Tax residency rules set for change

 

The Board of Taxation (BoT) says it will be undertaking further consultation on what reforms are desirable for the tax residency rules for individuals. This follows previous reviews of Australia’s residency rules going back to 2016 and also 2017.

It says the objective of any changes will be to ensure that any proposed new residency rules can be appropriately designed for present day realities and properly targeted. The BoT consultation, it says, will have a particular focus on maintaining, or indeed improving, the integrity of Australia’s residency rules.

The BoT’s consultation will cover the following issues:

  • options for a two-step model for individual tax residency;
  • the integrity risk posed by ‘residents of nowhere’ and related schemes to circumvent the tax residency rules; and
  • updating the superannuation test.

The BoT’s preferred option includes a primary bright-line test based on the time spent and a secondary test taking into account individual circumstances.

In a regular newsletter to its members, the Corporate Tax Association assistant director Paul Suppree says that while this is an area worth reviewing, “we aren’t convinced that what we currently have really needs much tweaking — and in fact tweaking could add to, rather than remove, compliance cost and uncertainty.”

“Sure it’s old law, but the cases show it is factual complexity that is the nub of the problem not the residence, domicile or 183 days test,” Suppree adds. “We’d be surprised if after this consultation process there will be any significant law changes suggested.”

The BoT consultation paper also has a link to its consultation guide document. The BoT has invited interested parties to make a submission, which are due by 26 October, or register for a “roundtable” discussion (registration requires an email, also linked to from the above webpage).

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