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Tax residency: Diamond case going to Court of Appeal

Most tax professionals will be aware of the Diamond case (Diamond v Commissioner of Inland Revenue (2014) 26 NZTC 21,093). It is the first High Court judgment on personal tax residency in New Zealand after the 1980 law change. It therefore affects all New Zealanders who move abroad.

The High Court had to rule on the question of whether a rental property owned and rented out by Mr Diamond (the taxpayer) could be considered his permanent place of abode in New Zealand. Clifford J stated that to have a permanent place of abode in New Zealand means to have a home in New Zealand with a sufficient degree of permanence. The rental property owned by Mr Diamond was not a permanent place of abode because it could not be considered a dwelling or the home of the taxpayer. The property was a genuine investment property. Mr Diamond had never lived in the property and there were never any plans to reside in the property in the future. In other words, the rental property was not his home in the ordinary sense of the word. The facts of the Diamond case were distinguished from the facts in Case Q55 (1993) 15 NZTC 5,313 where a University professor rented out his home while overseas on sabbatical leave. The home was occupied by the professor immediately before going overseas and on his return. It was always intended that the professor would live in his home on his return. However, it was argued that the home was not the professor’s permanent place of abode because it was not available to him during his absence (due to a short term fixed tenancy). Barber J found that the dwelling remained the professor’s permanent place of abode despite the fact that it was unavailable to him during his absence. The home was the professor’s permanent place of abode when he left for his sabbatical, and never ceased to be his permanent place of abode. In contrast, in the Diamond case, the rental property was never the taxpayer’s permanent place of abode to begin with.

Inland Revenue has appealed the matter to the Court of Appeal because they do not like the result. In a manner of speaking Mr Diamond is being sacrificed on the altar of principle. He lives and works in Australia and cannot afford to fund the appeal. Because of the importance of the case to all taxpayers I am seeking to crowd fund the cost of the appeal. It is believed that this is the first time that an attempt has been made to crowd fund a tax case. A “give a little” account has been set up to receive donations. The link is below.

https://givealittle.co.nz/cause/michaeldiamondtaxresidencyappeal/

It would be great if the taxpaying community could come together to support what is effectively a test case. The name of the appeal on the Give a Little site is “michaeldiamondtaxresidencyappeal”.

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