Proposed individual tax residence rules are in the spotlight with a Griffith expert calling for another round of consultation in a recently published article in Australian Tax Forum.
Co-author, Griffith Law Futures Adjunct Research Fellow Dr John Minas analysed the proposed rules by applying them to the facts of leading individual residence cases.
“Tax residence is a critical issue for Australians working internationally,” Dr Minas said.
“Although it is accepted tax law can be complex, and simplifying residence rules would be beneficial, the proposed rules appear somewhat complex and difficult to navigate.
“Whereas complexity under current law is usually associated with a small number of ‘borderline’ cases, it is likely that a higher proportion of taxpayers will be required to engage with the proposed rules to determine their residence status.
“On one reading the proposed rules might be seen as a solution looking for a problem.
“It seems unusual to rewrite the current law on individual residence, which would have the consequence of altering Australia’s right to tax individuals, in the absence of a statement from policymakers outlining a rationale for doing so.”
Co-author and taxation academic at Monash University, Swapna Verma said the claimed benefits of the proposed rewrite should be weighed against the inherent complexities in introducing a new set of untried rules.
“Our application of the proposed residence rules to the facts of some existing residence cases, highlighted a lack of appropriate flexibility, given their prescriptive nature,” Swapna said.
“In some of the leading tax residence cases we analysed, we found that if the taxpayer’s residence status had been determined using the proposed rules, the result would have changed.
“Specifically, some taxpayers who were not tax residents of Australia under current law, were tax residents of Australia on the application of the proposed rules – this has significant implications.
“Although there was a consultation process prior to the publication of the Board’s final report, another round of consultation should be an immediate priority.
“We question the need for the abolition and replacement of the current individual tax residence rules.
“Our research findings suggest the current residence rules are a solid foundation from which an alternative pathway to reform of individual tax residence could proceed.”
The article What is the future of individual tax residence under the proposed rules? was published in March in Australian Tax Forum (2023) 38(1).