The proposed changes clarified that a company incorporated offshore would be treated as an Australian tax resident if it had a “significant economic connection to Australia”. Technical amendments to clarify the corporate residency test were announced in the 2020–21 Budget. Given Australia’s international borders have now reopened, it seems unlikely this treatment will be further extended. The ATO did not apply compliance resources in these situations to determine whether the residency test was met, provided there were no other changes in the SMSF or to circumstances affecting other residency conditions. Residency relief was offered to SMSF trustees for the 2019–20 to 2021–22 financial years where a trustee was out of Australia for more than 2 years as a result of being stranded overseas due to COVID-19. Legislation has not been introduced for either of the proposed changes. When announced, the measure was proposed to apply from 1 July 2022. The measure was intended to provide members of these funds with the flexibility to keep their preferred fund while undertaking overseas work and education opportunities. The 2021–22 Budget announcement proposed to extend the central control and management test safe harbour from 2 to 5 years for SMSFs and remove the active member test for both fund types. Residency requirements were to be relaxed for self managed superannuation funds (SMSFs) and small-APRA regulated funds. The new framework, announced in the 2021–22 Budget, was to be based on recommendations made by the Board of Taxation in the 2019 report Reforming individual tax residency rules - a model for modernisation. Under the current rules, an individual who is physically present in Australia for 183 days or more in an income year will not be an Australian resident if their usual place of abode is overseas and they have no intention to take up residence in Australia Individuals who did not meet the primary test would be subject to secondary tests considering a combination of physical presence and other measurable, objective criteria. The individual tax residency rules were to be replaced by a new framework with a primary physical presence test.Ī primary “bright line” test would treat an individual who was physically present in Australia for 183 days or more in any income year as an Australian resident for tax purposes. This article outlines the status of proposed changes to the tax residency rules for individuals, SMSFs and corporates that now remain in limbo. As we head towards a federal election, announced measures yet to be legislated will be subject to consideration by the next government.
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