Who is an Australian Resident for Tax Purposes?

Who is an Australian Resident for Tax Purposes?

Great news! The Australian Taxation Office (ATO) has just issued the final version of Taxation Ruling TR 2023/1 on income tax residency tests for individuals. Let’s break it down in simpler terms:

Key Points from the Ruling:

1. Definition of ‘Resident of Australia’:
   • The ruling introduces four alternative tests to determine if you are a ‘resident of Australia’ for tax purposes.
     1. You ordinarily reside in Australia (the ordinary concepts test);
     2. Your domicile is in Australia (the domicile test);
     3. You’ve been in Australia, continuously or intermittently, for more than 183 days in the income year (the 183-day test);
     4. You are a member of a superannuation scheme established by deed under the Superannuation Act 1990, or an eligible employee under the Superannuation Act 1976, or the spouse or a child under 16 of the aforementioned persons (the Commonwealth Superannuation test).
2. Flexible Residency Determination:
   • Residency under the first three tests depends on looking at all the relevant facts and circumstances in your life. There are no strict rules or one major factor that decides it all.
3. No Bright-Line Rules:
   • The ruling makes it clear that there are no ‘bright-line rules’ to follow. No single factor is considered more important than the others in determining your tax residency.
4. Residency is about Connection:
   • It emphasizes that residency is all about your connection to Australia. It’s not just about where you physically are but also about your ties and links to the country.
5. Possibility of Dual Residency:
   • Interesting fact – you can be a resident for tax purposes in more than one country at the same time. This recognizes that people can have strong ties to more than one place.

In essence, the ATO is saying they’ll look at your entire situation to decide if you’re a tax resident, and it’s not a one-size-fits-all scenario. If you have connections to more than one country, they get that and won’t penalize you for it.

If you have any questions or want to discuss how this might affect you, feel free to reach out.

For those that love reading tax law and correspondence, The ATO has released the finalised Taxation ruling TR 2023/1 Income tax: residency tests for individuals and Compendium .