Moore Stephens Melbourne assisted Mr Mayhew in successfully
overturning the Commissioner's view that he remained a tax
resident of Australia before the Administrative Appeals Tribunal
(AAT) (AAT Case  AATA 130, Re Mayhew and FCT).
The AAT on 13 March 2013 held that Mr Mayhew had a permanent
place of abode outside of Australia and was therefore not a
resident of Australia for tax purposes for the year ended 30 June
This decision reconfirms that the leading authority on the
meaning of permanent place of abode is a decision of the Full Court
of the Federal Court of Australia in Federal Commissioner of
Taxation v Applegate (1978) 9 ATR 899. The Full Court upheld
the decision of Sheppard J: Applegate v Federal Commissioner of
Taxation (1978) 8 ATR 372. This view was also endorsed in the
subsequent Federal Court decision in Federal Commissioner of
Taxation v Jenkins (1982) 12 ATR 745.
Current ATO Activity
The Australian Taxation Office (ATO) has been active in the last
18 months in attempting to treat a large number of expat
Australians living and working in the Middle East on a long term
basis as remaining tax residents of Australia.
The ATO has written to approximately 3,500 taxpayers requesting
them to review their residency status and foreign employment income
(see the Beyond Numbers article of 12 Nov 2012).
The Commissioner initially argued that Mr Mayhew ordinarily
resided in Australia, but then subsequently conceded before the
AAT, that he did not ordinarily reside in Australia and therefore
the decision revolved on whether Mr Mayhew had established
permanent place of abode outside Australia.
The taxpayer, who had migrated to Australia from New Zealand in
1985, had commenced employment with an engineering company in Abu
Dhabi in December 2007. He leased his family home in Brisbane to
his son, although his wife did not join him permanently for 16
months. The taxpayer argued that although he maintained ownership
of the Brisbane residence, neither he nor his wife had any
intention to live in it again. The Commissioner had amended the
taxpayer's assessment for the 2008 income year and included an
additional foreign source income, derived from the taxpayer's
employment in the United Arab Emirates (UAE).
The issue in dispute was whether the taxpayer had a permanent
place of abode outside of Australia in the 2008 income year. The
Commissioner contended that the taxpayer was a resident of
Australia during the year in question, while the taxpayer argued
that he was residing in Abu Dhabi and that while his domicile was
in Australia prior to his departure for the UAE on 3 December 2007,
he changed his permanent place of abode as at that date.
The Tribunal concluded that the taxpayer handled his departure
from Australia, and his relocation to the Middle East, "in a
manner consistent with a person who had resolved to permanently
leave Australia". It therefore set aside the decision under
review and substituted a finding that, in the financial year ended
30 June 2008, the taxpayer had a permanent place of abode outside
of Australia and was therefore not a resident of Australia for tax
The Tribunal also made the following comment in paragraph 42 of
'The Tribunal does not consider it to be of significance
that Mrs Mayhew did not join her husband in the Middle East
immediately. She is clearly an independent person with strong
career interests, which she elected to pursue and complete prior to
joining her husband overseas. The Tribunal accepts Mrs Mayhew's
explanation that it was consistent with the lifestyle they had
always followed together that she would eventually abandon her job
in Australia and join her husband overseas; and this is precisely
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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