In brief - "Permanent place of abode" can also refer to a town or country not just a specific dwelling, Court finds

In Harding v Commissioner of Taxation [2019] FCAFC 29 an Australian expatriate was found not to be a resident of Australia while living in temporary accommodation overseas and despite maintaining many personal and financial connections with Australia, because he abandoned his Australian residence in a permanent way.
 
The issue for the Full Federal Court was whether Harding was a resident of Australia for the year of income ended 30 June 2011.

Courts agree that appellant did not reside in Australia but differ on determining his permanent place of abode

A resident of Australia is a person who resides in Australia and includes a person whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia.
 
The primary judge found that Harding was a resident of Australia in the 2011 year because while he did not reside in Australia, he did not establish a permanent place of abode outside Australia. Harding lived in temporary accommodation in Bahrain as his intention was to acquire a house once his family moved there. This was not enough to establish a permanent place of abode outside Australia.
 
On appeal the Full Federal Court agreed that Harding did not reside in Australia but found that Harding's permanent place of abode was Bahrain.
 
The facts were:
  • Harding was born in Australia and was an Australian citizen. He left Australia at a relatively young age, married his first wife in the United Kingdom and lived and worked in Saudi Arabia for 16 years
  • In 2001 the security situation in Saudi Arabia worsened and caused Mrs Harding and the children to return to the United Kingdom for two years
  • Mrs Harding and the children then returned to Saudi Arabia but soon after Harding and his family decided to relocate to Australia and they built a house at the Sunshine Coast. Mrs Harding and the children moved in to the house in June 2004
  • Harding remained in Saudi Arabia until 2006 and then joined his family at the house at the Sunshine Coast. It was the family's intention to stay in Australia temporarily until the security situation in the Middle East improved
  • Harding remained in Australia until 2009 when he accepted an offer to work in Saudi Arabia. He left Australia intending to leave permanently or at least indefinitely to live and work in the Middle East 
  • Mrs Harding and the children remained in the house at the Sunshine Coast but it was intended that Mrs Harding and the youngest child would join Harding in the Middle East at the end of 2011
  • Harding chose to live in Bahrain and commute to Saudi Arabia. Initially he leased a fully furnished 2 bedroom apartment so his family could visit. The apartment was intended to be a temporary residence until he acquired a house for his family
  • Mrs Harding changed her mind about joining Harding in Bahrain and the marriage broke down
  • Harding moved to other fully furnished apartments as a result of the marriage break down and later commenced a new relationship, which subsequently broke down because Harding's new partner did not want to join Harding in Oman when he commenced a new job
  • Until the marriage break up, Harding regularly visited his family at the house at the Sunshine Coast and in the 2011 year he visited them for over 91 days. He indicated on his passenger cards that he was an Australian resident
  • Harding's other connections with Australia included holding an Australian passport, using the house at the Sunshine Coast as his postal address, certain investments, a bank account, medicare and private health insurance, driver's licence and superannuation.

Purpose of definition of resident and meaning of "permanent place" considered by the Full Federal Court

In a victory for expatriates, the Full Federal Court held that the primary judge's view of permanent place of abode was too narrow having regard to the purpose of the definition of resident, which was that a person domiciled in Australia was not to be subject to income tax once they have abandoned in a permanent way their Australian residence. 
 
It could not have been Parliament's intention to require a person to be permanently located in a particular dwelling to not be subject to income tax. If that had been Parliament's intention it would have used the phrase permanent abode rather than permanent place of abode. The word place in the context of the phrase outside Australia can mean a town, state or country in which a person is physically residing in permanently.
 
The Full Federal Court rejected the proposition that it does not matter if the person is not permanently in one country, but moves between foreign countries. The words permanent place require identification of a country in which the person is living in permanently.

Commissioner's Notice of Contention rejected, applies to appeal to High Court

The main judgment of the court was given by Davies and Steward JJ who agreed with the opinion of the primary judge that the circumstances of this case were most rare, exceptional and extraordinary. 
 
In a separate judgment, Logan J provided advisers and the Commissioner with some salient points, namely that determination of a person's residence is a question of fact and degree and it is not appropriate to seize on a particular fact as decisive or to apply particular facts found decisive in the different circumstances of previous court decisions as if they were principles of law. 
 
Each of these comments potentially invites the Commissioner to adopt its common approach in relation to unfavourable court decisions, which is to issue a decision impact statement which states that the decision should be confined to its own facts.
 
The Commissioner has applied for special leave to appeal to the High Court.

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