Individual tax residency rules set to change
The current tax residency rules of an individual - that is, the resides test, domicile test, 183-day test and Commonwealth superannuation test, are to be replaced with a new “bright line” test, whereby an individual who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident.
Individuals who do not meet the primary test will be subject to secondary tests, which are dependent on a combination of physical presence, measurable and objective criteria.
At this stage, it is unclear whether the individual needs to be in Australia for a continuous period of 183 days to satisfy the test; however, the enabling legislation should clarify this point.
This announcement follows an extensive review process undertaken by the Board of Taxation. The new residency test will deliver greater certainty in determining the tax residency of an individual, when compared to Australia’s current tax residency rules, which have become increasingly complicated to determine and apply in practice.
This measure will come into force from the first income year after the date of Royal Assent of the enabling legislation.
Last updated: 14th May 2021