At the start of a new year, we always notice an increase in professionals enquiring about working overseas.

The following is a summary of a Full Federal Court (FFC) decision last year on the Australian tax residency rules for Australians working abroad. The Australian Taxation Office (ATO) has also recently accepted the decision by way of a ‘decision impact statement’.

The FFC case in question was between the Commissioner of Taxation and Mr Harding (Harding case). 


The Harding case concerned an Australian citizen, Mr Harding, who lived in Bahrain and worked in Saudi Arabia between 2009 and 2014. During this time, Mr Harding lived in various apartments in a complex, but moved freely between one and two-bedroom units as the need arose (for example, when his family would visit). Relevantly, Mr Harding maintained joint ownership of a property in Queensland with his wife (even after the breakdown of their marriage in 2011), but sold all his personal belongings and did not intend to ever again reside in that property as his family home. The relevant question to be determined was whether Mr Harding was a resident for Australian tax purposes during the 2011 income year.  

Generally speaking, the Australian tax rules provide that an individual will be a resident of Australia where they: 

  • reside in Australia (ordinary concepts test);
  • have their domicile in Australia (domicile test); or
  • have been physically present in Australia for 183-days or more, (183-day test). 

Ordinary concepts test 

The ordinary concepts test provides that an individual will be an Australian tax resident where they reside in Australia. The term ‘reside’ has been regularly defined as meaning ‘to dwell permanently for considerable time, to have one’s settled or usual abode, to live in or at a particular place.’ 

In the first instance, the Federal Court (FC) found that Mr Harding was not an Australian tax resident according to the ordinary concepts test. Although Mr Harding retained joint ownership of the Queensland property where his wife and children lived, the FC held that Mr Harding’s intention to leave Australia indefinitely, outweighed any other factors he had in connection with Australia. The FFC agreed with this analysis on appeal. 

The FFC confirmed that the correct approach to the ordinary concepts test is to holistically consider the circumstances of an individual to determine the strength of their connection with Australia (for example, familial ties, the maintenance of a home and other assets, and the frequency and duration of return visits). The subjective intention of the individual regarding their living arrangements can also be considered, provided that it is consistent with an objective consideration of their circumstances. 

Domicile test 

The domicile test considers that an individual will be an Australian tax resident where they have their domicile in Australia. Generally, an individual will acquire their domicile at birth. Even where an individual has an Australian domicile, where they can demonstrate that they have a permanent place of abode outside Australia, they may be treated as a foreign tax resident.  

At first instance, the FC found that Mr Harding was an Australian tax resident because he had retained his Australian domicile and did not have a permanent place of abode outside Australia. This was based on the fact that the apartment complex in which Mr Harding was living while in Bahrain was typically used as temporary accommodation, and that Mr Harding would move between different apartments in the same complex. Consequently, this type of accommodation lacked the requisite ‘permanence’ required to demonstrate a foreign ‘permanent place of abode’.  

On appeal, the FFC found that the phrase ‘place of abode’ should be given a broad interpretation. In other words, to not only include a specific address but also a town, state or country. Consequently, even though Mr Harding moved between apartments in the same complex while in Bahrain, he was still ‘physically residing permanently’ in the country and was, therefore, not an Australian tax resident. Importantly, the FFC confirmed that an individual will generally only be considered a non-resident under the domicile test where they have ‘definitely abandoned’ their Australian residence. Ultimately, individuals who move between dwellings but remain in a single geographic location outside Australia may be foreign tax residents. However, their tax residency status would still need to be considered on a financial year by year basis. 

 In its decision impact statement, the ATO acknowledges that an individual’s geographic location can be considered for residency purposes but warns that a specific dwelling itself (as in the Harding case) may still be a relevant factor. 

183-day test 

Even where a taxpayer is not found to be a resident under either the ordinary concepts test or the domicile test, they may still be an Australian tax resident under the 183-day test. Broadly, the 183-day test provides that an individual will be an Australian tax resident where the individual has been physically present in Australia for 183 days or more in the relevant financial year. 

Although the 183-day test was not expressly considered in the Harding case, it remains an important consideration for those frequently travelling between Australia and overseas.  


The Harding case provides much-needed clarification around the application of the tax residency rules for Australians living overseas or considering living and working overseas. 

Determining residency status for income tax purposes can often be a complex exercise: please contact your Cornwalls representative, or someone from the Cornwalls Revenue Law team, if you would like to discuss these matters. 


This article is general commentary on a topical issue and does not constitute legal advice. If you are concerned about any topics covered in this article, we recommend that you seek legal advice relevant to your situation.