9 July 2018

Review of Tax Residency Rules for Individuals

The Minister for Revenue and Financial Services, the Hon Kelly O’Dwyer MP, today welcomed the initial report of the Board of Taxation (the Board) on income tax residency rules for individuals.

The Board has conducted a self-initiated review of the individual income tax residency rules. The Board considered whether the existing individual tax residency rules, that are largely unchanged since enactment in 1930, are:

  • sufficiently robust to meet the requirements of the modern workforce; and
  • simple, efficient and fair.

The Board also considered integrity concerns, the reasons for an increase in litigation relating to the residency rules since 2009, and any changes that could be adopted to improve the residency rules.

The Board has provided its initial report to the Minister. A copy of the report is available at the Board of Tax website.

“The Board has undertaken an extensive consultation process, and I thank everyone who has been involved for their contributions,” Minister O’Dwyer said.

“The Government values the crucial input provided by key stakeholders.”

The Board found that the current individual tax residency rules require modernisation and simplification.

The Board also identified opportunities for tax arbitrage, for example where individuals become ‘residents of nowhere’ when they leave Australia and do not become tax residents of another jurisdiction. 

“These are complex issues that deserve further analysis and consideration,” the Minister said.

“Before the Government takes any position on these matters I have asked the Board to consult further on key recommendations, including how Australia could draw on residency tests in other countries.”

The Board is a non-statutory advisory body charged with contributing a business and broader community perspective in improving the design of taxation laws and their operation. Interested stakeholders may contact the Board for updates on the process for further consultation.