The Diamond Case: Will Reason Prevail in the Permanent Place of Abode Test?

Over the last few years there has been increased interest in the residence laws for individuals. The interpretation of s YD 1 (Residence of natural persons) has faced further discussion, analysis and comment especially of the term “permanent place of abode”. For years the factors the Commissioner considered in determining “permanent place of abode”, listed in TIB vol 7:1 (July 1995), formed the basis of decisions. These were: continuity and duration of presence; durability of association; availability and use of dwelling; intention; family and social ties; employment and business interests and economic ties; personal property; and miscellaneous factors, such as whether the person receives any social welfare payments or returns to New Zealand for holidays. However, Inland Revenue Interpretation Statement IS 14/01: Tax Residence was published on 6 March 2014. The first case discussed in this article was before IS 14/01 and the second (the appeal case) was after the publication of IS 14/01. The article also reflects on the consequences of the penalty and use of money interest regimes that can rapidly turn a tax shortfall (the focus of the case) into a debt that may well be unpayable. With individuals this may result in bankruptcy and the eventual part debt write-off.