New ATO draft ruling on individual tax residency
Ahead of the Budget, the Australian Taxation Office (ATO) has issued a draft taxation ruling, TR 2022/D2 – Income Tax: residency tests for individuals.
The ruling consolidates and replaces prior tax rulings on individual tax residency and updates the ATO’s views on the matter following several Federal and High Court decisions over recent years.
The Australian Government taxes its residents on worldwide income at rates of up to 47% (including Medicare Levy), so understanding where you are a tax resident is important.
The legislation has not changed in years and a resident of Australia for tax purposes is:
A person, other than a company, who resides in Australia (ordinary concepts test) and includes a person:
(i) whose domicile is in Australia, unless the Commissioner is satisfied that the person's permanent place of abode is outside Australia; (domicile test)
(ii) who has actually been in Australia, continuously or intermittently, during more than one-half of the year of income, unless the Commissioner is satisfied that the person's usual place of abode is outside Australia and that the person does not intend to take up residency in Australia; (183-day test) or
(iii) who is:
(A) a member of the superannuation scheme established by deed under the Superannuation Act 1990; or
(B) an eligible employee for the purposes of the Superannuation Act 1976; or
(C) the spouse, or a child under 16, of a person covered by sub-subparagraph (A) or (B) (Commonwealth superannuation fund test)
A person needs only satisfy one of the tests to be considered a tax resident. If no tests are satisfied, then a person will not be a tax resident of Australia.
The draft ruling explores each of the tests and provides a number of practical examples which consider the application of each of the tests to the facts in each example.
Expatriates and individuals moving into and out of other countries will also need to consider the tax rules in that other country. If the other country has a tax treaty with Australia, the tax treaty will apply a tie-breaker test to determine which country the taxpayer is considered a resident for the purpose of the treaty. The treaty provisions will generally overrule the domestic law in determining the taxation of income.
If considering a move overseas, or moving to Australia, it is critical to consider this issue and obtain tax advice in relation to your personal circumstances. With advisors in more than 90 countries, Mazars can provide professional advice to ensure you are aware of your tax obligations, wherever you choose to live.
Should you require advice in this regard, contact your usual Mazars advisor or alternatively one of our experts via the form below or on:
Brisbane – Jamie Towers | Melbourne - Evan Beissel | Sydney – Gaibrielle Cleary |
+61 7 3218 3900 | +61 3 9252 0800 | +61 2 9922 1166 |
Find out what this draft ruling means for you as well as other topics that lie ahead in this months Labor Budget, by registering for our Federal Budget update webinar.
Author: Jamie Towers
Published: 07/10/2022
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