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Tuesday Tax Tip – Latest developments on individual residency



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Latest developments on individual residency

The ATO recently released Taxation Ruling 2023/1 in June 2023, which updates the ATO’s views on the Australian individual residency tests, reflected in previous Rulings to take into account developments in case law in recent years. The ruling consolidates and replaces IT 2650, IT 2681, and TR 98/17.

The ruling does not change the overarching principles of the current residency tests, including that, all relevant facts and circumstances need to be considered and that there are no ‘bright-line rules’ or any single factor that can be said to be paramount.

However, in July 2023 Treasury issued a consultation paper on ‘Modernising individual tax residency’, which proposes some significant changes to the way in which an individual’s residency is determined for Australian tax purposes.

While it appears to make it easier to assess an individual’s residency, in some circumstances it may make it more difficult to become a non-resident as the proposals currently stand.

Although not yet law, when advising clients about residency, it is important to not only consider existing case law and the new taxation ruling, but also the potential impact that the proposed changes may have on any advice provided and ensure that clients are aware of how the current proposal may impact on their Australian tax residency.

If you have any questions, please feel free to reach out.

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