High Court confirms Full Federal Court’s Harding tax residency ruling

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 decision, which held that the taxpayer was a non-resident and should therefore only have to declare his Australian sourced income, not his worldwide income.

Board of Taxation’s residency recommendations
The decision in Harding comes at the same time as the Board of Taxation continues with its review of the income tax residency rules for individuals. Note also that the above reasoning has already been applied in an Administrative Appeals Tribunal matter, Handsley and Commissioner of Taxation [2019] AATA 917 (see more here).

Harper Group Pty Ltd – Chartered Accountants Frankston - Ph 9770 1547

Disclaimer: All information provided in this article is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.