On 13 September 2019, the High Court refused the Commissioner of Taxation’s (Commissioner) application for special leave to appeal the Full Federal Court decision in Harding v Commissioner of Taxation (Harding).
The refusal by the High Court confirms that the Full Federal Court decision in Harding (discussed here) is the leading authority on the phrase ‘permanent place of abode’ in the individual residency test. It also means that the Administrative Appeals Tribunal (AAT) decision of Handsley v Commissioner of Taxation  AATA 917 (Handsley) from 17 May 2019 is the first AAT decision to apply the Harding decision.
Both Harding and Handsley involved Australian citizens who left Australia to work overseas. Both cases involved individual tax residency rules and more particularly, the domicile test and the phrase ‘permanent place of abode’. So, what is the difference between Harding and Handsley?
In Harding, the Full Federal Court held that the phrase ‘permanent place of abode’ was a reference to a particular town or country, not to a specific type of accommodation or building. Therefore, even though Mr Harding lived in short-term fully furnished apartments, his circumstances of staying in Bahrain was sufficient to satisfy the definition of ‘permanent place of abode’ as Bahrain was the country that Mr Harding was staying in.
In Handsley, the taxpayer left Australia in the 2011 and travelled overseas to work as an aircraft mechanic in various international locations including Vietnam, Turkey, China, Singapore and Malaysia and spent the balance of the 30 June 2013 year in multiple locations for short periods of time. Importantly, he travelled on short-term visas for work purposes and the longest time Mr Handsley stayed in one physical place was 45 days in Malaysia. He also did not have visas allowing him to stay in any overseas country apart from China for more than 90 days. He returned occasionally in the 2013 income year to Australia to visit family.
The AAT applied the Harding decision. Specifically it applied the test that the phrase ‘permanent place of abode’ was a reference to a town or country. However, it found that Mr Handsley did not have a permanent place of abode outside of Australia. Because of Mr Handsley’s short stays in different places and countries during the 30 June 2013 income year, he had not done enough to establish a ‘permanent place of abode’ outside Australia.
Accordingly, the AAT found that Mr Handsley failed the domicile test and was a tax resident of Australia for the 30 June 2013 income year.
The Full Federal Court’s decision in Harding and the High Court’s denial of the application for special leave means that there is greater clarity about what is a ‘permanent place of abode’.
However, Harding, and permanent place of abode being a town or country may mean that an individual who for example lives and then moves thousands of kilometres between Alaska, Hawaii, and Florida may have a ‘permanent place of abode’ within the United States of America.
On the other hand, an individual who travels between Vietnam, Cambodia, and Thailand, which is geographically much closer than Alaska, Hawaii, and Florida, may not have a ‘permanent place of abode’ due to moving between countries.
Factual situations such as these mean that, despite the Full Federal Court decision in Harding, further clarity and or reform to the individual tax residency rules is needed.
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