HARDING v FC of T

Judges:
Derrington J

Court:
Federal Court of Australia

MEDIA NEUTRAL CITATION: [2018] FCA 837

Judgment date: 8 June 2018

Derrington J

1. Mr Glenn Gerald Harding (Mr Harding), makes this application pursuant to Part IVC of the Taxation Administration Act 1953 (Cth) in which he appeals the Objection Decision of the Commissioner of Taxation dated 28 June 2017. By that decision the Commissioner disallowed Mr Harding's objection to a Notice of Amended Assessment which had been issued on 11 December 2015.

2. The year of income which is the subject of the Objection Decision is that ending on 30 June 2011 ("the relevant income year").

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The critical issue in this matter is whether Mr Harding was a resident of Australia for the purposes of s 6(1) of the Income Tax Assessment Act 1936 (Cth) (ITAA36) in the relevant income year. By the Objection Decision, the Commissioner determined that Mr Harding was an Australian resident under both the "Ordinary Concepts Test" and the "Domicile Test". Consequent upon that determination Mr Harding's overseas-earned income was assessable and the Notice of Amended Assessment was issued on that basis.

4. Before this Court Mr Harding has challenged the Amended Assessment on the basis that he was not a "resident" in the relevant income year under either of the identified tests.

5. The questions which arise in the present case are not easily answered. The characterisation of a person as a resident of one country or another for the purpose of the ITAA when the person works in one place and yet retains a house and family in another involves an analysis which is fraught with some difficulty. The cause of that difficulty is that the common law test of "residency" lacks sufficient precision for use in borderline cases and, to a significant extent, is dependent upon the uncertain task of ascertaining the subjective intention of the individual involved: cf
LK v Director-General, Department of Community Services (2009) 237 CLR 582, 599 . One might also add that the established definition of "residence" may, in some respects, not necessarily accommodate the manner in which some people presently live and work. In times past when travel was substantially more expensive and significantly slower and communication more difficult it was a reasonable assumption that if a person moved to another country to engage in work, they would take up residency there. In modern times those same limitations no longer apply and it is common place that people undertake extensive travel to engage in work in various places even when it cannot be said that they have taken up residency where they are so engaged. The ease with which people may today communicate with each other, regardless of where they are, has the consequence that a breadwinner of a family unit has the ability to work far from their home and yet remain in constant or frequent contact with their spouse and children. This means that they might work in a foreign country whilst minimising the impact of separation from their loved ones. It is not surprising then that the Courts have seen numerous cases where the breadwinner or one of the breadwinners for a family unit is able to work in a foreign country on a full time basis without relocating their family there and maintain the family unit and residence in their country of origin.

6. An additional complication in relation to the definition of "resident of Australia" in s 6 of the ITAA is that the section contains an expanded definition of "resident" which, in part, utilises concepts of domicile and "a permanent place of abode". That latter expression lacks precision in a number of respects. In addition, as is discussed below, the expanded definition of resident appears to contemplate that a person may have an Australian domicile whilst, at the same time, having a permanent place of abode outside of Australia. On the ordinary meaning of the expression "permanent place of abode", such a concept is incongruous as, if a person had established a permanent place of abode outside Australia, they must necessarily have lost their domicile here.

The facts

7. As is often the case in matters of this nature, the facts are not greatly in dispute save, perhaps, for the subjective intention of the taxpayer concerning issues relevant to his residency or place of abode.

8. Mr Harding is an Australian national having been born here on 11 July 1965. He is an Australian citizen and holds an Australian passport. He also holds a British passport.

9. It appears that Mr Harding started his working life as an aircraft engineer with BAE Systems. He left Australia at a relatively young age and was married to his first wife (Ms Tracey Harding - a British national) on 20 July 1990 in the United Kingdom. In December 1990, Mr Harding's employment with BAE Systems caused him and his wife to move to Khamis Mushayt in the south-west of Saudi Arabia. Mr and Mrs Harding lived there for about 7 years after which they moved to Riyadh. For all of that time Mr Harding continued his employment with BAE

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Systems. During this period Mr and Mrs Harding had two children and on each occasion Mrs Harding returned to the United Kingdom for their birth and only returned once they were about six weeks old.

10. The uncontested evidence before the Court is that, Mr and Mrs Harding enjoyed life in the Middle East as part of the expatriate community. Indeed, it is apparent that Mr Harding was particularly enamoured with that way of life. It also appears that his expertise and abilities could be put to great use in that part of the world.

11. The political and geopolitical situation in the Middle East worsened after the events which occurred in the United States of America on 11 September 2001. A number of armed attacks occurred in Saudi Arabia against Westerners. One of Mr and Mrs Hardings' close friends was killed in the course of such an attack. Other attacks occurred in and around the area where the Hardings were living. For these reasons Mrs Harding returned to England with her two sons where those boys continued their schooling. Although they returned to the Middle East in August 2003, in the following year Mr and Mrs Harding decided to relocate to Australia. In her affidavit, Mrs Harding deposed that the move to Australia was always intended to be temporary and only until the security situation in the Middle East improved. At this time she was pregnant with her third child. In Australia Mr and Mrs Harding built a house at Warana on the Sunshine Coast in Queensland which was completed in early 2004. Although it was not stated explicitly, it appears that the location was chosen due to its proximity to Mr Harding's parents and siblings. In any event, Mrs Harding and her two boys moved into the property in June 2004. Mr Harding remained in Riyadh until May 2006 at which time he decided to leave the Middle East and re-join his family in Australia.

12. In Australia, Mr Harding moved into the family home at Warana. He commenced working for a company called CADET Training and Employment as an operations manager. Although he enjoyed this role and being back in Australia, he was receiving significantly less income than was available to him in the Middle East. The reduced remuneration had the consequence that the lifestyle which he had previously enjoyed was affected and somewhat diminished. That said, he remained in Australia for approximately three years.

13. In February 2009, he received an offer of employment to join the firm TQ Education and Training Limited (TQ Education) which was a UK based company. The offer was to work in Saudi Arabia as the Director of Training. The salary attached to the position, being USD$175,000, was substantially in excess of what he was then receiving being AUD$115,000 and, in Saudi Arabia, his income would not be taxed.

14. After ascertaining that it would be permissible for him to live in Bahrain and travel each day to Dannan in Saudi Arabia for work, Mr and Mrs Harding agreed that Mr Harding would accept the position with TQ Education and relocate permanently to the Middle East. At that time the Hardings' middle child, Scott, had two years remaining in order to complete his High School education and they agreed that Mrs Harding would move to the Middle East towards the end of 2011, after Scott's secondary education was finalised.

15. Mr Harding deposed that when he left Australia in March 2009 he did so with an intention to live and work in the Middle East permanently or, at least, indefinitely. He said he had no fixed intention of when or if he would return to Australia. He also claimed that he expected that Mrs Harding and their youngest son would join him in Bahrain towards the end of 2011 and that they would live with him. He further said that when he left in March 2009 he did not expect to ever live in the property at Warana again. For that reason he took his clothes, suits and other personal belongings with him to Bahrain. He sold all of his significant personal possessions in Australia including his boat and his car. Although some of his possessions remained, they were not of a type which Mr Harding ever intended to use again and he left them for the use of his sons who still resided at the Warana property. These included fishing gear and a small tin runabout, as well as water skis. Whilst it may have been the case that several other items were left at the Warana property, I accept the general thrust of Mr Harding's evidence that, when he

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left Australia in 2009, he took with him all of his own personal belongings.

16. Of course, he retained joint ownership of the family home in Warana with his wife. However, he intended that to be for the use and enjoyment by his wife and his children whilst they remained living here. I also accept his assertion that, when he left in 2009, he did not ever intend to reside in that property as his family home again.

17. It is true that Mr Harding returned to Australia each year. Generally he did so when it was convenient to his working conditions. When he returned he stayed in the Warana property with his family. He claimed that he did so because that was where his wife and family resided but that he was then effectively only visiting therm. Moreover, he did not intend to take up full time work on the Sunshine Coast ever again.

18. From about March 2009 until about February 2015, Mr Hutchings lived in Bahrain and worked in Saudi Arabia. He had entered into an employment contact with TQ Education. Whilst on its face the contract was for a duration of 12 months, it is apparent the agreement was varied and necessarily extended over time. For the full extent of the period during which he was in Bahrain and working in Saudi Arabia, he only ever signed the one employment agreement.

19. The nature of Mr Harding's work in Saudi Arabia was to run TQ Education's training facilities. That company had a contract with Saudi Petroleum Service Polytechnic pursuant to which it would operate training schools for persons wishing to work in the petroleum industry. During the six years whilst Mr Harding undertook this work, TQ Education expanded the number of facilities it operated and his responsibilities increased. That caused him to travel more within Saudi Arabia.

20. In terms of his living arrangements Mr Harding chose to live in Bahrain and cross the causeway each day to work in Saudi Arabia. He claimed that the living conditions in Bahrain were substantially more comfortable than in Saudi Arabia. In Bahrain the restrictions on expatriates were less harsh, the society was more liberal and there were greater opportunities for families. The attractiveness of Bahrain as a place to live for people working in Saudi Arabia is well known.

21. In the five or six years during which Mr Harding lived in Bahrain, he resided in an apartment building called "Classic Towers". Whilst he moved from unit to unit as his circumstances required, it appears that he remained located in the same unit block. Initially he took a two bedroom apartment because he believed this his wife and children would visit him from time to time. He remained in that apartment from 10 June 2009 until 9 June 2011. It would appear that when his marriage broke down in around 2011 and he realised that his wife would not be moving to Bahrain, he moved in to a one bedroom apartment where he remained until 9 June 2012. However, by 10 June 2012 he had formed a relationship with a Ms Gonzalez who wished to live with him and that had the consequence that he moved back into a two bedroom apartment with a full sized kitchen.

22. The nature of these apartments and the type of accommodation they provide becomes more relevant when considering the question of whether Mr Harding had established a permanent place of abode in Bahrain. This is discussed below. Presently, it is only necessary to observe that the apartments were effectively fully furnished apartments and the additions which Mr Harding made to the contents of the apartment were more for comfort rather than out of necessity and were not enduring. That, perhaps, excludes sheets, towels, linen and the like.

23. Each of the apartments was leased from the same Bahraini national who owned all three apartments in which Mr Harding lived from 2009 to 2015. Pursuant to the lease agreements Mr Harding was responsible for utility charges to the extent to which they exceeded 35 Bahrain dinais per month. He was responsible for telephone charges. The units were not serviced per se, however, Mr Harding utilised the facilities offered by the apartment building complex to secure the services of a cleaning lady once a week.

24. Mr Harding claims that these units became his home and, when he went on holidays, he would leave his personal

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belongings there. He had exclusive possession of the apartments pursuant to the leases.

25. In the period immediately following Mr Harding's return to the Middle East, he started making plans to relocate his wife and youngest son to Bahrain. In July 2009 the family visited him for a few weeks. During that time he and Mrs Harding commenced looking for appropriate accommodation for the family and considering the options in relation to schools for their youngest son. In fact, that son, Jordan, was enrolled in the British School in Bahrain for the academic year commencing in 2011.

26. Ultimately, however, Mr and Mrs Harding's marriage did not survive the arrangements which they had put in place. They separated in about October 2011 and divorced in March 2014.

27. Subsequent to the separation Mr Harding commenced the relationship with Ms Gonzalez. That relationship continued until approximately 2014 at which time Mr Harding committed to moving to Oman for work in the following year. Ms Gonzalez was reluctant to move to Oman and that had the consequence that the relationship came to an end.

28. Subsequently, Mr Harding formed a further relationship with his now present wife, Monique. It appears that Monique Harding moved in with him in Oman in 2015 following their marriage on 10 January of that year. The move to Oman was prompted by Mr Harding ceasing his employment with TQ Education and taking up employment with Takatuf Petrofac Oman.

The legislation

29. The definition of "Australian resident" is found in s 6(1) of the ITAA36. For present purposes it is that part of the definition of "resident" according to what is known as the Ordinary Concepts and according to the Domicile test which are relevant. Both of those are found in the following words:

"resident or resident of Australia" means:

(a) a person, other than a company, who resides in Australia and includes a person:

(i) whose domicile is in Australia, unless the Commissioner is satisfied that the persons' permanent place of abode is outside Australia;

30. Both the issue of residency according to Ordinary Concepts and residency by reason of the Domicile test are relevant in this case and they are dealt with separately. By the written and oral submissions Mr Harding focused attention on the Ordinary Concepts test and, conversely, the Commissioner focused attention on the Domicile test.

Residency according to ordinary concepts

31. The ordinary meaning of the term "reside" is not, in itself, defined for the purposes of Australian Income Tax Law. That said, it is now well accepted that the ordinary meaning of the word is that identified by Latham CJ in
Commissioner of Taxation v Miller (1946) 73 CLR 93 at 99-101. There, the Chief Justice considered that a person "resides" where they "lived" or where they keep house and do business and in doing so approved the observations in
Levene v Inland Revenue Commissioners [1928] AC 217. The Chief Justice said:

I should have thought that there was no doubt that a man resided where he lived, and I do not think that there is any interpretation of the word "reside" by the courts which makes it impossible to apply the ordinary meaning of the word "reside" in the present case. In Levene v Inland Revenue Commissioners, Viscount Cave LC said:

... the word 'reside' is a familiar English word and is defined in the Oxford English Dictionary as meaning 'to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place.' No doubt this definition must for present purposes be taken subject to any modification which may result from the terms of the Income Tax Act and Schedules; but, subject to that observation, it may be accepted as an accurate indication of the meaning of the word 'reside.' In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purposes of business or pleasure.

32. Thus, in ordinary parlance the word "resides" means "to dwell permanently for

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considerable time, to have one's settled or usual abode, to live in or at a particular place". For many purposes that relatively straight-forward test is easily applied. However, its application becomes problematic for courts in the less usual situation where a person maintains a home in one place but works in another. Such circumstances demand that the test of "where does the person live or have their settled place of abode?" be supplemented with additional considerations so as to enable a Court to ascertain whether the person resides where they live or where they work or, whether they reside in both places. In that context questions arise as to whether the departure from one place and relocation to another is, on the one hand, ephemeral or transitory or, on the other, permanent? That issue will often include a consideration of the subjective intention of the person concerned.

33. The relevance of the intention of the person concerned to ascertaining the location of their residency was emphasised by Wilcox J in in
Hafza v Director-General of Social Security (1985) 6 FCR 444 (Hafza). There his Honour accepted that the concept of residency has two elements being "physical presence in a particular place and the intention to treat that place as home; at least for the time being, not necessarily forever". His Honour said at 449-50:

Physical presence and intention will coincide for most of the time. But few people are always at home. Once a person has established a home in a particular place - even involuntarily : see
Commissioners of Inland Revenue v Lysaght (1928) AC 234 at p 248 and
Keil v Keil (1947) VR 383 - a person does not necessarily cease to be resident there because he or she is physically absent. The test is whether the person has retained a continuity of association with the place -
Levene v Inland Revenue Commissioners [1928] UKHL 1; (1928) AC 217 at p 225 and
Judd v Judd (1957) 75 WN (N.S.W.) 147 at p 149 - together with an intention to return to that place and an attitude that that place remains "home" - see
Norman v Norman (1969) 16 F.L.R. 231 at p.236. It is important to observe firstly, that a person may simultaneously be a resident in more than one place - see the facts of Lysaght and the reference by Williams J. to "a home or homes" - and, secondly, that the application of the general concept of residence to any particular case must depend upon the wording, and underlying purposes, of the particular statute in relation to which the question arises. But, where the general concept is applicable, it is obvious that, as residence of a place in which a person is not physically present depends upon an intention to return and to continue to treat that place as "home", a change of intention may be decisive of the question whether residence in a particular place has been maintained.

34. Counsel for Mr Harding sought to submit that the concept of "continuity of association" identified by Wilcox J was somehow incorrectly incorporated into the notion of "resident" in Australian jurisprudence because it was not consistent with the observations of Latham CJ in Miller as to the meaning of "resident". That submission conflates the meaning or definition of "resident" with the criteria which exist to ascertain whether a person comes within the defined meaning. The concept of "continuity of association" is an evaluative tool to be applied in circumstances, such as exist in the present case, to ascertain whether a person has a retained usual place of abode in a place or "lives" where he is not usually located. In any event, the passage in Hafza was approved by the Full Court in
Comcare Australia (Defence) v O'Dea (1998) 87 FCR 451, 455 where the concept of "continuity of association" was specifically accepted. No valid ground exists for distinguishing the ratio or carefully considered obiter of that case so far as it relates to this case.

35. Necessarily the question of where a person resides is a question of fact (and, perhaps, of degree per Dixon J in Miller at 103), the conclusion of which is reached by a consideration of all of the person's circumstances. Those circumstances will be directed to ascertaining whether a person has a physical presence or retains a "presence" in one location whilst at the same time maintaining an intention to reside there. The consideration also involves

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identifying the person's "habits and conduct within the period", however, that will include a consideration of the events occurring prior to and subsequent to the relevant period as illuminating the relevance of the events in the relevant period. See
Gregory v Deputy Federal Commissioner of Taxation (WA) (1937) 57 CLR 774 .

36. In Miller Dixon J further identified that the character of the place where a person was located will have an impact on the decision of whether they are residing there. In that case the taxpayer was stationed at a military base at Milne Bay and his Honour indicated at p 103 that this would suggest that his presence there was not for residential purposes. It is worth observing that in Miller, Latham CJ seemed to suggest that ascertaining where a person resided was simply answered by ascertaining where they "lived" (at p 99). However, Dixon J (at p 103) would have disagreed as to the application of the test in that case. This is, perhaps, indicative of the difficulties inherent in this area of the law.

37. In the earlier High Court decision in
Koitaki Para Rubber Estates Limited v Federal Commissioner of Taxation (1941) 64 CLR 241, 249 Williams J made it clear that residency is not concerned with where a person does business or holds business assets. He identified it as being a personal matter. He said:

The place of residence of an individual is determined, not by the situation of some business or property which he is carrying on or owns, but by reference to where he eats and sleeps and has his settled or usual abode. If he maintains a home or homes he resides in the locality or localities where it or they are situate, but he may also reside where he habitually lives even if this is in hotels or on a yacht or some other place of abode: see Halsbury's Laws of England, 2nd ed, vol 17, pp 376, 377.

38. That statement has been identified by the Full Court of this Court as applicable to the determination of whether a person is a resident under the Ordinary Concepts:
Scargill v Minister for Immigration and Multicultural Affairs (2003) 129 FCR 259 .

More than one residence

39. It was not submitted by either party and, indeed, it is well established that a person may be resident in more than one place (see
Levene v Inland Revenue Commissioners [1928] AC 217, 222-3 ;
Gregory v Deputy Federal Commissioner of Taxation (WA) (1937) 57 CLR 774, 777-8) and that a person may be resident in a place where he is not present because he has left it for the purposes of business or pleasure (Miller at 99). The conclusion that a person may have more than one residence or "home" at a time is not a concept which is unfamiliar to other jurisdictions:
Revenue and Customs Commissioners v Grace [2009] All ER (Dig) 280 .

40. The concept that a person may have more than one residence has the consequence that when it is said that residency requires presence that does not necessarily refer to physical presence at all times or even the majority of the time. It is well accepted that a person may be resident in a particular location even if they are absent for extended periods of time. Their "presence" (being the indicia that a place remains their home) continues so long as they maintain a continuity of association with the place from which they are physically absent.

Presence and intention

41. There did not appear to be any dispute between the parties that it follows from these decisions of the High Court that the concept of residency has, at least, two elements: physical presence in a particular place; and the intention to treat the place as home, at least for the time being, but not necessarily forever.

42. The question of "presence" is relatively straight-forward and that is particularly so when there is evidence of a person's physical presence in a particular place. However, where a person has more than one residence or the question is whether they remain resident in a particular location given that they spend significant time in other locations, different issues arise. In such situations there needs to be consideration of the connecting factors or the continuity of association between the person and the particular location. Here, the question is whether the connecting factors or the continuity of association are such that they establish

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that the person retains a "presence" in the community as a resident. Factors such as a home, a family unit, possessions, relationships with people and institutions and the like are all relevant to the determination of whether the person has maintained a presence in the community as a resident despite being physically absent.

43. The determination of whether or not a person has the intention to treat a particular place as their home will involve a consideration of numerous factors. Certainly, the evidence of the taxpayer as to their intention at the relevant time will be significant as would be any contemporaneous statement made by a taxpayer as the location of their residency. However, the objective manifestation of a person's intention is often a more accurate indicator of their state of mind at a particular time in the past than is an assertion about that alleged prior intent. A person's present belief about what their intention may have been in the past will necessarily be affected by their sub-conscious and the context in which they called upon to identify that past intention. That is especially so when, at the relevant time, the person did not then consider what their then intention may have been.

44. Even evidence of a person's contemporaneous statement as to their intention at a particular time in the past should be approached with a degree of care. Whilst that is likely to be more accurate than their present assertion of what their previous intention was, the value of the contemporaneous evidence will be affected by the circumstances of the statement and reasons for the making of the statement.

45. That being so, the more cogent evidence of a person's prior intention as to where they resided are the objective facts which reflect the person's then intention. In ascertaining whether a person intended to make a particular place their residence or to terminate their residency in a place, the facts and circumstances surrounding their mode of living will be a strong indicator of their presence in or continued association with a particular place and the intention accompanying that presence.

Are checklists useful?

46. Counsel for Mr Harding submitted that an approach to answering the question of residency which focuses upon a checklist of factors is not consistent with the authorities identified. However, that submission appears to be founded upon a mistaken view as to the relevance of the application of the "checklist" in particular cases. The so-called checklist approach might be traced back to, at least, the decision of Senior Member C R Walsh in Re Iyengar v Federal Commissioner of Taxation (2011) 85 ATR 924 and its subsequent application by the same member in Re Sneddon v Federal Commissioner of Taxation (2012) 89 ATR 739. . Those decisions identified a number of topics relevant to the ascertaining of a person's residence in Australia such as the person's physical presence in Australia, their nationality, the history of their past residence and movements, their mode of life and habits, the frequency, regularity and duration of visits to Australia, their purpose for visiting or leaving Australia, the remaining family and business ties with Australia in comparison to any other foreign country and the maintenance of the place of abode. However, these factors do not constitute some kind of rigid formula for the determination of whether a person is a resident. They do not each invariably apply in all cases. They are merely the constitutive indicators or objective facts which are frequently relevant to the determination of the nature and quality of a person's presence in or association with a particular location. A consideration of those objective matters will also reflect the actual state of mind of the person in question concerning their intention to treat a place as their home. It is noted that similar approaches are taken in other jurisdictions for the purposes of determining in what location a person has made their home:
Thompson v Minister for National Revenue [1946] SCR 209;
The Queen v Reeder [1975] DTC 5160 (TC).

47. In
Re Dempsey v Federal Commissioner of Taxation (2014) 98 ATR 698 the Administrative Appeals Tribunal appeared to consider that the checklist approach may have been intended to be, or used as, a substitute for the test of where a person resides. That is not so. It is, as indicated above, it is merely an evaluative tool which assists in ascertaining

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whether a person has a connection with a particular location as a resident and their actual intention as to whether they intend that place to be their home.

48. Mr Lakis for the taxpayer, in his written submissions, submitted as a general proposition that "the subjective intention of the Applicant is vital if not decisive in the analysis of where he resides". For the submission that subjective intention was "vital" he cited the decision in O'Dea at p 455. There is nothing in the decision in O'Dea which supports the proposition for which it is cited. What O'Dea said is that, in some circumstances, the subjective intention of a person "may be vital" and that consideration should not be limited to the objective facts. For the submission that the taxpayer's subjective intention is "decisive" Mr Lakis cited the Full Court decision in Hafza at p 450. Again, there is no support for that proposition in the case cited. What the Full Court actually said was that when considering the residence of a party who is not physically present, much depends on the intention of the party to return to the particular place and to continue to treat that place as home and, in that case, a change of intention "may be decisive".

49. There is no doubt that in the determination of where a person resides their subjective intention will have a role to play and can be significant. It is, however, not sufficient nor is it vital or decisive.

Application to the present circumstances

Mr Harding's intention

50. In the present case Mr Harding's actual intention does assume substantial significance. In 2009 he left his erstwhile home on the Sunshine Coast of Queensland where his wife and children were living and returned to work in Saudi Arabia whilst living in an apartment in Bahrain. He maintained the house at Warana for his wife and his children and over the following years he regularly visited there to see them. In most cases, the existence of a house in Australia maintained by a taxpayer who is working overseas and the maintenance of a family in the house will assume great significance in determining the taxpayer's residency. In all but the most exceptional circumstances, such a factor is more than likely to indicate that the taxpayer has maintained a "home" or residency in Australia because it is a place to which it could be expected they would return to live or it is a place which signifies the enduring continuity of association with Australia. Where a taxpayer maintains a home in Australia to which they regularly return to their spouse and family, it is an unusual case indeed that it can be said that they have ceased to be resident here. That would be particularly so in the case of a person who, for the first time, has ventured to live overseas.

51. However, each case must be determined on its own circumstances and, in this case, the circumstances are unusual. Firstly, Mr Harding had, prior to 2006 worked for approximately 15 to 16 years in the Middle East. He had enjoyed working there and he had also enjoyed the way of life there. It appears that his particular expertise in management was especially suited to a variety of positions available to him in the Middle East. He had only returned to Australia in 2006 after moving his family to Australia a few years earlier consequent upon societal and political upheaval in the Middle East. His return to the Saudi Arabia in 2009 was to resume his erstwhile lifestyle. It was not the commencement of a new, albeit tentative, adventure in life. He was relatively unhappy in Australia and, partly for financial reasons, wished to return to his former lifestyle and employment in the Middle East. Second, Mr Harding is acutely focussed upon his employment and work opportunities. The evidence discloses that he places his personal work satisfaction ahead of his personal relationships whether they be with his wife or his children. In the ordinary course, it is a natural assumption that an individual's close personal and familial ties will outweigh their employment or business interests. That is not the case with Mr Harding. In 2011, Mrs Harding had indicated her reluctance to return to the Middle East. For her, that would have meant leaving the proximity of her two eldest children. Whilst Mr Harding made various attempts to convince her to continue with the plan they had put in place to relocate to the Middle East, he was not successful. Despite that, he was not prepared to alter his plans and the pursuit of his employment opportunities in the Middle East by returning to Australia

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to be with his wife and family. This, it would appear, ultimately led to his divorce from Mrs Harding.

52. It should be kept in mind that Mr Harding's separation from his wife and children in 2011 is not the only evidence of Mr Harding's predisposition to place his career and life in the Middle East above personal ties. Subsequently, in 2014 Mr Harding secured an attractive job offer in Oman. At that time he had formed a close relationship with Ms Gonzalez. When it transpired that Ms Gonzalez would not move herself and her two young daughters to Oman, that relationship too came to an end.

53. In these unusual circumstances, I accept that in 2009 Mr Harding left Australia intending to leave it permanently as a place where he might reside. He had formulated such a plan with his wife and they intended to move back to the Middle East, albeit with Mrs Harding remaining in Australia until the end of 2011 whilst the second eldest son completed his High School education. In her evidence, Mrs Harding clearly identified that when Mr Harding left Australia in 2009 he was moving for good as part of the plan that had been agreed between them. Mr Harding's evidence was to the same effect.

54. Whilst it was submitted by Counsel for the Commissioner that Mr Harding's departure was conditional upon his family joining him in Bahrain, the evidence does not support that contention. The objective circumstances of Mr Harding's departure support his assertion that he was leaving Australia to permanently reside in the Middle East and that was so regardless of whether his wife and family subsequently joined him there. A number of factors bear that out:

(a) His departure for the Middle East was in no way tentative. He had worked and lived there previously for an extended period and he was well aware of the nature of the place to which he was going.
(b) He was not satisfied with the work and lifestyle opportunities which were available in Australia. The position offered to him in the Middle East was attractive to him and was one in which he might utilise his recently acquired Masters qualifications.
(c) He had been unable to obtain employment in Australia at a level of remuneration which satisfied him. The remuneration offered in Saudi Arabia was a significant increase from that which he had been earning in Australia and it was free of local taxes.
(d) Prior to leaving Australia he packed all of his personal belongings to take with him. This has been discussed above in the recitation of facts. In general, he did not leave in Australia anything for which it was necessary to return. He packed up and took with him all the belongings which were necessary for him to live and reside in the Middle East.
(e) He sold his motor vehicle here, as well as his powerboat.
(f) Prior to leaving Australia he had made enquiries as to the ability to live and reside in Bahrain and had obtained a visa to live there. He found that this arrangement was available to him. He also obtained a visa to work in Saudi Arabia.
(g) He obtained a lease on a two bedroom apartment. The size of the apartment was sufficient to allow his family to visit him over the next few years prior to them, or some of them, coming to live with him on a permanent basis.
(h) Whilst in Bahrain, Mrs Harding visited him and together they inspected houses which they might acquire to permanently live in together when she and the youngest son joined him in 2011.
(i) Mr and Mrs Harding also made enquiries about a suitable school for their youngest son and, in fact, enrolled him in the British School for the education year commencing 2011.
(j) Mr Harding purchased a second car for his wife to use when she joined him in Bahrain.

55. These above factors are indicative of Mr Harding's intention to leave Australia for good, at least in the sense of not having any intention of returning here to live. It might also be added that his conduct after the 2011 financial year is supportive of that conclusion. Most poignantly was Mr Harding's determination not to relocate back to Australia whilst his marriage began to deteriorate. Despite the fact that

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his children and spouse lived in Australia and his marriage was deteriorating he did not return to live here, although he did return to attempt to change his wife's attitude about moving back to the Middle East. Indeed, he has not returned to Australia to live since he departed in 2009. He has continued to reside in the Middle East. There he has had significant relationships, has remarried and has moved to Oman. He does not regularly return to Australia to see his children on holidays, although he does occasionally. His holidays are taken up by visiting other places such as Mexico, USA, UK, Singapore, Dubai, London, Bali and Paris.

56. It follows that a consideration of the objective facts surrounding Mr Harding's circumstances support his oral evidence that in 2009 he left Australia and went to the Middle East with the intention of staying there indefinitely and with no intention to return to Australia and to continue to treat it as "home". His absence from Australia and his formed intention not to return was sufficient to terminate his residency here to the extent that is determined by the "Ordinary Concepts" of residency.

57. It is true that there were a number of matters which pointed to him retaining a "continuity of association" with Australia. However, two things might be said about those. First, such matters might be relevant in ascertaining whether a person in Mr Harding's position had any intention of returning to live in Australia, in some cases however, here where the intention is otherwise clear, their import is diminished. Second, whilst they do indicate a retained "presence" in or continuity of association with Australia, as opposed to physical presence where, as here, a person has left the country with an intention of not to live here further, those factors are not sufficient to satisfy the existence of "residency" under the Ordinary Concept tests.

Other connecting factors relied upon by the Commissioner

58. Whilst any conclusion as to residency of the taxpayer is something which is determined in all of the circumstances of the case, in any particular case some factors assume greater relevance. In reaching the above conclusion as to Mr Harding's intention I have also paid particular attention to the matters which are discussed below. Some of these were principally relied upon by the Commissioner as indicating that Mr Harding retained a continuing intention to reside in Australia or, in other words, that demonstrated that he maintained a "continuous association" with his erstwhile home in Australia which reflected that intention to remain a resident.

A house in Australia

59. It is accepted that Mr Harding maintained a house at Warana on the Sunshine Coast in Queensland where his wife and children lived. Mr Butler for the Commissioner submitted that this matter is usually very significant when ascertaining the residency of a person in accordance with the "Ordinary Concepts". Whilst that submission is undoubtedly correct in most circumstances, as I have mentioned, in this case it is less so. Here, the existence of the house where Mr Harding's wife and children lived is explicable as part of the plan whereby Mr Harding would return to the Middle East to live and his wife and children would remain in Australia pending the completion of their second eldest child's education. The fact that Mr Harding had removed all of his personal belongings from the house is significant. In this I do not discount the fact that a few minor items belonging to Mr Harding remained. They were, however, generally, of a minor nature and certainly not items Mr Harding wished to continue to own. It follows that, in this unusual case, the maintenance of the family home for the benefit of his wife and children does not alter the conclusion that Mr Harding had formed the necessary intention to cease residency in Australia.

60. The Commissioner also relied upon the fact that when Mr Harding returned to Australia he stayed at the Warana property. Indeed, there is no doubt that he stayed there for not insignificant periods of time during the relevant income year. The evidence suggests that he was there for 91 days in total. However, the circumstances of his presence there cannot warrant the conclusion that he resided there. He was only there for the singular purpose of visiting his spouse and children and he was, in substance and in effect, on holidays there.

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Whilst he did "catch up" with friends on those occasions, that was obviously incidental to visiting his family. There is no evidence that he continued to treat the house at Warana as his home or his second home. That is, perhaps, best exemplified by the fact that in order to be there he was required to bring personal clothes and personal items with him. I accept that this is an unusual conclusion in cases of the type of which the present is one, however, it is warranted in the exceptional situation which occurred.

The passenger cards - evidence of intention

61. The Commissioner obtained copies of outgoing passenger cards and incoming passenger cards which Mr Harding completed for the purpose of international travel during the relevant financial year thereafter. He entered Australia on a number of occasions during the relevant financial year. On the outgoing passenger cards Mr Harding invariably indicated that he was an "Australian resident departing temporarily". That was so for the period from July 2010 until July 2015. On the incoming passenger cards he, similarly, identified himself as a "resident returning to Australia". However, on those cards he also identified that he did not "intend to live in Australia for the next 12 months".

62. If the incoming and outgoing passenger cards are taken at face value they could only mean that Mr Harding was, at all relevant times, an Australian resident. Whilst his stated intention when entering Australia that he will be living overseas for the following 12 months is important, it does not diminish the fact that he identified himself as remaining a "resident" here. On the face of the cards the two statements taken together are not inconsistent. At the very least they would indicate that Mr Harding was resident in two places.

63. In his submissions Mr Butler, for the Commissioner, relied upon the decision of the Full Court in Taylor v Natwest Australia Bank Limited (unreported, FCA, Wilcox, Burchett, Foster JJ, 16 October 1992) where it was held that statements made by a person on a passenger card that they were an Australian resident, constitutes an admission in subsequent litigation to the effect that they were a resident at the relevant date. Their Honours said:

We agree with counsel for the appellant that his client's self-descriptions on the immigration cards should not be treated as necessarily conclusive. Theoretically, it may be possible to outweigh such evidence by material showing that a person was not in fact ordinarily resident in Australia. However, the descriptions on the cards of 29 March and 6 July constitute admissions by the appellant that he was an Australian resident at those dates. They are some evidence of his place of ordinary residence. They lie near to, and on either side of, the relevant date - the date of the act of bankruptcy. Whilst it is open to a person in the position of the appellant to show that admissions of this type are erroneous, the appellant has not done so.

64. In the present case, the passenger cards do constitute admissions by Mr Harding that, at the relevant dates, he was a resident of Australia. However, in the exceptional circumstances of this case, I accept that the effect of the admissions is overwhelmed by other evidence. In particular, I refer to what I have ascertained to be Mr Harding's actual intention when leaving Australia in 2009. That, of itself, is sufficient to outweigh the effect of the admissions in the passenger card.

65. In an affidavit filed and read in the action, Mr Harding asserted that he indicated on the immigration cards that he was a citizen because he was using his Australian passport. He was not directly cross-examined on that assertion, but nevertheless, given Mr Harding's obvious intelligence, it does not appear to be a particularly plausible explanation. He also said in his affidavit that he made the entries in the passenger cards as he did because he thought that he would access the immigration queues faster. Whilst that explanation is also is suspicious, particularly coming from a person who was admitting to making false declarations, it is difficult to discount it altogether. Unfortunately, some difficulty arises in relation to this issue because there was very little cross-examination and re-examination of Mr Harding on it. Under cross-examination Mr Harding admitted, in response to a general question, that all of the entries on the incoming and outgoing passenger cards were correct. Implicit in that answer

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was an acknowledgement that the statements on the passenger cards that he was an Australian resident were correct. Somewhat surprisingly, he was not re-examined on his evidence in that respect despite it being directly contradictory to the evidence which he had given by affidavit.

66. Although the evidence on this topic remained in a most unsatisfactory state at the conclusion of the hearing, I am prepared to accept that Mr Harding's admissions that he was a resident of Australia at the relevant times were either mistaken or deliberately false. If, when he filled out the arrival and departure cards, he turned his mind to the accuracy of his answers at all, it is possible that he perceived he might obtain some slight time advantage from being regarded as an Australian resident. For present purposes it does not matter whether his answers were deliberately false or mistaken. I have accepted his evidence about his intention in 2009 to leave Australia permanently such that whether he thought that he was, technically or legally, a resident in the relevant income year or not is of little significance to the ultimate conclusion. It would follow that the admissions made by Mr Harding on the incoming and outgoing passenger cards were erroneous.

67. It is noted that in some decisions in this area the impact of declarations on outgoing or incoming passenger cards is said to be reduced because the declarations are made for the purposes of the Migration Act 1958 (Cth) and not for the purposes of the ITAA. It is difficult to see any validity in that approach. The questions asked of persons entering or leaving Australia concern the fact of their residency. Whilst the reason behind the Government asking such a question may well be for the purposes of the Migration Act 1958 (Cth), that does not alter the factual foundation of the question. The question posed to the passenger is one of fact, not of law. Additionally, that the declaration is not made for the purposes of taxation legislation, it is likely to render it a more accurate statement than one made by a person who may think that they will obtain a financial benefit by answering in a particular way.

68. It is also occasionally said that such declarations are made "casually" without the maker turning their mind to the accuracy of the answer. Again, that approach is disingenuous. It is apparent to anyone signing such cards that they are being made for official purposes. That is more obvious on the incoming passenger cards where the person is obliged to make declarations as to what items they may be bringing into the country. The cards also require the maker of the statement to declare that the statements are "true, correct and complete" and requires them to sign the card to signify their acknowledgement of this. Such circumstances make it pellucidly clear to the maker of the statement that truthfulness is required.

Employment

69. In his written submissions Mr Lakis for the taxpayer submitted that:

The courts have always treated the location of full time work as a paramount factor for determining a person's settled and usual place of abode.

70. In support of that proposition Mr Lakis cited Latham CJ in Miller at pp 99-100. Reliance on that part of Latham CJ's judgment, or any part of it, for the proposition is mistaken. Similarly, Mr Lakis relied upon the decision of Franki J in
Federal Commissioner of Taxation v Applegate (1979) 9 ATR 899, 901 in support of the proposition. That case also did not support the proposition contended for and Mr Lakis, in the course of his address, accepted that was so. That said, it is apparent that the locality where a person engages in fulltime employment can be relevant and, indeed, significantly relevant to a conclusion as to where they reside. However, the location of a person's employment is only one factor and each case is dependant upon its own facts.

71. The applicant's submission in this case that the location of a person's fulltime work is a paramount factor in ascertaining their settled and usual place of abode was somewhat curious in this case. Here, the place where Mr Harding worked was not the place where he claimed to reside. Whilst he worked in one country, Saudi Arabia, his residential accommodation was in Bahrain. Each day he travelled across the causeway link between the two countries to attend at his place of work. On most evenings he returned to Bahrain and to his apartment. The facts of this case, even as

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advanced by the taxpayer, indicate that the place or country where a person works or is engaged in full time business is not necessarily their place of residence. However, it is true that the fact that Mr Harding worked in Saudi Arabia on a fulltime and permanent basis adds weight to the conclusion that he had ceased his residency in Australia.

72. Mr Butler for the Commissioner submitted that Mr Harding's presence in the Middle East for work purposes was dependent upon his employment with TQ Education and somewhat tenuous. He pointed to the initial period of employment under Mr Harding's contract of employment being only from 7 March 2009 to 17 November 2010, that any extension to it required the approval of his employer, that his employment could be terminated on four months' notice, and that his employer might require him to leave Saudi Arabia at the end of his employment. The submission made was to the effect that these terms indicated that, until longer term employment was secured, it could only be concluded that Mr Harding was in the Middle East on a temporary basis and that this negated the suggestion that Mr Harding had the intention in 2009 of departing Australia permanently.

73. I accept that there is force in that submission. It must often be the case that an Australian resident's departure for work at an overseas destination for a relatively short and limited period of time will weigh against the conclusion that they intended to leave Australia permanently. That would certainly be the case where the person was leaving to work in a foreign country for the first time. However, the circumstances in the present matter are significantly different. Here Mr Harding had worked and lived in the Middle East for many years. His return to Australia was consequential upon the troubles which had occurred there. When those troubles abated his decision to return was not merely to take up the immediate offer of employment, but to reside there permanently. In his evidence Mr Harding asserted that even if his employment contract with TQ Education was terminated he would remain in the Middle East. Whilst it is true that his employment contract may have required him to leave Saudi Arabia on its termination, that would only have been until he acquired further sponsorship. In that respect the evidence before the Court was that Mr Harding's skill and expertise made him eminently employable in the Middle East as his work history demonstrates. It is also to be remembered that he lived in Bahrain and not in Saudi Arabia. That latter location was where he worked.

Where Mr Harding slept, ate and had his settled place of abode

74. It is also clear that Mr Harding established a "place to live" of sorts in Bahrain. When he returned in 2009 he took a long term lease on a two bedroom apartment. It was a fully furnished apartment (save for linen and the like) and was large enough to accommodate his family on their anticipated visits. It had two bedrooms, a lounge room, bathrooms and a full size kitchen. There was a not insignificant amount of cross-examination of Mr Harding as to the nature of the various apartments which he leased. In the relevant financial year he moved from the two bedroom apartment into a one bedroom apartment in the same apartment complex. That was around 9 or 10 June 2011.

75. The apartments rented by Mr Harding were in the nature of serviced apartments, although the nomenclature which is ascribed to them is not relevant. What is relevant is the character of the place of living to the taxpayer. Here, Mr Harding was content to live in a fully furnished apartment in circumstances where it and the furnishings and fittings were owned by a third party. As the evidence emerged it would appear that nearly all of the fittings and living accoutrement in the apartment belonged to the landlord. Very little was owned by Mr Harding. He acquired a few additional items which suited him. But by and large, the circumstances were that he moved into a fully furnished apartment which was ready to live in. In many situations and locations the adoption of this type of residence would be highly suggestive of a temporary stay. It is the type of accommodation which, in Australia, is regularly regarded as being the type of accommodation for transient or temporary purposes. Indeed, that is probably the case in many parts of the world. However, care must be taken when ascertaining the character of Mr Harding's residency in

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Bahrain not to assess it by reference to local standards. It is apparent that Mr Harding took leases of the apartments as extended term propositions. They were not for brief, short-term accommodation and that is true even though Mr Harding did not intend to stay in the apartments permanently.

76. His living arrangements illustrate the nature of his accommodation in his apartments. His usual activities included grocery shopping and preparing and cooking his meals at home. It was there that he did his laundry - where he had a washing machine and dryer. He also had satellite TV installed in his apartment and acquired additional televisions so that he might view it. He used the gym and pool for exercise. Moreover, it appears that he was able to keep all of his personal possessions in those apartments although they were limited in quantity. He also kept his motor vehicles in the associated car-park. His presence in the various apartments were intended to be for longer than short-term stays.

77. Mr Harding's conduct both prior to and subsequent to the relevant income year also impacts on this determination. In the whole of the period from 2009 to 2014 (being the time during which Mr Harding was employed by QT Education) he lived in the same apartment building albeit in different apartments. Therefore, whilst it is apparent that the nature of the accommodation was that he was easily able to pack up and re-locate in quick time, it was nonetheless intended by Mr Harding that he would live in the apartments for extended periods of time.

78. However, regardless of the fact that Mr Harding remained in the same apartment complex, it must be kept steadily in mind that, in the relevant financial year, it was intended that the accommodation there was for a temporary or limited purpose. It seems that for the bulk of the time in that year he contemplated that Mrs Harding and his youngest son would join him to live in Bahrain in the near future. To that end he and his wife had decided to purchase a house and they had inspected a number of properties. On that basis, whilst the apartment in Classic Towers in which Mr Harding lived for most of the relevant income year was not intended to provide brief or short term accommodation, it was also not intended to be permanent or of indefinite duration. It had been acquired for a temporary purpose, being until more permanent accommodation suitable for housing the whole family could be acquired.

Other living conditions

79. It is also apparent that Mr Harding made his life in Bahrain. It was the place from which he commuted daily to his work in Saudi Arabia. He formed friendships there and it was where he attended restaurants and bars after work. He also went to the beaches there and engaged in go-carting at the local grand prix track. In general terms, he pursued the expatriate lifestyle with which he had been familiar for many years.

Return trips to Australia

80. In the relevant income year Mr Harding made four separate trips to Australia and he was present here for a total of 91 days. It is not in doubt that he spent his time here with his wife and children in the Warana premises. On behalf of the Commissioner it was submitted that this indicates his maintenance of a residence in Australia during that time and a continuity of association with Australia. In the ordinary course of events there would be much force in the Commissioner's submission. The maintenance of a house as a family home is usually an important indicator of residency and that is particularly so when the taxpayer supports their spouse and children in that home. The periodical return of the taxpayer to the family home for the purposes of maintaining the family unit will often evidence an intention to continue a "presence" at that place as part of the family unit which will indicate an intention to continue to reside in that location.

81. However, as has been said above, each matter turns on its own facts. In this case, in 2009 when Mr Harding left Australia for the Middle East he had a strong and fixed intention to leave Australia and make a new home overseas. Australia, and in particular the Warana property, remained as a convenient place where his wife and children remained, on a temporary basis, pending their move to Bahrain to be with him. For Mr Harding his return to Australia was in the nature of a holiday, albeit extended, because he was attempting to encourage his wife to relocate to

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the Middle East and thereby save their marriage. Given his determination to leave and live permanently overseas with no existing intention to return to live here, his visits were solely for the purposes of seeing his family and encouraging his wife to change her mind about her decision not to follow through with their original plan. It is not possible to conclude that, by his visits, he was returning to a place which he regarded as, or was, his home.

Financial Matters

82. In support of the argument that Mr Harding was an Australian resident according to Ordinary Concepts in the relevant financial year because he retained his intention to reside in Australia, the Commissioner referred to a number of financial matters which, so it was submitted, evidenced Mr Harding's continuity of association with Australia. They included the following:

(a) That Mr Harding maintained and supported his family at the Warana property and he did so using an Australian Bank account. In the relevant income year he transferred over $168,000 from an overseas account to a joint account held by himself and his wife at the Suncorp Bank. That money was utilised for the expenses of the family including mortgage payments, school fees, utility costs and the like.
(b) That during the relevant income year Mr Harding and his wife purchased an investment property at Birtinya, Queensland and considered other investments.
(c) That Mr Harding also maintained his own bank account in Australia with Suncorp Bank and caused his bank account statement accounts to be sent to the family home at Warana.
(d) That Mr Harding also maintained his Medicare account, Australian private health insurance with BUPA (a health insurance company) and his Queensland driver's licence. He also maintained a superannuation account in Australia.
(e) That subsequent to the relevant income year, being in 2013, Mr Harding made two substantial investments in Australia. Both investment were made with IOOF.

83. It can be accepted that, despite having departed in 2009, Mr Harding's financial affairs remained substantially located in Australia during the relevant income year. In the ordinary course those matters would weigh heavily in favour of the conclusion that Mr Harding had not abandoned his residency in Australia. They can logically be taken as evidence which reflected an intention not to leave Australia permanently and to retain a presence here as well as to continue to maintain a residence where his family were living. They tend to suggest a strong continuing association with Australia.

84. However, as has been mentioned, the circumstances of this case are most unusual. Mr Harding made a decision to leave Australia to pursue his career and resume the expatriate lifestyle which he had previously enjoyed. He did so in the expectation that his wife and youngest son would eventually join him although his departure was not conditional upon that eventuality. I have accepted that, at this point in his life, his decision was to leave Australia permanently come what may and regardless of whether his family followed him at a later date. In those circumstances, the financial arrangements which remained in place, or which were put in place subsequent to his departure, are more properly regarded as the remnants of his prior residency and the fact that he retained ongoing responsibilities to Mrs Tracy Harding and her children for whom Mr Harding provided. They should not be seen as indicators of a continuing intention to maintain residency in Australia.

85. It should be added that the factor of where a person maintains investments may, in these days, have little bearing on where a person resides. In the past quarter of a century there has been a growing internationalisation of investment markets which has increased the ability of people in one country to make investments in businesses in other countries. In this case it is, perhaps, not surprising that Mr Harding maintained significant investments in the relatively stable financial markets in Australia despite having abandoned his residency here.

Conclusion on residency under the Ordinary Concept test

86. Unquestionably, the circumstances of this case are most rare. It is an extraordinary

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situation where a husband and father would leave his erstwhile home in Australia, where his wife and family reside, to go to live and work in another country and be steadfast in that resolve regardless of whether his wife and family followed him. Although such a conclusion is somewhat counterintuitive, nevertheless, the evidence in this case points to Mr Harding having that exact interest. When he left Australia in 2009 he did not intend to return to live here. His entire expectations were that he would live in the Middle East and within a few years his wife and youngest child would follow. That was the basis on which he left. However, it does not follow that changing his residency was conditional upon his wife and family following. Contrary to the Commissioner's submissions the existence of such an unconditional intention was borne out by the evidence. When, in 2011, Mrs Harding chose to remain in Australia, Mr Harding's only thought was to encourage her to relocate to Bahrain. There was no suggestion that Mr Harding would return to Australia. Indeed, as the events played out, Mr Harding put his career and lifestyle ahead of his relationships with his wife and children and pursued the work opportunities in the Middle East. This same attitude was reflected a few years later when he sacrificed his relationship with Ms Gonzalez to move to work in Oman. On his departure from Australia, Mr Harding's intention was to permanently leave Australia and his residence here. He intended to resume his residency in the Middle East in one country or another and to pursue his career there regardless of what his family did.

87. It is clear that there are many factors in the circumstances of this case which are suggestive of Mr Harding retaining a residency in Australia. The Commissioner's conclusion that Mr Harding remained a resident of Australia in the relevant income year pursuant to the Ordinary Concepts test is far from being unreasonable. However, the difficulty in this unusual case is that the many indicia of Mr Harding's presence in Australia are not co-extensive with any intention to reside here. In those circumstances, he was not a resident under the Ordinary Concept.

Residency under the Domicile test

88. The Domicile test in sub-paragraph (a)(i) of the definition of resident in s 6(1), is an expanded test of "residency" for the purposes of the ITAA36. It provides that a person is a resident of Australia if they have an Australian domicile "unless the Commissioner is satisfied that the person's permanent place of abode is outside of Australia". Although the test is briefly stated, its application is far from easy or straightforward.

A textual analysis of the Domicile test

89. Prior to considering the few authorities which exist on the Domicile test it is apt to consider, from an ordinary reading of the section, its apparent scope of operation.

90. First, it is an apparent assumption that the Domicile test operates with respect to a person who is not a "resident" in Australia within the scope of the Ordinary Concept test. If the person were within the Ordinary Concept test there would be no point considering the Domicile test. Thus, this latter test extends the concept of "residency" beyond the ordinary meaning of that word.

91. Second, the section operates upon the presumption that the taxpayer has retained their Australian domicile of origin or choice. That is, they have not been present in another country with a concurrent intention to make that place their home indefinitely. In that respect, Australia or the Australian legal system remains the place in respect of which the taxpayer has the closest connection at the relevant point in time.

92. Third, whilst the taxpayer's domicile is the connecting factor for the purposes of the imposition of tax on overseas sourced income, the Legislature has identified the limit beyond which it chooses not to exercise of its power to impose taxation. That limit is where, in the relevant income year, the "person's permanent place of abode is outside of Australia". There is no requirement that the person has taken up "residency" in a foreign jurisdiction. However, it is clear that the legislation intends that unless a person of Australian domicile has established their accommodation arrangements in a foreign country in some permanent manner, they are to remain subject to Australian taxation obligations. There is logic to

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that approach. Whilst they have retained their Australian domicile it is apparent that they have not settled somewhere else with the intention to make that place their home with the result that the Australian legal system remains the one to which they have the closest connection. Further, if they have not established any form of permanent accommodation in a foreign country they have not established any real connection with that place which might suggest that they then belong there as far as taxation obligations are concerned.

93. Fourth, the use of the word "permanent" is significant. It would appear to impose a requirement that, in the relevant income year, the person's living circumstances outside of Australia are intended to be enduring.

94. Fifth, a complex issue arises as to the relationship between the concepts of "domicile" and that of "a permanent place of abode" as used in this section. This has caused great difficulties in the authorities which have considered the section's operation. On the one hand, it is clear that a particular taxpayer may have retained their Australian domicile even though they have moved to another country. They will not lose that domicile unless and until they are present in another country and intend to make their home there indefinitely: s 10 of the Domicile Act 1982 (Cth). On the other hand, if the concept of a "permanent place of abode" means something akin to a person having made their permanent home in some other country (as would appear to accord with the natural meaning of those words), it would necessarily follow that they would no longer be a person whose domicile is in Australia. That is because once a person acquires a place in another country in which to live and makes it their home on a permanent basis, they must necessarily have formed the intention to make that other country their home indefinitely. If they are present in that other country and have that intention it would follow that their Australian domicile will be destroyed.

95. As will appear from the following discussion, there are three possible ways of construing sub-paragraph (a)(i) of the definition of "resident of Australia" taking into account the apparent inconsistency created by the concurrent use of the concepts of domicile and "permanent place of abode". None of them are wholly satisfactory in that they all require a not-insignificant departure from the natural meaning of some the words used in one way or another.

96. The first possible construction is to construe the words "permanent place of abode outside Australia" as meaning merely that the taxpayer is living outside of Australia on a permanent basis in the income year. That is, all that needs be shown to establish that a person is not a resident within the Domicile test is that, in the relevant income year, the person retains their Australian domicile, because they have not been present in a foreign country with the intent of making their home there indefinitely, but they are living permanently outside of Australia. On that construction a person who retains their Australian domicile (because they have not been present in another country with the intention to live there indefinitely) and who has left Australia for a limited purpose and without having determined not to return, would remain a "resident". This was the construction of this section advanced by the Commissioner in
Applegate v Federal Commissioner of Taxation (1978) 18 ALR 459 , 462 (Applegate v FCT) but rejected by Sheppard J and by the Full Court on appeal. It is not a construction which was advanced in this case and, despite the appeal of its simplicity, it is a construction which puts too much strain on the natural meaning of the words used.

97. The second possible construction is that the words "permanent place of abode…outside of Australia" mean that, in the relevant income year, the person must have established a home or residency outside Australia that is lasting or enduring but that the quality of their presence in that place falls short of permanent in a general sense. The absence of such permanence is needed because, if the person intended to live in the place outside of Australia permanently or indefinitely, they would lose their domicile in Australia. On this construction the quality of permanence in respect of the place of abode is concerned with the enduring quality of the person's accommodation whilst they are living in a particular locality rather than in a more general sense. That is, the abode in question is "permanent" for the purposes of the person whist they are living in the foreign country

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rather than being a "permanent" abode in the context of that person's life circumstances. In a number of ways this construction approximates to the approaches of some of the judgments in
Federal Commissioner of Taxation v Applegate (1979) 27 ALR 114 (FCT v Applegate). On this interpretation, the inconsistency of a person retaining Australian domicile and having a permanent home outside of Australia is ameliorated.

98. The third possible construction is one which gives predominance to the expression "permanent place of abode outside Australia" such that, in order for a person of Australian domicile to cease to be a resident they must establish that they have made a home for themselves outside of Australia where they intend to live permanently or indefinitely. This is the construction which was partly advanced by the Commissioner in this case. However, that construction has the difficulty that if the person shows that they have established a permanent home in a foreign country they will have lost their domicile in Australia. On that basis, the Domicile test would be that a person would be a resident if they are domiciled in Australia unless they have established that they are not domiciled in Australia.

99. It is important to keep steadily in mind that the Domicile test operates in relation to a subset of those persons who are not residents under the Ordinary Concept test. It is concerned with persons who are not "actually" resident in Australia in the relevant income year who, however, have not yet been present in another country with the intention to make their home there indefinitely. That would include non-residents who take different jobs in different places in the world for extended periods, but at no time have they found a place to make a permanent home so as to destroy their Australian domicile. If the Commissioner is satisfied that, in the relevant income year, a person's "permanent place of abode is outside Australia" they will not be a "resident" for tax purposes. In that way the test is concerned with the enduring quality of the person's living arrangements in a foreign country in circumstances where they are not residing in that foreign country on a permanent or indefinite basis. It is in that context that the living arrangements must amount to a permanent place of abode outside Australia.

100. It might also be observed that the test adopted by the legislature focuses upon a person's place of abode. The concept of residency could have been used had that been thought appropriate. If the legislature had taken that approach it would have excluded from the expanded definition of "resident of Australia" persons who, whilst domiciled in Australia, had acquired a residency in a foreign country. That is, made a place to live or make a home there for an extended period of time. That would have been conceptually coherent because a person might reside in a foreign country without losing their erstwhile domicile of origin or choice. However, the legislature did not adopt the touchstone of "residency", but appears to have required something more enduring although falling short of the establishment of a place where the person intends to remain permanently in the sense that such an intention will destroy their Australian domicile.

The taxpayer's concession as to an Australian domicile

101. For the purposes of this part of the case, Mr Harding made the concession that he retained his Australian domicile in the relevant income year. This may have been reflective of Mr Harding's long term intentions with respect to his future presence in Australia or of the fact that he had not, at that time, formed any intention of making his home permanently in any particular country in the Middle East. It seems that he was content to move from one Middle Eastern country to another depending on the location of available work and, as such, he had not determined to make any particular country his home indefinitely. Alternatively, it may have been reflective of the fact that by the time of his disputation with the ATO he had ceased to be a resident of Bahrain and had moved to Oman.

102. Section 10 of the Domicile Act 1982 (Cth) provides that the "intention that a person must have in order to acquire a domicile of choice in a country is the intention to make his or her home indefinitely in that country". That is reflective of the Common Law and, in this case, by his concession Mr Harding can be

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taken as indicating that he had not formed the intention of making his home indefinitely in Bahrain or Saudi Arabia, despite having determined to leave Australia indefinitely:
Smith v Smith [1975] 1 NSWLR 725 ;
Miller v Teale (1954) 92 CLR 406 . If he had made such a choice, he would have lost his Australian domicile of origin or domicile of choice: Re Cartier v [1952] SASR 280 ;
Armstead v Armstead [1954] VLR 733 .

103. Mr Harding was represented at all relevant times in his dealings with the Australian Taxation Office and before this Court such that it can be assumed that the concession as to his domicile was thoughtfully and deliberately made. It is likely that he had very good reasons for making it and it ought not to be gainsaid by the Court.

The Australian authorities

104. Somewhat surprisingly, there are relatively few Australian authorities dealing with the meaning of the expression "permanent place of abode is outside of Australia" as used in s 6(1). Despite that, the principles which might be derived from those authorities remain unclear.

105. The decision in Applegate v FCT is important. There, Sheppard J considered whether the taxpayer, who had not abandoned his domicile of origin in Australia, had nevertheless acquired a permanent place of abode outside of Australia. The taxpayer had departed his erstwhile home in Australia to start up a branch office of his firm in Vila. There was no agreement with his firm as to a fixed date on which he might return to Australia or how long he might stay in Vila. He was to remain there for an indefinite and substantial time and did not intend to return to Australia after a short or temporary absence. However, it was also not his intention never to return to Australia. He took a long term lease (one year with an option for a further year) on a house so as to accommodate the whole of his family. Due to ill health the appellant was required to return to Australia after a relatively short time. In relation to the section under consideration Sheppard J held:

(a) That the section did not operate to apply to people who had left Australia with the intention of never returning to live but who had not formed the necessary intention to acquire a domicile of choice elsewhere as has been submitted by the Commissioner (at 463) ([25]-[35]). What is required for the purposes of the section is that there be a permanent place of abode outside of Australia and that inquiry is an objective one despite the fact that the intention of the taxpayer in relation to the length of time that he will reside in a place outside of Australia a relevant factor to be considered (at 463).
(b) The word "permanent" is used in a comparative sense. That is, it is not used in the sense of "everlasting" but rather in contradistinction to words such as "temporary" or "transitory" (at 463).
(c) In considering whether the taxpayer satisfies the section, "place of abode" may mean "the house in which the person lives or the country, city or town in which he is for the time being can be found" (at 467). In other words, a person may have a permanent place of abode in a particular place despite the fact they move from house to house.
(d) "Permanent" is used in the sense of something which is to be contrasted with that which is temporary or transitory, but it does not necessarily mean everlasting (at 467). The concept of "permanent" might be equated with that of "indefinite".
(e) In the circumstances, the taxpayer's permanent place of abode in the relevant income year was outside of Australia.

106. Although the orders of Sheppard J were upheld in the Full Court in FCT v Applegate, a variety of views were expressed as to the nature of the expression "permanent place of abode". Franki J (at 116) held that the concept of "place of abode" was to be given a broad meaning. His Honour held that the word "permanent" had many shades of meaning (at 116) and, in the light of the context in which it was used, the section meant something less than a permanent place of abode in which the taxpayer intends to live for the rest of his life (at 117). His Honour considered that the subsection required the taxpayer to have an intention to live outside Australia indefinitely and an absence of any definite intention of ever returning to Australia in the foreseeable future apart from at some remote point in time (at 117). He also held that

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the enquiry as to whether a person has a permanent place of abode outside of Australia is an objective one although the taxpayer's intention as to the length of time that they will reside in a place outside of Australia is a relevant factor (at 117). His Honour did not specify whether "place of abode" referred to home or house or, more broadly, to a place, suburb, city or country, but was satisfied that the taxpayer did have a permanent place of abode outside Australia.

107. Northrop J was also of the view that the expression "permanent place of abode" may have many meanings and might refer to the building or place where a person sleeps and can refer to the building or place where he is usually found which might include his place of business (at 122). He considered that "place of abode" was synonymous with the word "residence". He also held that the word "permanent" as used in the subsection must be construed as having a shade of meaning applicable to the particular year of income under consideration (at 123). However, for the purposes of applying the test he reversed an aspect of the section by finding that what is important is whether the taxpayer has abandoned any residence or place of abode he may have had in Australia (at 123). That question is clearly not what was prescribed by the Parliament. The test imposed is whether the person's permanent place of abode is outside of Australia. Additionally, it is axiomatic that the section is only relevant where the person has no residence or place of abode in Australia as otherwise they would be a resident under the Ordinary Concepts.

108. In his reasons Fischer J held that the relevant enquiry is determined upon an objective consideration of the facts, one of which is the expressed intention of a taxpayer as to the length of time they will be outside of Australia and, in that scenario, an indefinite period away from Australia indicates permanency (at 126-7). His Honour accepted that "permanent" as used in the subsection, did not mean "everlasting". His reasons appear to support the proposition that "abode" was used in the sense of home or house. This is apparent from the following comments at p 127:

To my mind it is significant that the word "permanent" is used to qualify the expression "place of abode" ie the physical surroundings in which a person lives, and to describe that place. It does not necessarily direct attention to the taxpayer's state of mind in respect of that or any other place. Such a state of mind is crucial to the determination of his domicile, ie his permanent "home", and if he retains his Australian domicile he is considered a resident of Australia until he acquires a place of abode of a particular character elsewhere. Such a place of abode may be his "home" for the time being but it is not his permanent home if he proposes ultimately making his home elsewhere. Should he, whilst living in his permanent place of abode, abandon his intention ultimately to make his home elsewhere, his permanent place of abode will become his permanent home. He will in consequence be held to have abandoned his Australian domicile and to have acquired a domicile of choice in the country of his home.

109. Fisher J also held that regard needed to be paid to the nature and quality of the use to which the taxpayer makes of a particular place of abode for ascertaining whether or not it qualifies as their "permanent place of abode" (at 128). If the stay in a particular place is temporary and the taxpayer intends to move on to a new place or to return to Australia then the place of abode does not have the necessary quality of durability (at 128). However, his Honour also agreed that a place of abode may be permanent even if the taxpayer knows he will return to Australia so long as the residency is indefinite (at 128):

To my mind the proper construction to place upon the phrase "permanent place of abode" is that it is the taxpayer's fixed and habitual place of abode. It is his home, but not his permanent home. It connotes a more enduring relationship with the particular place of abode than that of a person who is ordinarily resident there or who has there his usual place of abode. Material factors for consideration will be the continuity or otherwise of the taxpayer's presence, the duration of his presence and the durability of his association with the particular place.

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As is apparent from Fisher J's reasons, an intention to make a place a person's home for the time being is an important element in characterising the place of abode as the "permanent" place of abode. That will be ascertained by evidence of the relevant intention as given by the taxpayer, but probably more accurately by an examination of the evidence relating to the nature and quality of the use which a taxpayer makes of a particular place of abode.

110. It is unfortunate that there was little commonality in the reasons of the Full Court as to the meaning of the expression "permanent place of abode". It is clear from the various reasons for judgment that their Honours were concerned by the apparent incongruity between the person having Australian domicile on the one hand and a permanent place of abode in a foreign country on the other. At most it can be said that the inquiry is an objective one and the word "permanent" does not have its ordinary meaning such that it may simply mean "indefinite" although even the use of that word is problematic given that an intention to reside in a foreign country indefinitely would destroy the person's Australian domicile. And, while Fisher J would appear to accept that "place of abode" tends to refer to a home or house, Northrop J would have given it a wider application.

111. In this context I mention the decision of Sheahan J in (Jenkins) although it does not analyse the concept of "permanent place of abode" beyond considering some of the statements in the two decisions in Applegate. His Honour (at 471) considered that the decision in FCT v Applegate turned on the fact that the duration of the appellant's stay in Vila was indefinite such that it could not be said that he had a place of abode in Australia. However, in the case before him the intention of the taxpayer was to stay in Vila for three years only. It was not for an indefinite period. Nevertheless, his Honour considered that the establishing of a residence for a fixed number of years would be permanent in the sense of not being temporary or transitory. That seems to be somewhat at odds with the observations of Fisher J in FCT v Applegate who held, in effect, that where the intent of the habitation is that it be temporary, in the sense that it will exist until the happening of a future event, it will not be permanent. And that was so regardless of whether or not the future event was certain to happen or not. Nevertheless, Sheahan J held that, for the relevant income year, the taxpayer had a permanent place of abode in Vila. Essentially it appears that his Honour concluded that the intention was that the duration of the presence in Vila was to be for a significant period of time.

112. It is relevant that the learned judge did not consider the taxpayer's actual living conditions in Vila and was only concerned with his presence in Vila, being a place outside of Australia. That would seem to suggest a view similar to that of Sheppard J in Applegate v FCT to the effect that a "place" of abode can be a country or region.

Other authorities concerning a "place of abode"

113. It would appear that the ordinary meaning of the expression, "place of abode" is that of a person's home or house. The Oxford English Dictionary defines the expression as being "a place of ordinary residence, a dwelling place; a house or a home" and the Macquarie Dictionary defines abode as being "a dwelling place; a habitation". Similarly, in Jowitt's Dictionary of English Law (4^th Ed) 10 December, 2015, the expression "place of abode" is identified as meaning the same as "place of residence" as per the phrases "last known place of abode" or "usual place of abode". The approach of Fisher J in Applegate is consistent with these definitions.

114. Generally, a "place of abode" refers to a fixed site such that a person who lives in a car which goes from place to place does not have a place of abode: A person of no fixed place of abode is a person who is itinerant and that is so even if they live in the same city. Although there are many cases that consider the expression "place of abode", those considerations are coloured by the context of particular legislation in which the expression is used. On a broad analysis of the cases, it would appear that where legislation using the expression "place of abode" affects a person's substantive rights, the expression is construed to confining the word to the ordinary meaning, namely the place where a person

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lives and sleeps, as was the case in
R v Hammond (1852) 117 ER 1477. However, where the expression is used in a more procedural sense; namely, where notice is required to be given to a person; a wider meaning is usually adopted;
Price v West London Investment Building Society [1964] 1 WLR 616, 621-2;
Stylo Shoes Ltd v Prices Tailors Limited [1960] Ch 396; such that the place of a person's business might be regarded as their place of abode. Generally, in the case of a body corporate, its place of business would be its place of abode.

115. There is little or no authority to the effect that a person can have a "place of abode" in a particular country rather than at a particular residential location there. Whilst it was suggested in Applegate that this was the case, there is much authority to the contrary:
R v Webb [1896] 1 QB 487.

An important decision of the New Zealand Court of Appeal

116. A not insignificant decision in relation to this discussion is that of Commissioner of Inland Revenue v Diamond [2015] NZCA 613. Unfortunately, neither party addressed the Court on it. There, the New Zealand Court of Appeal considered in detail the concept of "permanent place of abode". The taxation laws in New Zealand had adopted the concept of a "permanent place of abode" as a dominant consideration as to whether a person was a "resident" of New Zealand for taxation purposes. The Commissioner for Inland Revenue argued that the expression "place of abode" was not the equivalent of a home so long as there was a place where the person could abide. Interestingly, the introduction by the New Zealand Parliament of the concept of "permanent place of abode" into the NZ taxation laws was an attempt to adopt into New Zealand tax legislation the meaning of that expression as it had been articulated in
Federal Commissioner of Taxation v Applegate ([2015] NZCA 613,[22]). This was recognised by the New Zealand Court of Appeal in Diamond and, after considering the statutory context of the provision, the Court (Randerson, Stevens and French JJ) said (at [48]):

First, we consider the plain meaning of the words "permanent place of abode in New Zealand". The word "permanent" is important, to state the obvious, permanent is the opposite of temporary. Something is permanent when it is "continuing or designed to continue indefinitely without change. Next, the word "abode" means "habitual residence, house or home or place in which the person stays, remains or dwells". We consider this plain meaning, coupled with the statutory context we have reviewed above, demonstrates that the phrase means something more than mere availability of a place to stay and implies actual usage of the property by the taxpayer for residential purposes. (footnotes omitted)

117. In reaching the above conclusion their Honours were assisted by the passage from the reasons of Fisher J in Federal Commissioner of Taxation v Applegate (128) which is set out above. Their Honours further held that the concept of "permanent place of abode" was rightly considered as being a synonym for "permanent home". In the matter before the Court, the street address in question had never been the taxpayer's home or permanent home and it was, therefore, not his "permanent place of abode".

118. The decision in Diamond is not binding, although it has some significant persuasive effect. That is especially so given the legislation in question sought to incorporate the concept of "permanent place of abode" as used in s 6(1) of ITAA36 and, in particular, as it had been interpreted in Applegate. Moreover, the decision is that of a senior appellate Court of a Commonwealth country. To that can be added the observation that the Court of Appeal applied the natural meaning of the expression under consideration.

The submissions of the parties

119. In his submissions for the Commissioner, Mr Butler referred to the decision in Inland Revenue Commissioner v Lysaght [1928] AC 234. Whilst that case does not directly touch the question in issue here, it did equate the concept of a place of residence with a place of abode which supports the usual meaning of the word "abode" as being someone's home, dwelling or house. The Commissioner also relied upon the decision of the AAT in Executors of the Estate of Subrahnanyan v Federal Commissioner of

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Taxation [2002] AAT 1298. That case proceeded upon the footing that there was no authority specifically binding upon the AAT concerning the question of the place of abode and, given the disparity between the reasons for judgment of the Full Court in FCT v Applegate, that was an understandable conclusion. For the reasons which I have identified above, there appears to be a lack of any clear ratio in that decision as to the meaning of the expression "permanent place of abode" although the reasons of Fisher J appear to accord more closely to the natural meaning of the words used.

120. The Commissioner also relied upon the decision of R v Hammond (1852) 117 ER 1477. This decision concerned the construction of the expression "place of abode" in legislation relating to the election of council members. In that respect the construction of the expression must take colour from its context. However, a more general identification of the concept of "place of abode" was discussed by Lord Campbell CJ where his Honour said at p 1480:

After an attentive consideration of the Act of Parliament, we are of opinion that by place of abode it means the place of residence of the candidate. Such is the usual meaning of this expression. In Johnson's Dictionary "abode" is defined to be "habitation, dwelling, place of residence;" and "residence" is defined to be "place of abode; dwelling." A man's residence, where he lives with his family and sleeps at night, is always his place of abode in the full sense of that expression; and, if this be stated to be his place of abode, no doubt nor difficulty can occur. In some instances he may be quite as well known if described of the place where he carries on his business; but this is never the place of abode in the ordinary sense of the expression; and he may have a place of business to which he goes very rarely, and which may be known to few as belonging to him.

121. The learned Chief Justice concluded that the natural meaning of the expression "place of abode" was the appropriate one for use in the circumstances of the legislation before him.

122. Mr Butler for the Commissioner submitted that a permanent place of abode referred to and meant a single dwelling place. His submission was to the effect that Mr Harding did not establish a permanent place of abode in the Middle East because he moved freely between the apartments in which he lived at the Classic Towers complex. He also submitted that the lack of permanence was revealed by Mr Harding's departure in 2014 for Oman.

123. In his submissions Mr Lakis for Mr Harding relied upon the meaning given to "place of abode" by Sheppard J in Applegate v FCT to the effect that it might refer to the country, city or town in which a person is for the time being. He did not submit, and correctly so, that the decision of the Full Court upheld that part of the judgment. It is to be noticed that his submissions in this regard are inconsistent with his submissions in relation to the Ordinary Concept of residency where he relied upon the observations of Williams J in Koitaki Para Rubber Estates Limited v Commissioner of Taxation (1941) 64 CLR 241, 249 to the effect that a person's residence is not determined by the place where they do business, but by reference to where he eats and sleeps and has his settled or usual abode.

124. Some reference was made to the fact that the clause in question refers to "place of abode" rather than merely "abode" and, for that reason, it ought to be read more widely. For the purposes of that submission it was submitted on behalf of Mr Harding that the Court should focus on the duration of his presence in Bahrain regardless of the actual location of his accommodation and, in that respect he had a permanent position in Bahrain. Whilst there is some force in the submission, historically, the expression "place of abode" is a unitary one and one which has been equated with the concept of home or residence.

125. It was also submitted on behalf of Mr Harding that the question was to be determined annually, being in respect of each financial year. I accept that is so, although it does not follow that circumstances either side of the relevant income year should not be considered for the purposes of ascertaining the nature of the place of abode in the relevant year. The

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circumstances of this case are a good illustration of that. Here, Mr Harding's accommodation in the Classic Towers apartments was intended to be of a temporary nature, limited to the expected arrival of his wife at the end of 2011. The nature of his presence in his two bedroom apartment for most of the relevant income year was coloured by that fact even though it was expected to occur after the relevant year.

Conclusion as to the expression "permanent place of abode"

126. There is no straightforward answer to the question of the construction of the Domicile test. Although I have reached a conclusion, as I must, it can be accepted that reasonable persons may differ as to the correct interpretation.

127. There is much to commend the construction advanced by the Commissioner which is to the effect that it must be shown that the person claiming not to be a resident has established a new home, being their place of abode in another country and that it has the necessary quality of permanence about it. That is a construction which gives the critical words "permanent place of abode" their natural meaning. It also establishes an objective framework in which the section may operate. On the other hand, the construction would seem to involve the inconsistency in that if the person had established a permanent home in another country, they would lose their Australian domicile. There could never be a person who has both an Australian domicile and, on the above construction, a permanent place of abode outside Australia.

128. If, on the other hand sub-paragraph (a)(i) of the definition of resident means a person who retains their Australian domicile yet whose abode is outside of Australia, even though they have no fixed home in any country, the inconsistency is reduced. Whilst this is a more consistent construction, it pays very little attention to the ordinary meaning of the words "permanent place of abode".

129. It ought to be accepted that the expression "place of abode" in sub-paragraph (a)(i), has its natural or ordinary meaning such that it is refers to a house or place of accommodation or a house or place to live. There seems to be very little to warrant the conclusion that it is intended to have the expanded meaning contended for by Mr Harding. That construction would almost inevitably deprive the Domicile test of all operation.

130. However, whilst the expression "place of abode" must be given its ordinary meaning, ascertaining the meaning of the combined expression "permanent place of abode" requires a more nuanced approach. As appears in the discussion of the Australian authorities, the word "permanent" has often been identified as a word with many shades of meaning. In sub-paragraph (a)(i) it is used to describe the nature of the enduring quality of the person's place of abode outside of Australia. It is also used in conjunction with "place of abode" to describe a person's mode of living outside of Australian and that combined expression is intended to be used consistently with the concept of domicile in Australia. Therefore, whilst the ordinary meaning of "permanent place of abode … outside Australia" would refer to a person's permanent home outside of Australia, in the context in which it is used it means something less. In the circumstances it must necessarily refer the existence of a person's enduring habitation in their accommodation, but taking into account that the person is not intending to live there permanently or even indefinitely. It is in these circumstances that the concept of "permanence" must be considered. Taking that into account, the person's place of abode must be their intended permanent place of abode, at least while they remain in a particular locality. It is in this sense that Fisher and Northrop JJ in FCT v Jenkins referred to permanent as not being transitory or temporary. If, in the present case, Mr Harding lived in Bahrain in the relevant income year but regularly and intermittently moved from hotel to hotel or to different places of accommodation on a temporary basis, it could be clearly said that he had no permanent place of abode in Bahrain. If, on the other hand, he had purchased a house there which he intended to live in until he left Bahrain at some fixed or indeterminate time in the future, it would be certain that he had permanent place of abode there. The place of abode would be "permanent" in the sense that, whilst he was living in Bahrain, he had a place

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where he intended that he would always be residing or living. The actual facts of this case fall somewhere between these two hypothetical scenarios.

131. That is not to say that, for a relevant income year, a person may not have more than one permanent place of abode. It is axiomatic that a person's circumstances may change with the result that they may alter their accommodation arrangements and the intention with which they reside in a particular place.

132. In the above discussion care must be taken to keep steadily in mind the difference between a person's intention to make a home in a country on a permanent or indeterminate basis (in which case they will acquire domicile there and lose their Australian domicile) on the one hand and, on the other, their intention as to the enduring quality of their accommodation whilst living in a foreign country. It is the latter context with which the Domicile test is directly concerned.

133. It can be accepted that the construction of the phrase "permanent place of abode" which I have accepted has many similarities to the concept of "usual place of abode", but it is not necessary and nor is it desirable to attempt any comparison in that regard.

134. It follows that on the correct construction of paragraph (a)(i) of the definition of "resident of Australia", a person is not taken to be a "resident" for tax purposes in the following circumstances:

(a) the person has remained domiciled in Australia, such that they have not been present in another country with an intention to remain there indefinitely or permanently;
(b) the person is not a resident under the Ordinary Concepts test, such that they are living outside of Australia and have no residency in Australia;
(c) the person has, during the relevant income year, a place of abode being an actual physical place of accommodation in which they live outside Australia;
(d) the person has lived in that place of accommodation with the intention that, whilst they are living or staying in that particular locality, that place will be the permanent place where they live. The relevant distinction is with persons who reside in accommodation temporarily or for transitory purposes during the period in which they are in a particular place;
(e) the person will be in the place of accommodation "permanently" whilst they are living in the locality even if their presence there is indefinite. This is consistent with the views expressed in FCT v Applegate;
(f) the person might move from one permanent place of abode to another whilst they are living in a particular locality and, indeed, in the course of a relevant taxation year, but that will not prevent them having a permanent place of abode for the purposes of the Domicile test.

135. This construction of the Domicile test which I have adopted explains the various approaches of Franki and Northrop JJ in FCT v Applegate and has the identical legal result in application. Further, it accepts the conclusion contained in the Australian authorities to which reference has been made, that the word "permanent" in the expression "permanent place of abode" does not mean everlasting so much as not temporary or not transitory. It seems that "indefinitely" will be sufficient to establish permanency. This was the view of the members of the Full Court in Applegate and of those in the Court of Appeal in Diamond and the above construction accommodates this view.

Application to the present facts

136. In ascertaining whether the abode or premises of the taxpayer are "permanent" or not transitory or not temporary in the sense identified above, the objective facts of habitation and the person's actual intention need to be considered.

137. Here the evidence supports the conclusion that Mr Harding was not a resident under the Domicile test. When he left Australia in 2009 he left to live and work in the Middle East permanently or indefinitely and, according to paragraph 47 of his affidavit, he had no fixed intention of when he would return to Australia. He reiterated that under cross-examination. It appears that, at that time, he was not living in Bahrain with the intention of living there indefinitely and the reasons for that have been

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discussed above. It follows that he retained his domicile in Australia.

138. For most of the relevant income year Mr Harding was living in a two bed-room apartment in the Classic Towers apartment complex. On 10 June 2011 he moved to a single bedroom apartment. The question then is whether his accommodation in the relevant income year had the quality of permanence about it that it became his "permanent place of abode … outside Australia"? The question might alternatively be framed, were the apartments his permanent places of abode for the purposes of living in Bahrain in the relevant income year? Necessarily, that is a question of fact and one of degree.

139. On one level, Mr Harding's accommodation in the Classic Towers Apartments was of a temporary nature and type. It was of a kind where he did not put down his permanent roots in the sense of establishing his own home or dwelling. Of course, if he had established his own home there for a permanent or indefinite period he would have acquired domicile there. However, for the purposes of the Domicile test the question is whether, for the purposes of his life in Bahrain, his apartment or apartments qualified as a permanent place of abode outside Australia within the meaning identified above.

140. He was living in rented, fully furnished accommodation which he was able to change quickly and at relatively short notice. Indeed, he did so on a number of occasions. He arrived in the Middle East in March 2009 and he took up the lease on a two-bedroom apartment in the Classic Towers building on 10 June of that year. He remained there for most of the relevant income year although he relocated to a single bedroom apartment on 10 June 2011. He remained in that single bedroom apartment for 12 months and then moved again to yet another apartment. On each occasion on which he moved he was able to pack all of his belongings into a few suitcases and an overnight bag and use the elevator in the building to transport his assets to a new apartment. It can be expected that he was also required to move the televisions which he had acquired to the new premises.

141. The type or character of accommodation was a fully furnished apartment which is a type of accommodation not frequently used for permanent or long-term accommodation although it must be acknowledged that it may be so used. The only necessary items which Mr Harding was required to bring with him was linen and towels. Otherwise, everything else was provided. Whilst he did acquire some additional household goods such as more cutlery and the like, by and large the apartments which he rented were places where he was not required to expend money for the purposes of his day-to-day living requirements. Whilst he may have acquired a few items for added comfort such as additional televisions, these were not acquisitions which suggested that he was intending to make the apartment his permanent place of abode whilst in Bahrain. The type of accommodation occupied by Mr Harding can generally be identified as being of a temporary nature for the people who use it. It is the type of accommodation where the inhabitant is not required to outlay any substantial permanent expenditure for the purposes of their residential comfort with the consequence that they do not acquire many personal items which are necessary for day-to-day living. That, of course, has the advantage that they are able to move easily and readily if they so desire. It has the added benefit of being economically rational where the duration of the stay is short. The occupant does not need to purchase household items which might only be utilised for a brief period of time before they move again. Whilst it must be kept steadily in mind that the attributes of ordinary living in one society may not mirror those in another, the accoutrements of establishing a permanent place of abode would seem to have universal commonality.

142. In this case, in the relevant income year Mr Harding was not required to and did not make any substantial acquisitions in relation to his dwelling. All that he required was largely provided for in the fully furnished apartment. The absence of any substantial domestic acquisitions (apart from motor vehicles) was indicative of the fact that he was not intending his stay in either of his apartments in the Classic Tower complex to be of a significant duration or other than temporary.

143.

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That is not to suggest that the two bedroom apartment which he inhabited for most of the relevant income year was not fully equipped. It had a full size kitchen, several bathrooms, a lounge room and bedrooms and a laundry. In these respects the nature of the accommodation was obviously intended for longer term habitation than would be a hotel room, but it was not optimally suitable for permanent or indefinite habitation.

144. Another aspect of Mr Harding's accommodation was that he was not required to enter into utility agreements with third parties. Such matters were attended to by the landlord and the cost of such services was largely covered an amount paid to his landlord. This is further indicative of the fact that the housing was of a temporary nature and that Mr Harding was not establishing a permanent (being non-temporary) home or dwelling there. Additionally, the maintenance of the apartment was a matter for the landlord, aside from items damaged by Mr Harding. The premises were not Mr Harding's to do with as he liked. He was not entitled to hang pictures on the wall without the consent of the landlord.

145. It should not be thought that occupation of fully-furnished apartments could not amount to having a permanent place of abode there. Quite clearly, that may well occur. If, for instance, a person in Mr Harding's position went to Bahrain with the intention of staying for a number of years and took a lease on an apartment for that length of time, the apartment would most likely become their permanent place of abode for the purposes of their life in Bahrain. That conclusion is reached by having regard to the enduring quality of their occupation of the premises for the purposes of their time in that country and the intention with which the place was occupied. In that sense, it would not be "temporary" accommodation even if it was only to be used for the period the person was in Bahrain.

146. In the course of submissions the Commissioner placed emphasis on the fact that it was part of the conditions of Mr Harding's contract of employment that he might be moved by his employer, TQ Education, to any of its centres, branches, facilities, associates or enterprises in Saudi Arabia. For that reason Mr Harding was required, in his employment contract to acknowledge that he may be required to move to a new address in order to perform his duties. The Commissioner's argument was that this supported the conclusion that Mr Harding's accommodation in the Classic Towers apartment building was necessarily of a temporary nature given that he may have been required to relocate at short notice. Whilst there is some force in that submission, it is not a matter of great weight as it appears that Mr Harding was looking to establish himself in a permanent house at some point in time regardless of the terms of the terms of his employment agreement.

147. An associated argument advanced by the Commissioner was that as Mr Harding's employment in the Middle East might be terminated at short notice, his presence there was necessarily of a transitory nature. That submission, however, fails to take into account that Mr Harding was intent on remaining in the Middle East, although not necessarily in Bahrain, and his presence there was not, necessarily, tied to his continued employment with TQ Education.

148. The taxpayer gave evidence that he had a social life in Bahrain and that he had friends with whom he socialised and he regularly engaged in motorised go-cart racing. Whilst social interaction is not irrelevant to issues such as the one under consideration, it is not a greatly significant factor in this case. Regardless of whether a person is at a place temporarily or permanently, these activities might be engaged in as pleasant ways to expend spare time (cf Sheahan J in
Federal Commissioner of Taxation v Jenkins (1982) 59 FLR 467, 469 ).

149. It is a not insignificant feature of Mr Harding's residence at the Classic Towers complex that he did not appear to use it as an address for correspondence. He seemed to have retained his address at the family home in Warana in Queensland, Australia as the address for important mail. It is indicative of an intention to reside at premises permanently or, at least, not temporarily if that place is used as the address for correspondence. Were a person to use their apartment address as that to which important correspondence is to be

ATC 20758

addressed it can be thought that they are intending to remain there for an extended period of time.

150. It is also relevant that the first apartment in which Mr Harding resided in Bahrain was large enough to accommodate his family when they visited. This is a point which was strongly advanced by the taxpayer as suggesting that it was intended to be his permanent premises. That submission is undermined to a large extent by the fact that when Mrs Harding did visit she spent time looking for a house to purchase. Neither Mr nor Mrs Harding envisaged the apartment would be the family home when she relocated. In that respect it can be concluded that Mr Harding's residency in these apartments was always, and at least during the relevant income year, intended to be for a temporary purpose. His plan was to live in this type of accommodation until he acquired a house for his family and him to live in when they joined him in Bahrain after his second oldest son completed his schooling in Australia in 2011. The evidence before the Court was that Mrs Harding had travelled to Bahrain for the purposes of looking for a family home to acquire and in which they would live when she moved to Bahrain with their youngest son. In his affidavit, Mr Harding that this was part of their overall plan (at paragraph 53 of his first affidavit). He also indicated that he would have acquired a larger apartment or a house for when his wife and youngest relocated there (at paragraphs 82 to 90 of his first affidavit). In any event, it is clear enough that Mr Harding's presence in the apartments in the Classic Towers complex was only for a temporary period of time, being until he acquired a house, or a larger apartment, for his family and himself. In terms of the authorities on this section which have been referred to above, this would tend to suggest that Mr Harding's presence in the apartments in the relevant income year was "temporary" or "transitory".

151. It follows that in the relevant income year Mr Harding did not establish a permanent place of abode in Bahrain. By its character it was a type of premises used for temporary or transitory accommodation and Mr Harding used it as such. By Mr Harding's own acknowledgements in his affidavit, his presence in that accommodation in that year was temporary and only intended to continue until he was joined by his wife and youngest son at which time they would have acquired permanent accommodation.

Conclusion on residency under the Domicile test

152. On the above finding in the relevant income year Mr Harding did not have a permanent place of abode in the sense required under the Domicile test. It follows that Mr Harding was a "resident of Australia" in the relevant income year.

Result of the application

153. It follows that the appeal against the Objection Decision of the Commissioner must be dismissed. I will hear the parties as to costs.

THE COURT ORDERS THAT:

1. The appeal is dismissed.

2. The parties are to be heard on the question of costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

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