The 2019 full Federal Court decision in Harding v Commissioner of Taxation may make it easier for expatriates to prove that they are non-residents for tax purposes. By doing so, only their Australian-sourced income has to be declared on their tax return (not their worldwide income).

The Full Federal Court ruled that a taxpayer, Mr Glenn Harding, was not an Australian resident for tax purposes. This overturned an earlier decision of the Federal Court (single judge) which held that the taxpayer – who was an Australian citizen living outside Australia for a few years, and who had established a home overseas – remained a tax resident as his overseas accommodation (a rented, fully-furnished apartment) was not considered sufficiently permanent.

From 1990 until 2006, Harding had worked in the Middle East. His wife and small children relocated to Australia in 2004, with Harding joining them two years later. He stayed and worked in Australia until 2009 when he took up a position in Bahrain, Saudi Arabia, on a substantially increased salary.

For Harding, an additional benefit of working in Saudi Arabia was that his income would not be taxed. Upon arriving in Bahrain, he rented fully furnished two-bedroom apartments. During the course of living there, he did not make any substantial domestic acquisitions to use in these apartments.