Taxation Law and Practice

This essay discusses the tax implications for Australians living as expats in other countries and the application of the ordinary concepts test. It focuses on the Harding case and its implications on expats. The major elements discussed include the residency tests, tax implications, and the permanent place of abode.

Running Head: TAX 0
Taxation Law and Practice
Student Details
8/29/2019

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The taxpayer is the winner
The taxation law is the law that decides the compliance of income tax law and
practice accepted in any County. In Australia, the major bodies which are regulating the tax
are the Taxation Administration Act 1953, the Tax Assessment Act 1936 and Income Tax
Assessment Act 1997 (Australian Taxation office, 2019). The tax reforms can be defined as
the rules to achieve law and order in the country (Dickinson, 2014).
In the following essay, the major elements discussed are tax implications for
Australians, who are living as expats in other counties, and the application of the ordinary
concepts test. The essay aims to discuss the Harding case. Recently after an appeal, the
Hardening case decision was changed from Mr Hardening being non-resident of Australia
from the resident of Australia. The major changes in the case and the implication of the case
on expat is discussed in the essay.
Tax implication
The case of Harding v Commissioner of Taxation [2019] has become the major base
in discussing the residency of expats in different countries, The court analysed two of the
major tests in the above case which need to be fulfilled when an Australian continue to be the
tax resident of Australia. In the above case, Mr Harding was penalized for not paying taxes.
In his defines, he concluded that he has moved to Saudi Arabia for his job in the year 2009.
The wife of Mr Harding stayed back for some personal priorities that were the reason Mr
Harding was living permanently in any place (Price water coopers, 2019). He kept traveling
to and fro but in the end, his wife never moved with him and eventually they got separated.
After the separation, the Harding moved to the furnished apartment in the same building.
Two major tests decide that the person is a resident in Australia or not. In the Hardening
case, the two tests of Australian taxation law were analysed and discussed. The major two
tests are residency rules designed by the Australasian office taxation are a permanent place of
Harbour and 183 days rule. It is important to note that the expats which mean people living
outside the arm of the Australian law.
In the case, the Australian taxation office argued that Mr Harding was not able to
fulfil ‘permanent place of abode' outside Australia test because as researched it was found
that the first apartment he shifted was temporary. The reason behind this allegation is that the
individual was waiting for his wife and the Australian taxation office also pointed out that the
things and belongings of Mr hardening can be carried in two suitcases and he can move
anywhere from there which make them trust that the Mr hardening stays in Australia only and
he has permanent place in Australia only.
The most interesting thing observed in the hardening case of the reasoning behind the
case which made this case unusual to understand and follow. As was discussed earlier the
Hardening case is the best example for understanding the priorities of the individuals who are
living outside the country for long periods. In various cases, it is also seen that the individual

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is considered resident in Australia because for some reason they have been living in Australia
for 183 days or even less are considered suspicious (Bannister, Olijnyk, & McDonald, 2018).
The ATO helps the individuals to arrange a system that can help the individual to survive. It
is important to note that the ATO never impacted the concerns when Mr hardening and his
wife got separated. After the appeal, the Federal Court rejected the above argument and
decided that Mr Harding had left his residence in Australia which proves that he will be
living outside the country and he is not liable for the tax in the argued tax year.
The risk continued as the individuals that the ATO will keep the individuals under
observation even if they are staying under 183 days. There is also a provision of double
taxation in the case of the individuals who are working and living in Australia. This effect is
only possible in case of dame residency and the individual is a sole tax resident of one
country. The proper care is required in case of double tax agreements as there are various
rules which need to be interpreted in case of the double ta agreements (Lunney, 2017).
The effect of tax upon the production and consumption of a product is defined as
implication of tax. One of the best example of this definition is that the implication of raising
tax on gasoline may lead to reduction of its sale. It can be thus stated that in both the above
mentioned cases in Australia the implication of the taxes are divided under two heads i.e.
residents and non-residents. The residents are to pay the taxes upon the employment earned
form the overseas also, they are also held taxable for all the investments done in the
worldwide. All the overhead earned gains are also taxable. Whereas in the case of non-
residents if the incomes are sourced from the foreign nations then no tax would be imposed
on them, interest, royalties, divided incomes earned form the foreign nations will not be taxed
neither they would be imposed tax on any capital gains earned form the foreign countries
(Australian Taxation Office, 2018).
The Ordinary concept test
The basic application test is considered as the basic rules which need to be followed
in the case to achieve basic residency case involved in designing and deciding the tax
obligations in Australia (Barnett, 2014). The Australian taxation office has segregated this
test into four major parts which should be followed and analysed in the given course of time
before implementing tax application on individuals who are residents in the country or are
working outside for a considerably long period.
In the domestic tax law of Australia, various phases need to be understood and
applied to achieve the fair practice of taxation in the international market. An individual will
be considered as tax resident only if they meet any one of the following four tests which are
described as the important pillars in describing the Australian tax residence rules. The
taxation administration in 1939 states that the individual should pay taxes in the case where
the employees earn income from current sources that are available in the country. (AustLII,
2019)
The first test is that the person ‘resides’ in Australia. The meaning of ‘resides’ can be
explained as the person who has its permanent habitat of above where he/she stays is

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described as resides in terms of Australia living definition in eyes of Australian domestic law.
The next test is known as domicile test which includes the verification of ‘permanent place
of abode’ outside Australia is satisfactory that means the place which can be considered as
the place of permanent habitat, not the place where the individual keep roaming from place to
place within the country or in different countries (Australian Taxation office, 2019). And the
third is the 183 rule of residency which states that the individual should be staying in the
country which is Australia for 183 days or more in the tax year.
The last test is that the person should satisfy the superannuation test which states that
the individual should be a member of the superannuation scheme or an employee of
superannuation act management in 1976. The superannuation community was established in
the year 1990 under the act named as the Superannuation Act 1990 (Miller, 2016).
The above four tests decides that the individual is considered as tax resident or not the
hardening case as discussed earlier was decided on the basis of above two tests as the Mr
Hardening was considered non-resident as he has not resided in Australia at the time of tax
year but Mr Hardening failed the second test which states the justification of permanent place
of adobe in which case the victim could not prove the new country place as its permanent
place due to some personal family reasons which led the individual to keep moving from
service apartment to different hotels in last 8 years. (Barnett, 2014) The major implication of
the appeal of the hardening case has changed the way expats are being judged. This case led
to the base of tax judgment even in the future. The implications of the permanent place of the
adobe are discussed and analysed in the next section of the essay.
Permanent place of abode
As discussed earlier the permanent place of adobe is the major change in the
hardening case which makes this case unusual. The hardening case first verdict was based on
the below rule discussion only as the judge was not convinced about the permanent place of
adobe because the individual has not made a permanent place in Saudi Arabia. The case
changed its decision due to the unusual situation Mr Hardening who was able to prove that
the Mr hardening has a wife and child which are not moving to the new country the way it is
planned which was the sole reason for not able to shift in permanent place or building of his
choice (Werner Haslehner, 2018).
The major implications which can be constituted as a permanent place of abode
include two major tests which include the Domicile test and 183-day test. In domicile tests,
the individual is not considered to have a permanent place of adobe outside Australia and
hence considers as Australian resident under the domicile test if the below conditions are not
fulfilled. The first condition is having no fixed habitual place and the individual move from
one country to country. The other concern is that the individual move within one country
constantly (Australian Taxation Office, 2019). In this test, the individual should be resident in
Australia for more than half of the tax year which means that the individual has a permanent
place in Australia itself. The person if frequently move to the place and keeps coming back
many times can be considered the same as happened in Hardening case.

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Importance
This decision will mostly help expats who are living in serviced apartments and hotels
for a long period. As the major argument in the case states that Mr Harding does not have a
permanent place for abode (Price water coopers, 2019). It is also important to note that the
individual should be resident in Australia for 183 days continuously as this shows that the
individual has some source of income in Australia as the non-residents have to pay the
income tax on the amount which is earned from Australia only. The discussion aims to
manage tax laws for the people who are living outside the nation for an extended period.
In the analysis, it was also analysed that various exceptions need to be considered
while making a tax resident decision. The main aim is to understand the different situations
which can lead to unfair taxation on employees. In this era of globalization where the
employees are traveling and staying for a long period because of the career opportunities
need to focus on the management of rules applied in taxation. The major focus is to alter the
permanent place of above which can be understood through the Hardening case. The whole
aspect of this decision which can be estimated and concluded is to provide some comfort to
Australians living and working overseas.
The major input and conclusion of the essay are that it can help Australian expatriates
who choose to live in serviced apartments and hotels on a long term basis. This case has also
established that there are many subjective for the success of the case result. The management
should also take care of the tax style to understand the employee's needs who are working for
the company overseas.

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References
AustLII. (2019). TAXATION ADMINISTRATION ACT 1953. From
http://classic.austlii.edu.au/au/legis/cth/consol_act/taa1953269/
Australian Taxation Office. (2018). International tax for individuals. From
https://www.ato.gov.au/Individuals/International-tax-for-individuals/
Australian Taxation Office. (2019). Residency – the 183 day test. Retrieved from
https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/
Residency/Residency---the-183-day-test/
Australian Taxation office. (2019). Residency – the resides test. From
https://www.ato.gov.au/individuals/international-tax-for-individuals/in-detail/
residency/residency---the-resides-test/
Bannister, J., Olijnyk, ,. ,., & McDonald, S. (2018). Government Accountability – Australian
Administrative Law: Australian Administrative Law. Cambridge: Cambridge
University Press.
Barnett, K. (2014). Remedies in Australian Private Law. Cambridge: Cambridge university
press.
Dickinson, A. (2014). Australian Private International Law for the 21st Century: Facing
Outwards. London: Bloomsbury Publishing.
Lunney, M. (2017). A History of Australian Tort Law 1901-1945. Cambridge: Cambridge
University Press.
Miller, R. L. (2016). Business Law: Text & Cases - The First Course - Summarized Case
Edition. Boston: Cengage Learning.
Price water coopers. (2019). Australia: Residency case a win for Taxpayer. From
https://www.pwc.com/gx/en/services/people-organisation/publications/assets/pwc-
australian-residency-case-a-win-for-the-taxpayer.pdf?elq_mid=16164
Werner Haslehner, G. K. (2018). Time and Tax: Issues in International, EU, and
Constitutional Law: Issues in International, EU, and Constitutional Law.
Netherlands: Kluwer Law International B.V.