New Individual Australian Residency Rules Proposed by Board of Taxation

Updated: Feb 3

Over the past three years the Board of Taxation has been working on a proposal to simplify the rules for determining Australian tax residency. In March 2019 the Board submitted an updated proposal to the government. This report was released in December 2019. While these proposed rules are not currently being considered for legislation, it may be of interest to understand how the Board of Taxation is looking to reform legislation around residency.

Under the proposal tax residency would be determined by what is intended to be a simple two-step approach instead of the more complicated criteria that currently exist.

The First Test

The first test would be the very simple 183-day test. This simply means that any individual who spends 183 days or more in Australia would be considered a tax resident. This would mean that a lot of temporary residents and holiday makers, who are currently considered non-residents, would be considered tax residents.

The Second Test

The second step would be to capture genuine Australian residents who do not qualify for the first test. This would involve a new commencing residency and ceasing residency test to determine if individuals who were not in Australia for 183 are still to be considered tax residents.