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Tax tip – major case loss for Australian Taxation Office over Tax resident definition.

Last week, the Australian Taxation Office lost a significant case about “Tax Resident” in the High Court of Australia.

Harding v Commissioner of Taxation [2019] FCAFC29 is the court case that changed the landscape of tax residents definition in the Australian Taxation Office. The outcome of the court will affect 33,000 tax audits, and up to thousands of tax objections, private rulings, and tax litigations combined.

Before the court case, the Australian Taxation Office upheld the view that to meet the tax resident definition, the taxpayers must demonstrate they have permanent dwellings aboard.
That permanent dwelling must be a house or unit, and the taxpayer should buy the residence rather than rent it.

However, in Harding’s case, the high court determined that that the permanent residence aboard does not necessarily have to be a house or a unit. Instead, it can be in a town or a country. Also the High Court rejected the ATO’s special leave for appeal, meaning the outcome of the court case is final.

As such, they deemed Mr. Hardings to be a non-tax resident. The consequence of the decision is that his income during the years he was in Dubai is not assessable in Australia, and as such, does not need to pay Australian tax.

If you are an Australian working and living overseas, and always claim or think you are a non-tax resident, now is a great time to make a private ruling.

You can get a seal of approval from the Australian Taxation Office in determining that you are a non-tax resident. Please give us a call on 0410-829-900.