In a comment article published in today’s Australian Financial Review, tax partner Shaun Cartoon explains that although Australia is unlikely ever to match the generous tax concessions that have propelled the popularity of family offices in Singapore and Hong Kong, proposed changes to our tax residency laws are generating a degree of optimism among offshore clients.
“Existing residency rules require a holistic examination of an individual’s circumstances, with particular weight given to their intentions, which is why it takes a brave (or foolish) tax lawyer to offer an unqualified legal opinion on residency,” Shaun writes.
“Despite residency being applied at an individual level (as opposed to family), decisions in Australian courts and tribunals have consistently reinforced the adage that ‘home is where the heart is’. This means that if a taxpayer who works overseas continues to maintain a home in Australia to which they regularly return to their spouse and family, it will generally be hard to argue that they are not also a tax resident here. Few taxpayers in these situations realise how easy it is to slip into the Australian tax net – at least according to the Australian Taxation Office – and, in our experience, tax audits in this area run long and hard.”
A discussion paper, released by Treasury late last month, titled “Modernising the individual tax residency rules”, introduces a different lens whereby a primary “bright line” test is used to establish residency and secondary tests, based on measurable, objective criteria.
Shaun explores a number of potential flaws in the proposed changes but concludes that while the Treasury paper still needs some real-world practicality applied, it does signal a willingness from the government to roll up its sleeves and engage in difficult but timely tax reform.
“It is hoped that bringing more certainty to our residency laws will further attract high-wealth families to Australia, and with them their fortunes.”
To read Shaun’s full article, click here.