The ATO’s application for special leave in the residency matter of Harding v Commissioner of Taxation has been refused by Australia’s High Court. This means the decision of the Full Federal Court (FFC) holds, which essentially provides a wider interpretation of the meaning of “permanent place of abode” than had previously been the case.

It also means it is going to make it easier for expatriates to prove that they are non-residents for tax purposes. The FFC concluded, and now appears to establish the principle, that a permanent place of abode need not be the same particular dwelling (that is, the same apartment, unit or house) in a foreign country.

To re-cap, in February the FFC overturned a Federal Court decision that had ruled a taxpayer was a resident. The Federal Court decision held that the taxpayer, who had lived and worked in the largely tax-free Arabian Peninsula, was a resident for tax purposes on the basis that the home he had established there (a rented fully-furnished apartment) was not sufficiently permanent.

The FFC disagreed with this prior decisionwhich held that the taxpayer was a non-resident and should therefore only have to declare his Australian sourced income, not his worldwide income.

The facts behind the case
From 1990 until 2006, Glenn Harding had worked in Saudi Arabia. His wife and small children relocated to Australia in 2004 and Harding joined them two years later. He stayed and worked in Australia until 2009 but then returned to Saudi Arabia after taking up a new position on a substantially increased and tax-free salary.

Harding deposed that when he left Australia in March 2009 he did so with an intention to live and work in the Middle East permanently or, at least, indefinitely.  He said he had no fixed intention of when or if he would return to Australia.  He also claimed that he expected that his wife and their youngest son would join him towards the end of 2011 and that they would live with him.  He further said that when he left in March 2009 he did not expect to ever live in his Australian property again.  For that reason he took his clothes, suits and other personal belongings with him to the Middle East. He sold all of his significant personal possessions in Australia including his boat and his car. Readmore