possibly retiring here.

· When she came to Australia she did so to seek treatment. Given that her doctor indicated that the treatment would be lifelong she would have expected to remain in Australia for the rest of her life. This is supported by her application for private health membership.

· Her decision to sell her house and transfer the sale proceeds to Australia was made within weeks of her arrival in Australia.

· Her treatment commenced soon after arriving and, as such, her lifestyle changed significantly - a lifestyle that was totally dependent on her remaining in Australia."

71 Thus, the question that arose for the Tribunal was whether, on the material before it, the Deceased was a resident of Australia for any part of the period from 7 September 1994 until her death. The Commissioner, in his ruling, concluded that she was a resident for the whole of that period. The Tribunal concluded that she was not a resident for any part of that period. If the Deceased was a resident of Australia during the whole of that period, all income derived by her was assessable income pursuant to s 26 of the 1936 Act or s 6-5 of the 1997 Assessment Act, as the case may be. 72 "Resident" or "resident of Australia" is defined in s 6(1) of the 1936 Assessment Act as follows: "(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;

(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 Australia and that he does not intend to take up residence in Australia;…"

There is a corresponding definition in the 1997 Assessment Act. 73 There are, in effect, three tests for determining whether a person is a resident of Australia for the purpose of the Assessment Acts. The tests are not cumulative. If an individual satisfies any one of the tests, there is no need to consider the others. The tests might be summarised as follows: · the person resides in Australia; · the person has a domicile in Australia; · the person has actually been in Australia, continuously or intermittently, during more than one half of the year of income.

74 The second and third tests are subject to exclusionary provisions. Thus, even if a person has a domicile in Australia, the person will not be a resident if the Commissioner is satisfied that the person's permanent place of abode is outside Australia. Further, even if a person has actually been in Australia, continuously or intermittently, during more than one half of the year of income, the person will not be a resident of Australia if the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residence in Australia. 75 The Tribunal concluded that the Deceased did not satisfy any of the three tests. The Commissioner contends that the Tribunal erred in law in reaching its conclusion. The Commissioner accepts that, if his contentions in relation to the third test are not accepted by the Court, it would be virtually impossible to demonstrate that there was an error in relation to the first two tests. Accordingly, it is convenient to deal first with the third test, sometimes referred to as "the 183 day test", derived from s 6(1)(a)(ii) of the 1936 Assessment Act. 76 To apply "the 183 day test", it is first necessary to determine whether the deceased was actually in Australia during more than half a year of income. The determination must be made for each year separately. Based on the figures in paragraph [15] above, the deceased satisfies that precondition for each of the years in question. As a result, the deceased is presumed to be a resident unless the Commissioner is satisfied that the "usual place of abode" of the deceased is outside Australia and that the deceased did not intend to take up residence in Australia. 77 The Tribunal's conclusions in relation to the 183 day test are contained in the following paragraphs: "36. Although conceding that the deceased's place of abode was Australia during the relevant period, the applicant's representative submitted that, throughout that same period, the deceased's usual place of abode was Singapore. It was contended that the deceased's lifestyle in Australia had been severely restricted because of her health problems and that, during that time, she had not been living a normal and usual life. The claim was that the lack of quality and character of lifestyle should be recognised when distinguishing between 'abode' and 'usual place of abode'. 37. The Tribunal is of the view that the nature and quality of the use which a person makes of a particular place of abode is a relevant factor when considering whether that abode qualifies as his or her usual place of abode. To this extent there is some overlap between the elements falling for consideration under the meaning of 'resides' in s.6(1)(a) as defined by this Tribunal and the inclusive provisions of paragraph (ii) of s.6(1)(a) of the Act. 38. It is the Tribunal's opinion that the deceased's use of her brother's home in Australia was at the bottom end of the quality and character of life scale. Indeed, it seems that, during the whole of the period, the deceased's attendance in Australia approached that of a patient presenting herself for medical treatment. In the final analysis, the Tribunal concludes that the deceased's use of the abode in Australia did not possess the characteristics necessary to classify that abode as her usual place of abode. For this and other reasons stated elsewhere, the Tribunal is satisfied that the deceased's usual place of abode was outside Australia and that she did not intend to take up residence in Australia."

78 Thus, the Tribunal recognised a distinction between the place of abode of the Deceased on the one hand and the usual place of abode of the Deceased on the other hand. However, the Tribunal did not, in its reasons, give any consideration to where the usual place of abode of the Deceased might have been. The Act appears to contemplate that there will be only one usual place of abode, although it does not necessarily follow that every person must have a usual place of abode. When comparing two places of abode of a particular person, in order to determine whether one is the usual place of abode, it is necessary to examine the nature and quality of the use to which the person makes of each particular place of abode. It is then possible to determine which is the usual one, as distinct from the other or others which, while they may be places of abode, are not properly characterised as the usual place of abode. The Tribunal properly examined the nature and quality of the use to which the Deceased made of her abode in Australia, namely her brother's home. The Tribunal concluded that the Deceased's use of her brother's home in Australia "did not possess the characteristics necessary to classify that abode as her usual place of abode". 79 The Tribunal did not, in its reasons, consider the question of whether the Deceased had any other place of abode, other than to observe that the Executors submitted that her usual place of abode throughout the relevant period was Singapore. The Tribunal made no finding as to where that place of abode was. It certainly gave no reasons for concluding that the Deceased's usual place of abode was in Singapore, if that is the conclusion that the Tribunal reached. 80 The material before the Tribunal showed as follows: · The Deceased was single and had no children. · The Deceased's stated purpose in coming to Australia was to seek medical attention and to retire. · In September 1994, the Deceased, having arrived in Australia, took out health cover in Australia and commenced receiving medical treatment. · Within a few days of arriving in Australia, the Deceased made arrangements to sell her home in Singapore and remitted the whole of the proceeds of sale to Australia. · The nature of the Deceased's illness indicated that she intended to remain in Australia for a lengthy period and did so remain in Australia. · Although the Deceased returned to Singapore on a number of occasions to "renew the Australian visa", each trip overseas was for less than 16 days. · On the sale of her home in Singapore, the Deceased stored her furniture and personal effects in Malaysia until she disposed of them in August 1996. · The Deceased had close friends and relatives in Adelaide and she expressed the view that she preferred to be with them.

81 All of those matters tend away from a conclusion that, after 7 September 1994, the Deceased's usual place of abode was Singapore. In the light of those matters, it was incumbent upon the Tribunal to indicate the material before it upon which it based its conclusion that the abode that the Deceased had in Australia was not her usual place of abode. To do that, it was necessary to point to material that supported a conclusion that there was another abode outside Australia that was her usual abode. The Tribunal erred in failing to do so. 82 As a result of that error, it is unnecessary to consider the other tests for residency for the purposes of s 6(1) of the 1936 Assessment Act.

CONCLUSION 83 The Tribunal erred in the way in which it dealt with the 183 day test provided for in s 6(1) of the 1936 Assessment Act. Accordingly, the decision of the Tribunal should be set aside. The matter should be remitted to the Tribunal for determination according to law. The Executors should pay the Commissioner's costs of the application. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 19 December 2001 Counsel for the Applicant: M Gordon

Solicitor for the Applicant: Australian Government Solicitor

Counsel for the Respondent: J de Wijn QC with A MacDonald

APPENDIX NOTICE OF PRIVATE RULING This Ruling is a Private Ruling for the purposes of Part IVAA of the Taxation Administration Act 1953. THIS RULING APPLIES TO: Estate of S.T. Subrahmanyam CIC192090 YEAR(S) OF INCOME TO WHICH THIS RULING APPLIES: Year ending 30 June 1995 Year ending 30 June 1996 Year ending 30 June 1997 Year ending 30 June 1998 TAX LAW: Subsection 6(1) Income Tax Assessment Act 1936 Subsection 6-5(2) Income Tax Assessment Act 1997 Paragraph 25(1)(a) Income Tax Assessment Act 1936 WHAT THIS RULING IS ABOUT:

1. Whether the rulee is assessable under section 25(1)(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1995?
2. Whether the rulee is assessable under section 25(10(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1996?
3. Whether the rulee is assessable under section 25(1)(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1997?
4. Whether the rulee is assessable under section 6-5(2) of the Income Tax Assessment Act 1997 on interest income derived by the deceased for the year ended 30 June 1998? THE SUBJECT OF THE RULING: The arrangement as set out in your letters dated: 16 August 1999; 07 January 2000; and 08 February 2000. COMMENCEMENT OF ARRANGEMENT: Wednesday, 7 September 1994 RULING:
5. Whether the rulee is assessable under section 25(1)(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1995? Yes
6. Whether the rulee is assessable under section 25(1)(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1996? Yes
7. Whether the rulee is assessable under section 25(1)(a) of the Income Tax Assessment Act 1936 on interest income derived by the deceased for the year ended 30 June 1997? Yes
8. Whether the rulee is assessable under section 6-5(2) of the Income Tax Assessment Act 1997 on interest income derived by the deceased for the year ended 30 June 1998. Yes.