Mr Quy lived and worked in Dubai for more than five years. The Tribunal (eventually) accepted that he did not reside in Australia under the ordinary meaning of the word ‘resides’ test. And yet, he was still taxed as an Australian resident on his Dubai salary. So what happened?
Despite concluding that Mr Quy no longer resided in Australia, the Tribunal was not satisfied that Mr Quy had established that his ‘permanent place of abode’ was outside Australia.
Mr Quy’s appeal to the Federal Court was dismissed in Quy v Commissioner of Taxation [2026] FCA 1316, and Mr Quy has now appealed to the Full Court. In the meantime, taxpayers living and working overseas should consider whether they can prove that their ‘permanent place of abode’ is outside Australia.
What were the facts in Quy?
Mr Quy is a structural engineer who has worked for the same Australian employer since 1986. He had lived in Dubai with his family once before, from 1998 to 2009, before moving back to Perth.
In September 2015, he accepted a full-time role in Dubai. The facts were largely not in dispute:
- his assignment letter said the assignment was expected to last about 24 months, with Perth as his ‘point of hire’ and travel days for a ‘home leave trip’;
- he lived in the same Dubai apartment, leased by his employer’s Dubai entity, from late 2015 until early 2021;
- he bought a car in Dubai, held Dubai residency permits and took part in social and church activities there;
- he returned to Australia 12 times in five years, for between five and 35 days each time;
- his wife and daughters stayed in the family home in Perth while the daughters finished school and university;
- he kept cars, a motorbike, bank accounts, health insurance, two investment properties and some belongings (including winter clothes and two guitars) in Australia; and
- in 2021 he moved to Thailand for another posting with the same employer.
The Commissioner assessed him as a resident for the 2016 to 2020 income years. This is the case’s third trip through the tribunal and courts. In 2024, the Administrative Appeals Tribunal first found him to be a resident both under the ordinary concepts test and permanent place of abode test. The Federal Court then sent the matter back to the Tribunal in respect of how the residency tests were applied: Quy v Commissioner of Taxation (No 3) [2024] FCA 726.
On remittal, the Tribunal found that Mr Quy did not reside in Australia under ordinary concepts. His trips home were visits or holidays, and he did not treat Australia as his ‘home’. But because his domicile was still Australian, he was a resident unless he could satisfy the Tribunal that his permanent place of abode was outside Australia. The Tribunal was not satisfied that he had a permanent place of abode outside Australia: Quy and Commissioner of Taxation [2025] ARTA 174.
The Federal Court dismissed Mr Quy’s appeal from the second Tribunal decision, finding that the Tribunal had stated the principles correctly, how much weight to give each fact was a matter for the Tribunal, and no error of law was shown.
How do the resides and permanent place of abode tests fit together?
Under section 6(1) of the Income Tax Assessment Act 1936, an individual is a resident of Australia if they:
- reside in Australia according to ordinary concepts; or
- have their domicile in Australia, unless the Commissioner is satisfied that their ‘permanent place of abode’ is outside Australia.
(There are two other tests, but they were not relevant in Quy.)
The second test only matters once the first test has failed. As Northrop J said in Federal Commissioner of Taxation v Applegate (1979) 38 FLR 1, the extended meaning of ‘resident’ becomes relevant only when the taxpayer does not reside in Australia.
Two cases set the boundaries of the permanent place of abode test:
- ‘Permanent’ is not forever. In Applegate, a solicitor who moved to Vanuatu to open a branch office, intending to return to Australia one day, had a permanent place of abode overseas. ‘Permanent’ is contrasted with ‘temporary or transitory’, not with ‘indefinite’.
- The question is whether Australian residence has been abandoned. In Harding v Commissioner of Taxation [2019] FCAFC 29, the Full Court held that the test asks whether the taxpayer has ‘definitely abandoned’ their residence in Australia and is living permanently in another country. It need not be a particular house.
Northrop J put the point most clearly in Applegate:
If in that year a taxpayer does not reside in Australia in the sense in which that word has been interpreted, but has formed the intention to, and in fact has, resided outside Australia, then truly it can be said that his permanent place of abode is outside Australia.
What does the ATO say in TR 2023/1?
In TR 2023/1, the ATO sets out the following views on the permanent place of abode test.
- A permanent place of abode requires that the person has ‘definitely abandoned their residency in Australia’ and ‘commenced living permanently overseas’ (relying on Harding).
- ‘Permanent’ does not mean forever, and is contrasted with ‘temporary or transitory’.
- Factors include the length of the overseas stay, the nature of the accommodation and the durability of the person’s association with the place, looking at all the facts together.
- As a rule of thumb, two years is likely to be a ‘substantial’ period. By contrast, a planned stay of less than two years is unlikely to be enough. The critical question is whether a person has in fact abandoned Australian residency.
- Employer-arranged or non-exclusive accommodation usually indicates the stay is not permanent.
- A retained Australian home carries more weight where it is kept available for the person’s use and they return to it, and less where it is leased out or kept for family members.
What risk does Quy create?
The main risk is that a person can be accepted as no longer residing in Australia, yet still fail to establish a permanent place of abode outside Australia – even after working overseas for more than five years. If so, they remain an Australian resident under the domicile test and are taxed on their worldwide income.
That is what happened to Mr Quy. The Tribunal accepted that he did not treat Australia as home and that his trips back were visits or holidays. It then relied on largely the same Australian connections – the family home, cars, bank accounts and belongings – to find that he had not ‘abandoned’ his Australian residence, so his permanent place of abode was not in Dubai.
There is a tension between that outcome and the ATO’s public ruling, as well as the earlier case authorities. In Applegate, Northrop J said that a taxpayer who does not reside in Australia, and has in fact resided outside Australia, has a permanent place of abode outside Australia. How that statement fits with the Tribunal’s approach may be a point for an appeal. In the meantime, the risk is greatest for people who:
- are on an assignment with an Australian employer, particularly one with a fixed term, an Australian ‘point of hire’ or home leave;
- live in accommodation arranged by their employer;
- keep a family home in Australia, especially with family still living in it; or
- move between overseas postings with the same employer.
In the latest decision, the Federal Court acknowledged that ‘different minds might reach different conclusions’ on these facts, but held that weighing the evidence was a matter for the Tribunal.
I work overseas but keep a home in Australia – what should I do?
An Australian-domiciled taxpayer carries the burden of proving that their permanent place of abode is outside Australia. It will be important to keep evidence of:
- your overseas home – a lease or title in your own name, the length of the lease, and that you furnished it and paid the outgoings;
- your employment – the contract or assignment letter showing the role, its expected duration (ideally two years or more) and any extensions;
- your status overseas – visas, residency permits and local tax registrations;
- your belongings – removal and shipping records, and the sale or disposal of cars and other assets in Australia;
- your Australian home – if you keep it, an arm’s length lease, or why it is kept (for example, to house dependent children);
- your family – where your spouse and children live, including school enrolments and visas;
- your life overseas – local bank accounts, medical providers, club and church memberships, driver’s licence and vehicle registration; and
- your travel – a log of each trip to Australia, its purpose and where you stayed, and passenger cards answered consistently.
Each income year is tested separately, so the evidence needs to cover every year you are overseas, not just the income year you leave.
If you have already lodged returns on the basis that you were a non-resident, check whether your evidence would satisfy the ATO now. It is far easier to gather it while you are still overseas.
Please contact a member of our team if you would like to discuss.
