Highlights

  • Justice Christopher Horan dismissed engineer Trong Quy's appeal on 4 September 2026, ending his bid for a $542,943.29 PAYG refund.
  • The Tribunal found Quy kept an Australian domicile and had no permanent place of abode overseas, despite working in Dubai.
  • Australian residents are generally taxed on worldwide income, while non-residents are generally taxed only on Australian-sourced income.
  • The ATO has extended passenger movements data matching to 2026–27 through 2028–29, covering records on about 115,000 people a year.

Spend years working overseas and you might assume you have left the Australian tax system behind. A Federal Court ruling says it is not that simple. An engineer based in Dubai sought a refund of $542,943.29 in PAYG tax withheld from his pay, and lost. If you work abroad while keeping strong ties at home, the case shows how residency is weighed, and the ATO is matching travel records against tax returns as the 2 November lodgment deadline nears.

What the court decided

In Quy v Commissioner of Taxation [2026] FCA 1316, Justice Christopher Horan dismissed an appeal by Trong Quy. Mr Quy had argued he was not an Australian resident, did not have an Australian domicile and had a permanent place of abode in Dubai, where he worked from 2016 to 2020. The Administrative Review Tribunal had twice upheld the Commissioner's view that he remained a resident.

An appeal from the Tribunal to the Federal Court is limited to questions of law. Mr Quy raised three, all centred on whether the Tribunal should have been satisfied he had a permanent place of abode outside Australia. Justice Horan found it was open to the Tribunal not to be satisfied his permanent home was elsewhere. Its reasons, he said, "do not reveal any legal error".

Why the domicile test caught him

Australia has several statutory residency tests, including the ordinary "resides" test, the domicile test and the 183-day test. The Tribunal found Mr Quy was not a resident under the ordinary concepts test, but under the domicile test a person whose domicile is in Australia is treated as a resident unless the Commissioner is satisfied their permanent place of abode is outside Australia.

The Tribunal weighed his ties: he kept ownership and registration of motor vehicles in Australia, kept personal belongings at an Australian address, and moved between locations for work assignments with a long-term employer. His family stayed in Perth while he worked in Dubai. The Tribunal concluded his assignments did not show he had abandoned his Australian residence.

What residency means in dollars

The United Arab Emirates does not levy personal income tax on salaries, so residency status can decide whether tax on an overseas salary is owed in Australia at all. It also matters for capital gains: non-residents generally cannot use the 50% CGT discount, which from 1 July 2027 is replaced by indexation plus a 30% minimum tax for individuals.

Consider a hypothetical engineer, Sam, who earns $180,000 in Dubai in 2026–27 with no other income. As a resident, Sam would pay nothing on the first $18,200, $4,020 on the next $26,800, $27,000 on the next $90,000 and $16,650 on the remaining $45,000. That totals $47,670, and a 2% Medicare levy adds $3,600, for $51,270. A genuine non-resident would generally not be taxed in Australia on foreign-sourced salary. The example ignores offsets and deductions.

The ATO is watching the border data

The ATO has extended its passenger movements data-matching program, running since March 2020, to cover 2026–27 to 2028–29. The Department of Home Affairs will supply names, dates of birth, arrival and departure dates, passport details and visa status, which the ATO uses to test residency claims under the resides, domicile and 183-day tests.

Dates ahead

Self-preparers must lodge their 2025–26 return by Monday 2 November 2026, because 31 October falls on a Saturday, and residency is a key question on it. Payment is generally due on 21 November. The case is a reminder that cars, belongings or family kept in Australia can weigh heavily, and a new address abroad is not enough on its own.