The Court of Appeal found property which a person has never lived in cannot be their “permanent place of abode”, for tax purposes.
In a case potentially impacting all New Zealanders who move overseas, the Court of Appeal has decided in favour of the taxpayer, finding that property which a person has never lived in nor intends to live in cannot be their “permanent place of abode”, for tax purposes.
The case centred on whether Mr Diamond, who worked as an overseas security consultant between 2003 and 2012 (and continues to live overseas), was New Zealand tax resident in a number of those years.
KPMG New Zealand’s head of Global Mobility Services, Rebecca Armour, welcomes the decision which has broad implications for many expat New Zealanders.
This is important, says Armour, as a permanent place of abode can give New Zealand taxing rights over a person’s worldwide income. Following a 2013 decision at the Taxation Review Authority level in favour of the Commissioner, a number of expats had significant concerns about their personal tax obligations in New Zealand, even where they had been out of the country for some time.
Inland Revenue argued that Mr Diamond had a permanent place of abode due to the fact he owned a New Zealand rental property, which was available to him, and also his wider connections to New Zealand. Mr Diamond argued that the rental property was not his home, as he had never lived in the property, and there was no intention to ever use the property for that purpose.
Mr Diamond was successful in the High Court, with that judgement in 2014 confirming that to have a permanent place of abode means essentially to have a home and, on the facts, Mr Diamond did not.
Pleasingly, the Court of Appeal upheld the view of the High Court in a pre-Christmas decision.
While the decision is welcome, Armour says that it doesn’t remove the uncertainty completely. For example, expats that have rented out their New Zealand family home while overseas or who buy property which could be used as the family home on their return are still at risk. Their status will depend on past and prospective ties to any New Zealand property, the time away as well as other links to New Zealand. Therefore, care still needs to be taken when applying the residence rules.
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