Australian Tax Residency Rule Changes Are Back On for Expats?

I just returned from a few weeks in sunny Noosa to a cooler Brighton in Melbourne. A change in the AC from heating to cooling!

 As noted in my recent posts, the key concern for expatriates regularly travelling to Australia are the proposed changes to Australian’s tax residency rules and the impact those rules will have on the travel to Australia to catch up with family or business.  

 A brief summary the proposed tax rules below.

In the 2021 Federal Budget, the Australian Treasurer unveiled plans to modernize the tax residency rules, creating a clearer path for Australian expats. Their pitch, say goodbye to the confusion, and hello to the "Brightline" and "Factor Tests".

The Australian Treasury has now released a Consultation paper on proposed New Tax Residency rules with feedback required by September 22.

The intent is to have new tax residency rules in place and effective from 1 July, 2024.

The primary test is simple – if you're physically present in Australia for 183 days or more in any income year, you'll be considered an Australian tax resident. For those who don't meet this primary test, there is are secondary tests will factor in your unique circumstances.

Here’s a breakdown for incoming tax residents

1️⃣ 183-Day Test: Spend 183 days or more in Australia during an income year, and you become a tax resident.

2️⃣ 45-Day Test: If you spent between 45-182 days in Australia during the financial year, keep going to the factor tests.

3️⃣ Factor Tests: Meeting two or more of these factors deems you an Australian tax resident from day one in Australia. These include citizenship, accommodation, family, and economic ties.