Understanding Tax Residency in Australia: Recent Changes and Considerations
In Australia, the tax system has always had specific rules for non-resident taxpayers. These rules include things like withholding taxes on dividends, interest, and royalties, as well as capital gains tax (CGT) events. But in recent years, changes in the law have made determining a taxpayer’s residency status more crucial than ever before.
In the past, non-resident taxpayers got most of the same tax benefits as residents. However, over time, many of these benefits have been taken away, and new requirements have been added for dealing with non-residents, such as:
- The removal of the general 50% CGT discount since May 8, 2012.
- Foreign resident CGT withholding rules since July 1, 2016.
- Different tax rates for 'working holiday makers' since January 1, 2017.
- The need for income-contingent repayments on HELP debt since July 1, 2017.
Tax Alert: Understanding Income Tax Residency Rules
Figuring out if someone is a resident for tax purposes isn't always straightforward. There are several tests to consider, but the two main ones are the 'ordinary concepts test' and the 'domicile test.' Unfortunately, both these tests are somewhat subjective and can be unclear, leading to many tax disputes.
In May 2016, the Board of Taxation (BoT) began an independent review of Australia's individual tax residency rules. The review was completed in August 2017 and made public for feedback in July 2018. The BoT found that the current rules, largely unchanged since the 1930s, needed updating.
While the government has supported further consultation on new residency rules, it's uncertain if any changes will happen. For now, taxpayers must follow the existing rules and wait to see if any updates occur.
Should you have any questions or need assistance, feel free to reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.
- Topics on recent tax amendments on CGT (2)
- Topics on recent tax amendments on CGT (3)
- Topics on recent tax amendments on CGT (4)
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- Topics on recent tax amendments on CGT (7)
- Topics on recent tax amendments on CGT (8)
