Letter of Advice to Mr Nguyen Summary 2022

Running head: LETTER OF ADVICE TO MR NGUYEN
Letter of Advice to Mr Nguyen
Name of the Student
Name of the University
Author Note

1LETTER OF ADVICE TO MR NGUYEN

2LETTER OF ADVICE TO MR NGUYEN
Table of Contents
Summary of Advice..................................................................................................................3
Introduction.............................................................................................................................. 3
Issue........................................................................................................................................ 4
Relevant Law........................................................................................................................... 4
Application............................................................................................................................... 6
Conclusion............................................................................................................................... 6
References............................................................................................................................... 8

3LETTER OF ADVICE TO MR NGUYEN
Herbert Smith Freehills
ANZ Tower 161 Castlereagh Street
Sydney NSW 2000
Australia
Al Ahsa Street Our ref: 404
Malaz11371 24 th August
2019.
Riyadh
Riad.
.
Dear Mr Nguyen,
On the basis of our recent meetings, communications and telephone discussions, please find
our advice below regarding the various matters you have requested.
Summary of Advice
Attached below the summary advice are the various issues, relevant provisions and legal
citations that we consider to be necessary for your case. In case you feel that any of the facts/
assumptions provided by us are incorrect, please contact us immediately as this may have a
significant impact on the advice provided by us.
In brief, our advice to you is as follows:
- You cannot be considered to be resident of Australia for taxation purposes for the years
2017 and 2018 as you had not stayed in Australia during those years and your income
was accrued from Saudi Arabia,
- Income accrued from other countries cannot be charged for taxation purposes in
Australia as you are not a resident,
- Your returns to Australia in the month of January are only as a visitor and nothing else.
Hence, it cannot be suggested that you are maintaining residence in Australia. At this
point, it is very clear that your stay in Saudi Arabia is indefinite,
- Hence, you need not accept the offer of the Australian Taxation Office (ATO) or change
your tax returns as to those filed by a resident.
Introduction
- The tax laws in Australia are governed by the federal government and an annual tax is
levied on individuals and entities that earn income in the country during a financial year.
This is applicable on the income earned by them on a worldwide basis,
- In case of non-residents earning income in Australia, tax is only charged on the income
earned by them in a given financial year. However, there exist situations where

4LETTER OF ADVICE TO MR NGUYEN
determining the residential status of an individual becomes difficult1. Your situation is
something similar,
- Over the years, there have been many cases related to determining the tax situation of a
person whose residential status could not be determined using the ordinary methods of
determining the tax residency of an individual,
Issue
The main issues that are relevant in your case have been mentioned here.
- After residing and working as an engineer for many years in Australia, your marriage
broke down in 2015. You made a divorce related payment to your wife in the form of a
rental property. You, however, kept a property purchased in 1990 for $150000 to
yourself,
- After the settlement of your divorce, you moved to Saudi Arabia as a part of the new
job that started on 5th July 2016. To take part in the new job, you left Australia on 1st July
2016. The pay received by you as a part of the job is deposited into your Australian bank
account. Along with this, you did not take up any special efforts to give up your
Australian citizenship,
- These include not changing your driving license address or handing back your gun
license or informing any authorities about ceasing your tax residence,
- You further went on to file your 2017 and 2018 income tax returns as submitted by a
non-resident with the help of a local tax agent. The only aspect of income that was
mentioned in the income tax returns was the Australia based interest that you had
earned,
- You also continued to come back to Australia in the month of January every year and
lived for a month there. However, these are only as a visitor to meet your family,
- You really like your new job and have no material plans of returning to Australia in
the near future. You have received information that the income earned by you in 2017
and 2018 was subject to audit by the Australian Taxation Office (ATO),
- It is evident that you cannot be treated as an Australian citizen for tax purposes.
This is because you have continued to live outside Australia continuously for more than
half a year. Even though you have returned to Australia in the month of January, it is
only as a visitor and not anything else. The continued residence outside Australia
combined with your intention to not return to Australia is sufficient to say that you are not
a resident of Australia. A detailed explanation of the legal provisions is mentioned below.
Relevant Law
- According to section 6(1)(a)(1) of the Income Tax Assessment Act, 1936, a person will
be a resident of Australia if they permanently reside in Australia or live outside the
country but have a place of abode in Australia. Until the Tax Commissioner is convinced
that the person’s permanent domicile is not in Australia, he will not be considered to be
the resident of another country,
- The rules followed by the Australian Taxation Office regarding determining the
residential situation of an individual are different from those followed by the Department
of Home Affairs,
1 Bembrick, P. (2018). Taxing times for Australian expats overseas. Taxation in Australia, 53(5), 238.

5LETTER OF ADVICE TO MR NGUYEN
- As per the guidelines mentioned by the ATO, there are various categories of residents
within Australia apart from the regular residents. They are known as the Australian
residents for taxation purposes, foreign residents and temporary residents,
- Under resides test, an individual is deemed to be a resident of Australia if he dwells
permanently in a particular place in Australia for some time. The domicile test states that
a person is a resident of Australia if his domicile or place of origin is in Australia, unless
the Commissioner of taxation is satisfied that the person’s ‘permanent place of abode’ is
outside Australia2,
- Section 6.5 of ITAA 1997 suggests that if a person is considered a resident of Australia,
his worldwide income is taxable in Australia under the ‘ordinary concepts test’. While the
other tests are relatively straightforward in nature, the Permanent Place of Abode test
has been debatable over the past few years,
- The main point of contention in most of the cases has been determining the intention of
the individual involved3,
- This case is related to Mr Dempsey, who was a project manager on a major construction
project in Saudi Arabia. He had an employment contract of an indefinite duration while
his project lasted for three years. Dempsey expected that after the completion of this
project, he would move on to a new project in Saudi Arabia itself. However, it did not
happen and he had to return to Australia. While he returned to Australia regularly, they
were mostly short visits,
- As he lived in Saudi Arabia, his house in Australia was abandoned. The salary he
earned was credited into his Australian bank account and contributions to his
superannuation was made to the bank account in Australia,
- The court held that Mr Dempsey could not be considered to be a citizen of Australia as
his permanent place of abode was outside Australia and because his income was
earned using the resources of Saudi Arabia,
- It also cited a 1946 case of Miller as a basis for its judgement4. In the case of Miller, the
court stated that the term resides was not a term of art denoting a field with precisely
defined set of boundaries. The judge further stated that determining where a person
resides includes questions of degree and of fact,
- Hence, he suggested that there is no fixed definition of determining the place of
residence of a person and should always be considered on the basis of the facts of the
case. He went on to conclude that Mr Dempsey’s presence in Saudi Arabia was not
casual or temporary,
- Even though he made regular visits to Australia, they were only but as a visitor.
Therefore, he was not liable to pay taxes in Australia in those years. Another important
case that is relevant to your situation had occurred in 20025,
- This made important arguments about the term residence being given a much broader
meaning for a person deemed to be a non-resident of Australia and not a narrower
meaning6,
2 Pinto, D. and Sadiq, K. (2016). From Switzerland to New Zealand: Around the world in 13
cases. Australian Tax Review, 45(2), 133-144.
3 Dempsey and FCT [2014] AATA 335; 2014 ATC 10-363
4 Federal Commissioner of Taxation v Miller [(1946) 73 CLR 93]
5 Subrahmanyam v Commissioner of Taxation [2002] ATC 2303
6Ato.gov.au. (2019). Legal Database. [online] Available at: https://www.ato.gov.au/law/view/view.htm?
docid=EV/7925123987916&PiT=99991231235958 [Accessed 27 Aug. 2019].

6LETTER OF ADVICE TO MR NGUYEN
- The basis for this case is the judgement given in the case of Mr Appleton in the year
19797. In this case, the honourable judge Franki J cited another case to stress the
importance of what constitutes a ‘place of abode’8. He suggested that the meaning of the
word ‘permanent’ should be constructed according to the context in which it appears and
not have a fixed meaning in all situations9,
- The rules of the ATO also suggest that a person cannot be deemed to be a resident for
tax purposes if he has resided abroad for an extended period abroad and he does not
have any intention of returning to Australia. Both these factors together are sufficient to
make the ‘resides test’ irrelevant.
Application
- Your case is very similar to Mr Dempsey. You had left Australia in 2016 for Saudi Arabia
for an indefinite period and do not want to return to Australia for the foreseeable future,
- In a similar manner to Mr Dempsey, your period of stay in Saudi Arabia is indefinite as
of 2019 due to the nature of your job. After your divorce, even though you have retained
possession of your house, you do not use it for any money making purposes. This is the
same case with your car. The rental property has also been given to your wife. The
custody of your son lies with her. These acts of yours indicate that you are not actively
trying to make money from the possessions that you had left behind in Australia,
- And, to add strength to your defence, you have also declared the annual interest income
earned by you as a part of the annual income earned from Australia. This is a further
indication of your honesty and proves that you are a law abiding citizen,
- As held in all of the cases mentioned above, there is a need for a broader definition of
the word permanent in your case. Your extended stay in Saudi Arabia indicates the
intention to not return to live in Australia unless forced to do so,
- Even though you keep visiting Australia in the month of January every year, it was not
for any other purposes than as a mere visitor to meet your family. The residence
provided to you in Saudi Arabia, even if temporary in nature and free of cost, is irrelevant
in this case,
- Hence, as per the provisions of section 6-5 of ITAA 97, if it cannot be proved that you
were a resident of Australia in the years 2016 and 2017, then the income earned by you
will only include the ordinary income derived indirectly or directly from all the Australian
sources during those income years,
- You have also submitted the tax returns for the interest income earned through Australia
in a timely manner. All these facts, along with the previous court judgements are
sufficient to conclude that you are not a resident of Australia for tax purposes.
Conclusion
- After considering all the facts of your case and applying the relevant case laws to those
facts, it can be recommended that you need not accept the proposal of the ATO. This is
because all the relevant facts of your case suggest that you had no intention of returning
to Australia in the years 2016 and 2017,
- The only income taxable in Australia in your hands is the interest income earned by you,
the source of which is in Australia. Apart from the interest income, there are no
evidences at all to suggest that you are involved in making money from Australia,
7 Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1
8 Price v. West London Investment Building Society Ltd. (1964) 1 W.L.R. 616
9 Kenny, P., Blissenden, M. and Villios, S. (2015). Residency and Australians working overseas: can be
an expensive lesson in tax Law.

7LETTER OF ADVICE TO MR NGUYEN
- The other sources of income earned by you are all accrued in Saudi Arabia and have
nothing to do with Australia. Hence, to provide you with an advice about the next step
that should be followed, you need not accept the deal of the authorities,
- They are not fully aware of the facts of your case and any legal steps taken by them
cannot be held against you in the Court of Law.

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References
Ato.gov.au. (2019). Legal Database. [online] Available at:
https://www.ato.gov.au/law/view/view.htm?docid=EV/7925123987916&PiT=99991231235958
[Accessed 27 Aug. 2019].
Bembrick, P. (2018). Taxing times for Australian expats overseas. Taxation in Australia, 53(5),
238.
Kenny, P., Blissenden, M. and Villios, S. (2015). Residency and Australians working overseas:
can be an expensive lesson in tax Law.
Pinto, D. and Sadiq, K. (2016). From Switzerland to New Zealand: Around the world in 13
cases. Australian Tax Review, 45(2), 133-144.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., Teo, J. and KF Ting,
A. (2018). Principles of Taxation Law 2018. Australia: Pyrmont, NSW: Thomson Reuters
(Professional) Australia Limited.