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Progress on new tax residency rules, but tax experts fear more complexity

The Board of Taxation has released its consultation guide for its review of income tax residency rules for individuals but fears remain over the proposed changes possibly increasing complexity instead of reducing it.

Tax&Compliance Jotham Lian 26 September 2018
— 1 minute read

In July, the Board of Taxation released its report on its review of income tax residency rules for individuals, finding that the current rules were uncertain, imposed an inappropriately high compliance burden and are perceived to be subjective.


The latest consultation on the design of new residency rules follows from the government’s impartiality on the board’s recommendations, instead asking for further consultation on the proposed changes.

The board has recommended a simplified test in a two-step model, namely a primary “days count” bright line test, and a secondary test taking into account individual circumstances, which leverages some existing case law, as well as international practices.

Speaking to Accountants Daily, the Tax Institute’s senior tax counsel, Professor Robert Deutsch said that while the current rules were far from perfect, he was unsure if the recommendations would achieve the objective of certainty.

“At one level this seems to be a reasonable approach but in many ways it is simply a case of rearranging the deck chairs on the Titanic,” said Professor Deutsch.

“Currently we have a bright line test in the form of the 183 day test but it is subsumed within the other tests that focus on individual circumstances. I am not sure what will be achieved by making the 183 day rule the primary test and everything else secondary especially if the secondary can override the primary.

“The suggested secondary tests are starting to sound quite involved and complicated, for example, the suggestion we might introduce a further new concept of a ‘temporary non-resident’,” he added.

“This is a concept borrowed from the UK – I would not want to see us adopt a complex set of detailed legislative rules along the lines of what appears to have happened in the UK where the statutory rules stretch to some 65 pages. That would be a case of legislation gone mad and while the solutions offered by the board don’t go that far they could easily turn into that once put into the hands of a parliamentary draftsman.”

The board will undertake roundtable consultations in October and will accept written submission until 26 October 2018. Interested stakeholders are encouraged to participate, with information available on the board’s website.

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Progress on new tax residency rules, but tax experts fear more complexity
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Jotham Lian

Jotham Lian

Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.

Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.

You can email Jotham at: This email address is being protected from spambots. You need JavaScript enabled to view it.