COVID-19: Tax Residency Update

Tax Position When Returning to Australia

Australian expats who have had to come back to Australia because of the corona virus pandemic, should recognise what it may mean for their income tax position.

The latest advice from the Australian Taxation Office on this issue can be found here.

Correctly Classify for Tax Residency Purposes or Seek Advice

The ATO’s view is that if you are an Australian expat and you are temporarily in Australia for some weeks or months because of the corona virus, then you will not become an Australian resident for tax purposes as long as you live overseas and intend to return as soon as possible.

However, the ATO guidance acknowledges that tax residency issues can become more complicated if the non-resident ends up staying in Australia for lengthy periods or does not plan to return to their overseas country of residency.

The ATO guidance also acknowledges that there will be unique situations with a range of potential tax outcomes.

Even though we are in the midst of a crisis a number of far reaching implications will arise if a person incorrectly classifies themselves for tax residency purposes.

These can range from not declaring income which has become taxable in Australia and also incorrectly calculating capital gains (or losses) if the incorrect tax residency date is chosen.

The ATO will expect people to take advice and make reasonable enquiries in situations where they are not sure of their income tax status.

CST Tax Advisors can assist Australian expats with expert advice in this area.

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