Taxation Laws of Australia | Essay

Running head: TAXATION LAW
Taxation Law
Name of the Student
Name of the University
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Introduction:
The taxation laws of Australia is considered complex. Expatriates and the business
migrants equally should be aware regarding the specific concessions and pitfalls for those
whose arrangement for employment and financial interests helps in bringing them to the
Australian shores (Sadiq et al., 2017). Australia is treated as the most popular destination for
the expats across the world. Income tax is levied on all the individuals that are residents of
Australia and taxes are imposed on their universal earnings. Those that are non-residents of
Australia will be levied taxes on the Australian sources of income, even though their liability
might be reduced based on the provision of double taxation treaties that are entered into
among Australia and other nations.
The essay is based on understanding the tax implications for Australians that are
living as expats in other nations. The essay will take into account the judgements made in
“Harding v Commissioner of Taxation (2018)” and “Harding v Federal Commissioner of
Taxation (2019)” to understand the implications of applying the ordinary concepts test and
permanent place of abode test.
Tax implications for Australians living as expats in other countries:
The taxation system of Australia has two residence status which the expats needs to
be aware. Namely, an Australian resident for taxation purpose and foreign residents.
Irrespective of the residency status, an individual would be required to complete the tax
return. It is vital to not ignore the matters relating to taxation that should be attended before a
person leaves Australia following the completion of their expatriate assignment (Pwc, 2019).
Accordingly, it is assumed that a person is not anymore treated as Australian resident when
they leave Australia. Non-residents should be alert that beside the Australian tax liability
relating to gains and income sourced in Australia, there might be trailing tax liability in

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relation to employee share benefit plan or deferred bonus plan which is partially in relation to
the period of Australian employment.
Preparation should be made relating to lodgement of tax returns for the year in which
a person leaves Australia. Information such as the date on which the individual ceased to be
resident, details regarding employment and investment received till departure and details or
Australian sourced income earned after departure is important.
In the leading case of “Harding v Commissioner of Taxation (2018)” a decision was
made that would benefit several Australians that decided to relocate overseas for the extended
timespan (Pwc, 2019). The Australian Federal Court ruled that the Australians that are
working overseas can cease to be Australian resident for tax purpose when they take up
temporary accommodation in their fixed overseas location. The questions relating to
residency position for tax purpose was addressed by Federal Court in the case of “Harding v
Commissioner of Taxation (2018)” which highlighted the range of issues which is relevant
for the Australian expatriates that are working overseas for the extended time period
(Judgments fedcourt, 2019). The taxpayer along with his family lived in Australia for eight
years after earlier working in foreign country for around 10 years. An offer of permanent job
was accepted by the taxpayer and moved to foreign country indefinitely having no intention
of coming back to live in Australia.
Mr Harding’s wife and his wife were planning to join him in foreign when their
second child had finished up his high school in about two years’ time. Even though Mr
Harding held an Australian home together with his wife, he took all his personal belongings
with him and sold his water skis and boat (Deloitte, 2019). Throughout the period in question,
he lived in the different completely furnished apartments, originally with the motive that he
would move in the different accommodation when his family would join him. Nevertheless,

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Mr Harding separated from his wife during this period and subsequently made a home with
new partner.
Upon examining the case law, the main judge held that the usual place of abode of Mr
Harding was not anymore in Australia. Nevertheless, the judge held that Mr Harding did not
set up any permanent place of abode in foreign, since he took up fully-furnished rental
accommodation and planned to shift in different accommodation when he would be joined by
his wife and children in foreign. Consequently, Mr Harding remained Australian resident for
tax purpose because his domicile was in Australia.
In “Harding v Federal Commissioner of Taxation (2019)”, Mr Harding successfully
appealed to the Federal Court that ultimately reversed the actual decision and held that he is
not an Australian resident for taxation purpose (BarNet Jade, 2019). While allowing the
appeal the federal court noticed that the expression permanent place of abode is referred to
town or city and not the building. It was regarded as the common place for individuals that
are working in foreign to initially occupy the temporary accommodation while
simultaneously looking for more permanent accommodation and this must not prohibit them
breaking Australian tax residence. Short returns to Australia to visit his family cannot be
considered consistent with Harding living out of Australia whereas his family remained a tax
resident in Australia. Other factors such as taking away all his private belongings from
Australia held the conclusion that Harding has uninhibited his house in Australia and planned
to live out of Australia on permanent basis.
For the expatriates the decision at the initial instance was very much concerning that
seeks to leave Australia to work in foreign nation or for those that are presently working in
foreign (KPMG, 2019). Fully furnished home is generally used by the expats population in
several nations. Notably, the court recognised that it is possible for the fully furnished home