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Tax residency

Our tax team has accumulated a wealth of experience managing disputes and providing practical advice in relation to our clients’ tax residency legal issues.

Our team acted for the successful taxpayers in:

Harding v Commissioner of Taxation [2019] FCAFC 29 – a leading Full Federal Court case about what constitutes a ‘permanent place of abode’ outside Australia
Dempsey v Commissioner of Taxation [2014] AATA 335 – a case where the taxpayer stopped residing in Australia and acquired a ‘permanent place of abode’ overseas when he moved to Saudi Arabia.

Our team has also resolved a large number of tax residency disputes during the audit, objection and appeals stages, without having to proceed to a hearing.

The existing tax residency rules often create difficult challenges for taxpayers who want to be certain of their tax residency position, particularly where they continue to have connections with Australia. We help clients in these circumstances gather the evidence, and apply the law, to reach the correct results.

In some cases, clients will also control related companies or trusts. It is important to check the consequences that an individual’s change of residency status may have on their related entities.

Our team also assists clients who are permanently returning to Australia. Depending on the types of assets the clients have accumulated, there are sometimes tax traps that need to be managed.

In May 2021, the Government announced that the individual tax residency rules will be modernised into a new framework. These proposed new rules have the potential to significantly affect an individual’s tax residency position. Under the proposed new rules:

If you are an individual contemplating a move overseas, determining your future tax residency status may not be as straightforward as under the current rules. You may continue to be a tax resident of Australia for up to three years based on the current proposals. You should factor in this risk when negotiating packages or accepting offers.
For current Australian expats, the proposed new rules may trigger tax residency in Australia, particularly if you spend 45 days or more in Australia in any income year. You will then need to assess your residency based on ‘factors’ that connect you with Australia.

The proposed new rules will be subject to Australia’s double tax agreements. While the proposed new rules are designed to simplify the law, the reality is that it will become more complicated as clients need to fall within exclusions, or tie breaker tests in relevant double tax agreements.

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If you would like to discuss your residency position or the residency position of your clients, please contact a member of our team or access our resources below.