Proposed changes to Australian tax residency coming into force in July 2024 could have a significant impact on Australian expatriates living in Asia. Are you prepared?
Proposed changes to Australian tax residency
In July 2023, the ATO published its consultation paper Modernising individual tax residency. It outlines proposed changes to Australian tax residency designed to be simpler and less subjective than existing residency tests.
The changes could significantly impact Australians living in Asia. The new rules are likely to be effective from 1st July 2024, which is a few short months away, and we all know how quickly those will pass!
That’s why we advise all our Australian clients to book a review to discuss your mortgage, taxes and Australian super and ensure that you won’t suffer any nasty surprises come July.
Bright-line test
The new legislation proposes a bright-line primary test for all Australians to determine tax residency.
This test is very simple. If you are physically present in Australia for 183 days or more in any given tax year, you will be considered as an Australian resident and taxed accordingly.
A similar test exists at present (The current regulations are outlined here), but the proposed test will be simpler and will have fewer exclusions.
If you have not been resident in Australia for 183 days or more, there will be secondary tests which will scrutinise your unique personal circumstances in more detail.
The 45-Day Test
Anyone who is under the 45-day threshold of days spent in Australia in a year is deemed to be non-resident.
The grey area is when individuals spend between 45 and 182 days in Australia in a tax year. They will need to do the factor tests.
Factor Tests
This is a list of criteria which will be used to determine whether you are tax resident in Australia.
- Australian citizenship/right to reside permanently: Are you an Australian Citizen or a permanent resident?
- Australian accommodation: Do you have an arrangement at any time to stay in a property kept for your sole use?
- Australian family: Do you have a spouse and/or children under the age of 18 in Australia?
- Australian economic ties: Do you have substantial Australian economic ties (such as employment or business interests)
If you meet two or more of these, you will be deemed tax resident in Australia, which could impact your financial planning and you may need to make provisions to protect your interests.
This is a complicated area with many factors – including double tax agreements with certain countries – to consider. We recommend taking financial advice to clarify how the changes to Australian tax residency rules will affect you, particularly if you live and work offshore but have assets back home in Oz.
How will Australian Tax Residency rules affect you?
To discuss your specific circumstances and how these tax residency changes may affect you, we recommend booking an appointment with one of our team to review your situation. Contact us sooner rather than later for a heads-up about the new legislative landscape and help with navigating the changes successfully. We’ll let you know if you need to take any action prior to the new rules coming into force.
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