Taxation Law and Implications for Australians Residing as Expatriates

This essay discusses the implications of taxation law for Australians residing as expatriates and analyzes the case of Harding v Commissioner of Taxation. It explores the concept of permanent place of abode and its importance in determining tax residency.

Running Head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
Author Note

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Introduction
The Taxation Law of Australia is viewed as difficult. The business migrants and
colonials both should be equally aware of the specific concerns and drawback for individual
planning for the employment and economical interest leads to bring them to Australia
(Brauner & Stewart, 2017). Amongst all the countries, Australia is considered as standard
place in respect to tax exile over the world. Income tax is imposed on all the residents of
Australia to their respective earnings. The non-residents of Australia have charged tax on the
income from the Australian sources, along with knowing that their liability can be reduced
due to the provision of double taxation treaty in Australia and other nation.
This essay centered on the understanding of implication of tax for the Australian
residents those who are staying as expatriate in some other nation. Further, the essay also
intended to dictate one of the important judgment made in the case “Harding v
Commissioner of Taxation (2018)” and “Harding v Federal Commissioner of Taxation
(2019)” to understand the important aspect of implication of ordinary concepts test and the
concept of permanent place of abode.
Tax Implications for Australians residing as expatriate in other countries:
Tax implication in Australia discuss with the Income that would be subject to the
Australian taxation (Grange et al., 2014). This would be in two aspects. An Australian
resident is liable to pay tax on the worldwide income while the non-residents pays tax only on
the Australian sourced income. An individual who is residing and working outside Australia
becomes non-resident case that leads to lower taxes (Pwc.com.au 2019). It is important to
consider the facts that relates to the taxation which must be attended by the person before
leaving Australia along with the completion of the expat assignment. However, a person after
leaving Australia is assumed to be not a resident of Australia. Non-resident must be aware

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and careful in the matter that the tax liability is upon the Australian source income and gain
then also there might be a chance of tax liability in respect to the employees share benefit or
can be deferred bonus plan that is partial considering the period of Australian employment.
Arrangement must be made constituting the filing of returns for the particular year in
which person is leaving Australia (Kenny, 2013). Other specific information is important like
an individual terminated to call as resident, employment details, investment made till
departure and earning of an Australian Source of income after departure.
The Federal Court has addressed the tax residency of an individual in an important
case of “Harding v Commissioner of Taxation [2018] FCA 837” (the Harding case). The
judgment of this case would benefit many Australians those who have decided to reposition
themselves in some other country (Norbury, 2019). The Australian Federal Court has
governed that any Australian who are working outside the country have the option to
terminate themselves from being an Australian resident for gaining benefit in the matter of
tax, the time when they have a temporary place of lodging in their fixed location outside
country. The question in respect of Mr. Harding’s tax residency for the matter related to the
position of residence was held before the Federal Court (“the Court”) who considers the fact
and made a fair decision on more than one attempt.
In this case, the taxpayer with his family was staying in Australia for last eight years.
However, he has accepted an offer of a permanent job and established himself in other
country for an indefinite period. He has not an intention to return back to stay in Australia.
Mr. Harding’s wife and children was temporarily staying in Australia as they have planned to
move to Bahrain after their middle child finished schooling (Jones, 2018). Mr. Harding has
occupied a full furnished two room apartment in Bahrain itself, waiting to take other when his
family joins him. Even he had shifted all his personal stuffs with him and also sold the water

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skis and boat. Despite all these efforts of Mr. Harding his wife took ma decision to reside in
Australia only. Later, they got separated and Mr. Harding moved to a small furnished
apartment in the same building.
On inspecting the case the main judge found that Mr. Harding’s ‘usual place of
abode’ is not Australia. Along with that the judge insight that he has not a ‘permanent place
of abode’ in other country as he was staying in a full furnished apartment and was a plan to
move in other accommodation when his wife and children join him (BarNet Jade, 2019).
Accordingly, Mr. Harding has been held as an Australian resident for the tax as his dwelling
was in Australia.
After the first judgment Mr. Harding appealed in “Harding v Federal Commissioner
of Taxation (2019)”, against of the decision made by the court where the main question is
about Mr. Harding tax residency dealt in front the full court that consists of three judges
(Fedcourt.gov.au, 2019). The appeal has allowed by the court and result was in favor of Mr.
Harding that is not a resident of Australia for tax purpose in the concerned year. The Federal
Court observed while allowing the appeal that the appearance of permanent place of abode is
reflected as town or city and not a particular building. It was considered to be the casual place
of residence those who are working overseas initially occupied some temporary residence and
consecutively looking to shift in a permanent residence. These case must have allowed for
removing Australian tax residence. Sometimes, visiting Australia to look after his family
cannot be seemed as consistent to Harding staying outside Australia, along with his family is
considered to be a tax resident in Australia (Lexology.com, 2019). On the other hand, some
factors like shifting of all his personal stuffs with him supported the conclusion that Harding
has planned to move out of Australia leaving his residence in Australia in permanent basis at
a specific period.

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The decision at the first time was much concern to those who seeks to move outside
Australia for employment in some other nation or those who are currently working in other
nation. Generally, tax exiles take full furnished home in other nation. The court noticed that
full furnished home might be recognized as a permanent place of abode (Woellner, 2013). In
the case of Harding the court found the situation of temporary use and authentic use of
residence critical to judge. It is necessary to the expatriates to consider in a careful manner
about their overseas accommodation and arrangement from day one itself. Other factors that
is needed to be considered like lodging along with the arrangement for e-mail addresses,
necessary furniture acquisition and utility.
Implications for the application of ordinary concept test:
Under “Section 6 (1), ITAA 1936” the definition of term “Australian Resident”
within the ordinary concept consists of a person staying within Australia along with that
individual those who are having their dwelling in Australia, the taxation officer has
comfortable in respect to the fixed place of abode of the taxpayer is in foreign (Krever, 2015).
The case tracks the concern about Mr. Harding’s conditions that has supported his verbal
evidence that he left the country Australia in year 2009 to stay in Middle East with an
intention not to return to Australia. To the extent of Ordinary Concepts of residency, the
absence of Harding from Australia was enough to cancel his residency.
In case of “Harding v Commissioner of Taxation 2018” the commissioner
acquiesced the matter is more important while determining the individual’s residency in
context of Ordinary Concepts (Pwc.com.au, 2019). It has no doubt the conditions that dealt in
this case seems to be rare. It must be viewed like an exceptional situation where the husband
has left his home of Australia, where his family and wife too stays along with working in
other nation and committed to be followed later by their family. In the first instance the court
declared that the taxpayer did not resides in Australia under Ordinary Concepts. After

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appealing for the second time the full court reassured the improvement for the taxpayer and
concluded within “Harding v Federal Commissioner of Taxation (2019)”.
The taxation commissioner had to be dependent on the entire link that is connected to
Mr. Harding with Australia. Whether it was for the citizenship of Australia or his family
staying in Australia or his living in their family’s house. In the year 2011 it seems that Mr.
Harding has stayed in his family’s house for 91 days along with this he also maintained his
bank account in Australia (Pwc.com.au, 2019). The holistic approach was taken by the full
Federal Court in “Harding v Federal Commissioner of Taxation (2019)” for the first time
while considering about the whole circumstances of taxpayer and Mr. Harding’s intention to
shift outside Australia and not to come back following his leaving in 2009. Simultaneously,
the Federal Court has noticed that Mr. Harding did not consider that location as his residence.
Resulting to this, his place of staying should be treated as his home.
The Federal Court has rejected the commissioner’s argument that under ordinary
concept the taxpayer stayed in Australia. However, some of the points made by the
commissioner was relevant to support that case conclusion that Mr. Harding does not stays in
Australia. In the conclusion The Federal Court has reflected the nature as well as quality of
the interlinked connections of Mr. Harding was not seems to be Australian Resident or can
say not enough to dominate the purpose to left Australia for an indefinite period
(Pwc.com.au, 2019). The decision of the Court supported the law that cannot be replaced and
it must be applied in respect to facts that are related to the ordinary concepts accordingly.
Implications of Permanent Place of Abode and its Importance:
According to “Section 6 (1), ITAA 1936”, an individual can be as an Australian
resident if that person has the residence in Australia and if not, then the commissioner must
satisfy to the ‘permanent place of abode’ is outside Australia of that person (Morgan et al.,

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2013). As earliest the permanent place of abode concept is understood there will be not any
confusion regarding the aspect of law to taxation concern to the fact and the level of the case.
As per the entire rule a temporary residence does not prevent a person from having its
permanent place of abode outside nation. The Court states in the previous decision taken
within “Harding v Commissioner of Taxation 2018”, the maintenance of Mr. Harding’s
furnished home in other nation does not fulfill the permanent place of abode test. Further, an
Australian resident within “Section 6, ITAA 1936”, includes a person who stays in Australia
and has their residence in Australia, if not then the tax commissioner must satisfy with the
fact that the person’s permanent place of abode is outside country (Pwc.com.au, 2019).
Accordingly, the case in the full Federal Court under “Harding v Federal Commissioner of
Taxation (2019)” includes not only Mr. Harding was not the permanent place of abode
outside Australia but also about the commissioner must have their content based on the facts
presented by Mr. Harding that the permanent place of residence is outside Australia.
In the first instance on Mr. Harding case, the court emphasized on the residence in
Bahrain and whether it was to be consider as sufficiently permanent, the full Federal Court
reflects that the concept was narrow to consider as permanent place of abode. Therefore, it
will not be judged on the basis of person staying in a fixed place or house rather than it would
be needed documentation of the residence of the particular state or nation where the taxpayer
lives (Sadiq & Coleman, 2014). Although, the house in Bahrain of Mr. Harding might be
consider as temporary as he was searching for the purchase of other accommodation for the
family who was going to join him soon. That was a preplanned purpose with no intention to
return and suggest that he was his ‘permanent place of abode’ in Bahrain.

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Conclusion
At last this narrow concept was considered so that it can result to ‘permanent place of
abode’ in benefit. Earlier the decision made by the Court seemed as harder to the expatriates
to break the residential of Australia, even when the person has the intention to staying
overseas for an indefinite period. The Federal court with the final judgment has made a
reliable condition to the Australian expatriate that has left Australia for work. In the
disputable situation the Federal Court has balanced the whole situation by emphasizing on the
person or the taxpayer has constituted that they had permanently staying in outside nation.
Along with that the type of the residence for the expatriate out of the nation might be
consider as relevant to the investigation.
The recent decision made by the Court provided the government to consider revising
the Board of Taxation to govern the rule of residency for an individual. In the Harding’s case
an another example insight the difficulties in implementing the current law to the expatriate
of Australia and the need for change for clarity on the time when it becomes necessary to
define the residence of Australia for the purpose of tax to the expats.

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Reference
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16824335c473

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