Australia: Taxpayer held to be non-resident for Australian tax purposes

Last Updated: 21 March 2013
Article by Michael van Schaik

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 [2013] AATA 130, Re Mayhew and FCT).

The decision

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 2008.

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 purposes.

The Tribunal also made the following comment in paragraph 42 of the decision:

'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 what occurred.'

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.

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