Personal tax & transfer system International - Personal transfer system Residency

Modernising individual tax residency

Published Date: 28 Sep 2023


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The Tax Institute welcomes the opportunity to make a submission to the Treasury in relation to the consultation paper on modernising the individual tax residency rules (Consultation Paper).

In the development of this submission, we have closely consulted with our Large Business and International Technical Committee, Small & Medium Enterprises Technical Committee and Taxation of Individuals Committee to prepare a considered response that represents the views of the broader membership of The Tax Institute.

While tax residency is generally relatively straightforward for the majority of taxpayers, the existing rules are complex for those at the margins. This uncertainty leads to increased compliance costs for taxpayers and more frequent disputes with the Australian Taxation Office (ATO).

The Tax Institute supports the development of the new framework for the individual residency rules where the reform brings certainty and simplicity for affected individuals, employers, and the ATO, while maintaining the integrity of the system. We consider it crucial that the proposed rules are appropriately designed in alignment with existing policy settings and balanced against broader priorities.

Our comments in this submission are limited to the proposed 45-day threshold, and the factor tests. We consider that the 45-day threshold is too low and should be replaced with an at least 60-day threshold. In relation to the factor test, we consider that some of the factors proposed are not appropriate tests for determining individual tax residency, and that, in any case, a weighted model rather than a strict ‘2 of 4’ factors should be applied.

It is also The Tax Institute’s view that any reform to the individual tax residency rules would be well supported by the reinstatement of the former breadth of the foreign employment income exemption contained in section 23AG of the Income Tax Assessment Act 1936 (ITAA 1936).

Our detailed response is contained in Appendix A. We have attached in Appendix B our earlier submission to the former Government, regarding the Federal Budget 2021-22 announcement of measures proposing to reform the individual residency rules (2021 Submission).

In our 2021 Submission, we set out in detail our concerns regards the recommendations made by the Board of Taxation in its 2019 Report titled 'Reforming Individual Tax Residency Rules – a model for modernisation’ as well as a practical alternative approach which we still consider to be an appropriate option if reform of the individual tax residency rules is to proceed.

Our 2018 submission to the Board of Taxation regarding its 2018 Review of the Income Tax Residency Rules for Individuals (2018 Submission) is referred to in our 2021 Submission and provides further information on our views on the factor test, among other matters. Our 2018 Submission is attached in Appendix C.

Our comments in this submission should be read together with our 2018 Submission and 2021 Submission.

We note that our 2021 Submission endorsed the corresponding submission made by the Taxation Committee of Business Law Section of the Law Council of Australia (Law Council of Australia). We have had the benefit of reviewing the Law Council of Australia’s draft submission in response to the Consultation Paper and we continue to share and endorse those views.

The Tax Institute is the leading forum for the tax community in Australia. We are committed to shaping the future of the tax profession and the continuous improvement of the tax system for the benefit of all. In this regard, The Tax Institute seeks to influence tax and revenue policy at the highest level with a view to achieving a better Australian tax system for all.


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Unless expressly stated, opinions are not that of The Tax Institute, which accepts no responsibility for the accuracy of any of the information contained within it.

The Tax Institute
(ABN 45 008 392 372 (PRV14016))


The Tax Institute is a Recognised Tax Agent Association (RTAA) under the Tax Agent Services Regulations 2009. 

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Personal tax & transfer system International - Personal transfer system Residency

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