The Court of Appeal recently dismissed an appeal brought by the Commissioner of Inland Revenue (CIR) in CIR v Diamond [2015] NZCA 613. At the heart of the case was the issue of the meaning of “Permanent Place of Abode” (PPOA). Section YD 1 of the Income Tax Act 2007 states that a person is a New Zealand resident for tax purposes if they have a PPOA in New Zealand. Mr Diamond owned a rental property in New Zealand, but had never lived in it. He argued that he was not a resident in New Zealand as he did not have a home here. The Court clarified that “permanent” in the context of PPOA meant something that is “continuing or designed to continue indefinitely without change,” and “abode” meant “a habitual residence; a house or a home.” Given that Mr Diamond had never lived in the property, but had instead rented it out to others, Mr Diamond’s property was not, in the ordinary sense of the meaning, a PPOA.
This decision will be important for those living overseas who have investment properties in New Zealand. Those living overseas who retain and rent property out to others in New Zealand will continue to be treated as non-resident and will not incur New Zealand tax on their foreign earnings.