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High Court refuses Commissioner’s residency appeal

A taxpayer involved in a high-profile stoush with the ATO over residency rules has been given the backing of the High Court as it refuses the Commissioner of Taxation’s appeal application.

Tax&Compliance Jotham Lian 16 September 2019
— 2 minute read

The High Court has refused the Commissioner of Taxation’s application for special leave to appeal against the decision of the Full Federal Court’s decision in Harding v Commissioner of Taxation.


Big four firm PwC, who acted on behalf of the taxpayer, said the High Court’s decision provides greater certainty around the meaning of the phrase “permanent place of abode” in the context of the domicile test for the purposes of Australian tax residency.

“The decision to dismiss this special leave application confirms that, for the purposes of determining whether an individual is a resident of Australia, the phrase ‘permanent place of abode’ should not be determined by reference to a specific house or dwelling, but should be determined more broadly by reference to a particular ‘country or state’,” PwC said.

PwC also noted that based on documents filed by the Commissioner to support the special leave application, the decision will now have an impact on over 33,000 tax audits, 340 private binding rulings, over 1,000 tax objections and 54 litigation proceedings in Australia that were identified as matters which involve a person’s tax residency in the period from July 2015 to 31 December 2018.

The Harding case

The case saw the Full Federal Court upholding an appeal by Glenn Harding earlier this year, ruling that the taxpayer’s “temporary” apartment qualified as a “permanent place of abode” under the tax residency test and was not liable for tax in Australia.

Mr Harding, who departed Australia in 2009 to live and work in the Middle East, had moved between fully furnished apartments in Bahrain while waiting for his wife and child to join him.

The ATO assessed Mr Harding on the basis that he was a tax resident of Australia by arguing that the taxpayer did not have a “permanent place of abode” outside Australia because the apartment was only “temporary”.

The Full Federal Court overturned the Federal Court’s decision, ruling that a “permanent place of abode” should be interpreted more widely to consider whether a person is living permanently in a particular “country or state”, and not just the permanence of a specific house, flat or dwelling.

The decision, which was widely accepted by many in the accounting profession as a “common-sense outcome”, did not sit well with the ATO as it sought special leave with the High Court to appeal the decision.

According to PwC, at the special leave hearing in the High Court, the Commissioner’s counsel suggested that the satisfaction of a permanent place of abode would be met, for example, if a resident had “bought a house in Germany” instead of living in a more temporary form of accommodation.

The court commented that setting the bar at that height was “impractical” given the way that taxpayers now live and not consistent with the purpose of the legislation, proceeding to dismiss the Commissioner’s application for special leave.

PwC had also earlier said the ATO was arguing for special leave to be granted because of the significant number of taxpayers involved in disputes with the Commissioner as to their residency status.

Residency certainty?

While the High Court’s decision reinforces the decision by the Full Federal Court, income tax residency rules for individuals could still be up for changes, with the Board of Taxation currently undertaking further consultation following its review of current rules.

Current individual income tax residency rules have remained largely unchanged since they were introduced in 1930, and the Board of Taxation believes they are perceived to be subjective and impose an inappropriately high compliance burden.

“The question is whether clarity, including how the tax system should operate in a modern age where people have a high level of mobility, could be better achieved through legislative reform and specifically a new statutory test as recommended by the BoT in its report published in September 2018,” PwC said in May.

High Court refuses Commissioner’s residency appeal
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it.