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Review of the Income Tax Residency Rules for Individuals

Published on 20 Nov 18 by THE TAX INSTITUTE

As Australian residence is one of the two foundation stones upon which Australia’s taxation jurisdictional claim rests, the importance and potential impact of this review of individual residence cannot be underestimated.

Our submission addresses each of the design principles in the Consultation Guide rather than focussing on each individual question. There are two overarching concerns, being:

• That the proposed changes ensure that the goals of certainty and simplicity are met and not frustrated by an integrity regime that seeks to deal with rare occurrences that arise not necessarily due to residence abuse but often due to the operation of other provisions of the Income Tax Assessment Acts; and

• That the reform proposals mooted in the Consultation Guide will expand the scope of persons caught by the rules. This is so notwithstanding the assertion that the stated intention (on page 26 of the Consultation Guide), is that the revenue impact of the measure will be ‘immaterial or negligible’.

Our view is based on the proposals which would include the development of a more adhesive residence rule, the creation of two clear bright-line tests (which may include the measurement of presence over any 12-month period) and a factor test coupled with revision of the superannuation test. Therefore, in light of these potential Page 2 impacts the Taxation Institute urges the Board to undertake the modelling and associated costings appropriate in the context of this major reform of Australia’s jurisdictional change.

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The Tax Institute is Australia's leading professional association and educator in tax, with offices in most major cities. Focusing solely on tax, the Institute provides the best resources, education and networks. Our mission is to equip tax professionals with everything they need to demonstrate the highest level of expertise and increase the advancement of public knowledge and understanding. We are also committed to propelling members into the future and onto the global stage with the introduction of the Chartered Tax Adviser designation.
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