Case News: Pike Appeal

22 September 2020

The Commissioner has lost his appeal to the Full Federal Court in Commissioner of Taxation v Pike [2020] FCAFC158. The main issue was the application of the Australia-Thailand Double Tax Agreement and in particular how the 'tie-breaker test' of residency applied to Mr Pike's situation.

The Full Federal Court has re-affirmed the earlier decision of the single bench that Mr Pike's personal and economic relations were closer to Thailand than to Australia.

The Commissioner has lost his appeal in the Pike case [Full Federal Court in Commissioner of Taxation v Pike [2020] FCAFC158]. The decision follows an appeal from Logan J's decision at first instance in Pike v Commissioner of Taxation [FCA] 2185.

For a full analysis of the earlier decision readers can see our blog post https://www.expandtax.com.au/post/pike-vs-commissioner-of-taxation-when-tax-residence-depends-on-economic-and-personal-connections.

The decision of the Full Bench was unanimous in dismissing the Commissioner's appeal. In their joint judgement Justices Davies, White and Steward explained that Logan J conducted the correct legal analysis at first instance when he found that the tie-breaker article 4(3) of the Thai- Australia Double Taxation Agreement should be interpreted in Mr Pike's favour and that he was considered only a resident of Thailand. This was on the grounds that his personal and economic relations were closer to Thailand than to Australia, notwithstanding that his wife and children resided in Australia where he as also resident.

In concluding their joint judgement their Honours stated that "an appeal court will not overturn the decision of the primary judge merely because it prefers an outcome different from that adopted by the primary judge where both outcomes are equally available or finely balanced. In our view, this is such a case as the findings of fact upon which the Commissioner rested his case do not compel a different conclusion. Nor can it be said that the conclusion by the primary judge was not reasonably open." (see paragraph 42).

In terms of tax principles and treaty interpretation readers should not that their Honours also noted when considering whether a person's personal and economic relations are closer to Australia or another country Article 4(3) "does not place a greater weight on personal factors over economic factors." (see paragraph 39). If the Commissioner seeks leave to appeal this decision to the High Court it will likely be to test whether the Full Federal Court's view on this point is correct.