Welcome to 2016 and the first Polson Higgs Tax blog of the New Year.
An early Christmas present arrived for Mr Diamond late last year when the Court of Appeal dismissed the Commissioner’s Appeal from the High Court and held that Mr Diamond was not a tax resident of New Zealand.
While this is a bit of old news now for some it is not something we have covered in our weekly tax blogs and due to the significant nature I thought it might be appropriate.
Mr Diamond was born in New Zealand and was a New Zealand citizen however he lived for the most part out of New Zealand for the relevant tax years working as a private security contractor in Iraq. The Commissioner contended that while he did not satisfy the day count test Mr Diamond had a permanent place of abode due to a rental house he shared with his wife and whom he was separated from.
The Commissioner’s view was upheld by the Taxation Review Authority and caused concern among taxpayers and tax professionals alike as it seemed to suggest even minor connections with New Zealand could result in tax residency and a tax liability. A real concern where no double Tax agreement is present with the foreign jurisdiction.
On appeal the High Court found that while he had a property in New Zealand this had not been and had never been Mr Diamond’s home but rather an investment and so would not be a permanent place of abode.
The Commissioner appealed the High Court decision on the basis the statutory requirements do not require a home but only a place the taxpayer can abide.
The Court of Appeal confirmed that the context of the provisions mean something more than the mere availability of somewhere to stay. The focus is on whether taxpayer, not members of their family, has a permanent place of abode.
After a long road and a bit of struggle hopefully Mr Diamond was able to finally have a relaxing Christmas break and enjoyed the sun.