CA ANZ supports individual tax residency rules that are simple to apply and provide certainty. The Board’s proposed framework for individual tax residency provides an objective framework to work out an individual’s tax residency but the secondary tests are too rigid and were formulated at a time before the COVID-19 pandemic and the ability to work online from anywhere.

Since for Board of Tax report, the ATO has updated its guidance regarding individual tax residency. Our members’ feedback on the new TR 2023/1 has been positive to date as it provides clear guidance to navigate the existing individual tax residency legislative rules and addresses some commonly encountered scenarios.

The consultation paper proposes a primary bright line 183 day test and secondary tests which would require an individual to be physically present in Australia for a minimum of 45 days in an income year before commencing residency, or a maximum of 45 days in an income year before ceasing residency.

Generally, CAs are supportive of a primary bright-line 183-day test as it is a simple and objective test to apply. However, treating an individual as an Australian tax resident based on being physically present in Australia without looking at an individual’s ties to Australia and ties to another country, could result in undesirable policy outcomes.

CA ANZ calls for a Commissioner’s discretion to be included to allow the individual residency tests to be modified by the Commissioner in the event of a pandemic or other national emergency which results in people being displaced for a period of time.

CA ANZ is of the view the 45 days threshold is too short as the pandemic has also resulted in long-lasting changes to work and other countries have longer periods. In addition the need for maintaining two points of connection to Australia should be increased to three.