Tax Residency Tests for Individuals

On 7 June 2023, the ATO released the finalised Taxation Ruling TR 2023/1 on residency tests for individuals. We previously provided commentary on its predecessor Draft Taxation Ruling TR 2022/D2 which was in substance similar to this final ruling.

This Ruling consolidates and replaces previous longstanding ATO rulings, TR 98/1 and IT 2650 (both withdrawn effective 6 October 2022), and reflects recent Court decisions in the Addy, Pike and Harding cases. 

This Ruling provides up-to-date guidance to individual taxpayers as to the ATO’s view on the operation of the individual residency tax rules with a number of examples as guidance.

Based on these examples, Australian citizens or permanent residents who travel or live overseas for work should seek tax advice in light of this Ruling because the ATO’s interpretation of the tax laws will likely cause more people to be treated as Australian tax residents than may otherwise previously have been the case despite long periods of absence from Australia. Non-resident individuals who travel to Australia to live and work should also consider their Australian tax residence status in light of this Ruling.

This Ruling does not deal with the proposed new “bright line” residency tests announced in the 2021-22 Federal Budget (see Residency changes) which have not yet been enacted.

Should you wish to discuss this further in relation to individual circumstance, please reach out to a member of our remuneration and expatriate taxes team.