The budget papers did not estimate how the changes would affect tax revenue, and it is not known when they will be incorporated into the law. If, as tax advisors hope, draft laws are distributed for comment, the expected start date is next year or later. If the Enabling Act is enforced, the new regime could apply from July 1st.
Most Australian expatriates will fail the factor test because they are Australian citizens and own Australian property.
– Tristan Perry, selected investors Australia
Steve Douglas says expats feel that the value that Australia’s international community has brought to Australia has not been recognized. Trevor Collens
Tristan Perry, Tax Director at Select Investors Australia, advises his Singapore clients to count their days to stay below the allowed 45. He believes the changes could make expat work a lot less attractive to Australian employers and future expats.
“If the new rules are implemented in their existing format, the impact on business and leisure travel to Australia for Australian expatriates will be enormous,” said Perry.
The factor test would apply if an existing expat exceeds the 45-day limit or if they want to determine that they are no longer a tax resident. The four factors are: the right to reside permanently in Australia; Australian accommodation; Spouse or dependent children in Australia; and economic interests in Australia, including any real estate. If two of these are true, the ATO would apply for tax residency.
“Most Australian expatriates will fail the factor test because they are Australian citizens and own Australian property,” Perry said.
Steve Douglas, Executive Chairman of the consulting firm SMATS Group, hopes the factor test will be much nuanced before it is introduced. He also believes that the 45-day “light line” rule should be adjusted to reflect the pandemic.
“The changes are intended to adapt tax law to modern practice. But it’s very common for families to get separated these days, especially with COVID-19. And depending on when these new rules are introduced, those 45 days may need to include quarantine, ”said Douglas.
Mr. Douglas doesn’t live where he just wanted to be. He’s hoping to leave Perth and get back to his life in Singapore soon, but doesn’t know when that will be.
Many expats are in a similar position. Certainty is scarce and fear is high.
The caps on entry to Australia are making it difficult to come back and now there seem to be new limits on how long they can stay at home when and when they get there. Some question the value of their Australian citizenship – especially given the fact that it would be a disadvantage on the factor test even if the ATO’s claims were overridden by tax treaty law in some countries.
Mr. Douglas agrees that many are not happy. Expats believe that “the value that the international community of Australia has brought to Australia is not respected and recognized,” he said.