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Two taxpayers left Australia to work in the Middle East. One ceased to be an Australian tax resident and one did not. The difference lies in what ‘permanent place of abode’ requires.
For a person who remains domiciled in Australia, tax residency turns on the phrase ‘permanent place of abode’. Under the domicile test in subsection 6(1) of the Income Tax Assessment Act 1936, a person whose domicile is in Australia is a resident unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia. Where that is established, foreign-source income is generally outside the Australian tax net. Where it is not, the person is assessable on income from all sources.
Two decisions illustrate where the line falls. In Harding v Commissioner of Taxation [2019] FCAFC 29 the taxpayer succeeded. On facts that appear similar, the taxpayer in Quy v Commissioner of Taxation [2026] FCA 1316 did not.
The meaning of ‘permanent place of abode’
‘Permanent’ does not mean forever. Since Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1, it has been settled that a person need not intend to live outside Australia indefinitely, or never to return, in order to have a permanent place of abode overseas. Justice Northrop put it this way:
What is of importance is whether the taxpayer has abandoned any residence or place of abode he may have had in Australia. Each year of income must be looked at separately. If in that year a taxpayer does not reside in Australia in the sense in which that word has been interpreted, but has formed the intention to, and in fact has, resided outside Australia, then truly it can be said that his permanent place of abode is outside Australia during that year of income. This is to be contrasted with a temporary or transitory place of abode outside Australia.
The Harding decision endorsed that approach and explained that the exception is concerned with whether the person has ‘definitely abandoned’ residence in Australia and started living permanently elsewhere. It follows that a place of abode may be a town or a country rather than a particular dwelling, so a person who moves between apartments within a country may still have a permanent place of abode there. The inquiry looks to the permanence of the departure from Australia and the settling abroad. The nature of the accommodation is secondary.
In Quy, the Federal Court added two observations worth noting:
1. The concept of ‘abandonment’ is not drawn from the statutory language and is best regarded as an elucidation of what ‘permanent’ requires; and
2. Care is needed to avoid conflating the permanent place of abode inquiry with the test for acquiring a domicile of choice, which demands more.
In every case, the taxpayer bears the burden of proof and must, on review, satisfy the Tribunal that the assessment is excessive. As Quy demonstrates, that burden is heavier than it may first appear.
Harding
Mr Harding left Australia in 2009 to work in the Middle East and lived in Bahrain. He intended to leave Australia permanently. His wife and youngest child were expected to join him, but his intention to live overseas did not depend on whether they did. He took his personal belongings, sold most of his significant possessions in Australia and lived in a series of furnished apartments while he waited for his family. He retained a share of the family home for their use in the meantime.
The primary judge held that the furnished apartment was temporary accommodation such that Mr Harding had no permanent place of abode outside Australia and remained a resident. The Full Court allowed the appeal. Whether the apartment was temporary was not decisive because a place of abode is not confined to a single dwelling. Viewed as a whole, Mr Harding had definitely abandoned his Australian residence and settled in Bahrain. His remaining Australian connections were either consistent with that abandonment or insufficient to displace a clear intention to leave.
Quy
Mr Quy’s circumstances appear, on their face, stronger. He lived and worked in Dubai for about five years (i.e. a longer period than was in issue in Harding) and in a single apartment for almost all of it. He bought a car, held residency permits and participated in the local community.
He was nonetheless held to be a resident. The Tribunal was not satisfied that his permanent place of abode was outside Australia and the Federal Court found no legal error in that conclusion.
His connections to Australia were extensive and remained in place. The family home in Perth was retained and his family lived in it for most of the period. He kept Australian bank accounts, vehicles registered in his name, his driver’s licence, superannuation and investment properties. The Tribunal regarded these as inconsistent with having abandoned residence in Australia.
The Dubai arrangements did not help him as much as might be expected. The apartment was leased in the name of his employer’s Dubai entity, the residency permits were employer-sponsored and issued for 24 months at a time, and the Tribunal found the evidence of his accommodation and social arrangements equivocal, consistent with a longer-term stay but not necessarily a permanent one. As to intention, the Tribunal did not find that he had abandoned his residence in Australia. It saw a long-serving employee moving between international postings for the same Australian employer (of which Dubai was one) and the Federal Court observed that it appears to have regarded his working life as somewhat ‘itinerant’ or ‘peripatetic’ in nature.
Why the Outcomes Differ
Harding and Quy are not in conflict - they apply the same test and reach different results because the facts and the intentions evidenced by those facts were different. A permanent place of abode overseas is established by demonstrably ending residence in Australia; starting a life somewhere else is only part of that.
In Harding, the parties agreed that the Court would decide for itself whether the taxpayer had a permanent place of abode. In Quy, the question was whether the Tribunal’s lack of satisfaction was affected by legal error, reviewable only on limited grounds. Justice Horan accepted that different minds might reach different conclusions on the same facts, but could not intervene because there was no legal error to correct. The reasons for the different results are summarised below:
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Disclaimer: This material is produced by Cadena Legal, a Queensland-registered legal practice. It is intended to provide general information and opinions on legal topics, current at the time of first publication. The contents do not constitute legal advice and should not be relied upon as such.
