With the increase in flexible working alternatives, changes in international working arrangements, the uncertainty surrounding COVID-19 and the border restrictions that have been put in place over the recent years, the question of tax residency has become increasingly relevant and contentious.

The new ruling, TR 2022/D2, which replaces former rulings IT 2650 and TR 98/17,TR 2022/D2 does not appear to re-write the rule book but provides some firmer language on some of the ordinarily resides concepts and the factors to be considered. A contemporary interpretation of the existing legislation, it includes 14 modern examples to assist in understanding the ATO’s current view of the individual tax residency rules.

It also takes into account recent developments in case law, including but not limited to Harding v Commissioner of Taxation [2019] FCAFC 29, Pike v Commissioner of Taxation [2019] FCA 2185 and Addy v Commissioner of Taxation [2019] FCA 1768.

The ruling does not, however, provide a primary ‘bright line’ test as proposed by the former Government in the 2021-22 Federal Budget.

The primary ‘bright line’ test is where a person who is physically present in Australia for 183 days or more in any income year will be an Australian tax resident. It is unknown whether the current Federal Government will continue with the previous Government’s proposed changes to replace the individual tax residency rules and introduce a ‘bright line’ test.

The ATO is seeking comments and feedback by 25 November 2022.

Key takeaway

The devil is still in the ‘facts and circumstances’ of individual cases. Whilst the Draft Ruling steps through 14 examples, each situation comes down to the particular facts and circumstances of the specific taxpayer, and varies for each person.

The SW Tax team is keen to see whether the upcoming Federal Budget; the first for the new Federal Government, will shed any further light on likely future developments.

How can SW help?

Reach out to your SW advisors if you would like more information about your tax residency or what the Draft Tax Ruling might mean for you.

Contributor

Justin Batticciotto, Associate Director, Tax

The post ATO provides examples to illustrate Tax Residency for Individuals rules appeared first on SW Accountants & Advisors.

The Government announced in the 2020/21 Federal Budget that it will be amending the current corporate tax residency test in response to the Board of Taxation’s recommendations. The proposed change will amend the law so that a foreign incorporated company will only be an Australian resident company if it has a ‘significant economic connection’ to Australia.

The new residency test will be satisfied for a foreign incorporated company if both its:

• core commercial activities are undertaken in Australia and
• central management and control is in Australia.

The key changes

The prevailing interpretation of the current residency treats a foreign incorporated company as a resident if the company’s ‘central management and control’ is in Australia. This interpretation is relatively new and arose as a result of the High Court decision in the Bywater Case and the consequent withdrawal of the ATO’s previous view on corporate residency in Taxation Ruling TR 2004/15.

The existing interpretation ignores the location of the actual operations of the company as well as the day to day management, but rather focuses on the location of the controlling mind(s). This may result in a company becoming an Australian resident by virtue of a single person undertaking board level management activities in Australia – regardless of the location the company physically carries out its business.

This change is particularly welcomed during the COVID-19 pandemic where directors of foreign companies may be stranded in Australia as a result of travel restrictions.

Next steps

Review corporate tax residency positions and wait for the passing of legislation before amending guidelines for what activities may be undertaken by management in Australia.

Who will this impact?

Multinational groups and certain private client groups with international business operations.

Important dates

Announced on the 6 October 2020 Federal Budget.

The legislation will have effect from the first income year after the date that the enabling legislation receives Royal Assent.

However, taxpayers will have the option of applying the new law retrospectively from 15 March 2017 (the date on which the ATO withdrew its ruling TR 2004/15).

How SW can assist?

When the changes are legislated, SW can provide updated guidance on the Australian tax residency status of foreign companies that may have some form of management and control in Australia.

Contacts

The post Proposed changes to corporate tax residency appeared first on SW Accountants & Advisors.

The seminar will discuss the latest tax news and changes and provide an update on the following:

• What’s new and recent developments
• FBT recap
• Superannuation and amnesty update
• SRO / OSR payroll tax activity
• Global mobility / Tax residency trends
• Employee share schemes insights
• Other employment tax issues

Who should attend?

• Tax managers and their support staff

• Human resource management/remuneration and benefits managers

• Other staff interested in employer tax compliance, such as CFOs, financial controllers, CEOs and directors. 

Presenters

Stephen O’Flynn – Partner
Sam Morris – Partner
Helen Wicker – Partner
David Wilson – Associate Director
Leo Luan – Associate Director
Justin Batticciotto  – Associate Director
Rahul Sanghani – Senior Manager

Event details 

There will be five seminars hosted over the duration of two weeks, all of which are free to attend.

Melbourne

Employment Taxes Update: Corporate
Date: Tuesday, 5 March 2019
Time: 8:00am – 10:00am

Employment Taxes Update: Not-for-profit
Date: Wednesday, 6 March 2019
Time: 8:30am – 10:30am

Employment Taxes Update: Government
Date: Thursday, 7 March 2019
Time: 8:30am – 10:30am

Brisbane

Employment Tax Update
Date: Tuesday, 12 March 2019
Time: 12pm – 2pm

Sydney

Employment Tax Update
Date: Wednesday, 13 March 2019
Time: 8:00am – 10:00am

For more information about these events, or if you have any queries, please contact the ShineWing Australia Marketing team via marketing@sw-au.com

We look forward to your attendance!

The post Employment Taxes Update 2019 appeared first on SW Accountants & Advisors.