Australia To Reform Tax Residence Laws
The main focus of national and international tax policy makers at present is on the highly mobile, hare-like nature of business income, which whizzes from one jurisdiction to another at lightning speed, leaving tortoise-esque tax regimes trailing in its wake. But let’s not forgot that people are highly mobile too, as major advances in transport and communications technology have enabled individuals to live and work in all corners of the world and stay in touch with their work and family base with relative ease.
However, personal income tax codes, specifically rules on residency, have by and large also failed to catch up with the often-peripatetic nature of modern life. Indeed, some of these laws are so ancient, I’m sure Homer would still recognize them. Although the bit in the Odyssey about how Odysseus had to fill in numerous tax returns on his epic journey home was edited out of the final version. Understandably.
A major issue seems to be that once you’ve lived in a certain country for a certain amount of time, tax residency starts to stick, and in certain circumstances it becomes very difficult to shake off. At the same time, the land of one’s birth also may want a piece of the action too. I’m sure most of the approximately nine million US expats living overseas are familiar with this issue, or the numerous “accidental Americans” facing tax demands from the IRS despite having the most tenuous links to America. The United Kingdom also has the ability to make life difficult for former residents with its pernicious domicile rules. And attempts to clear things up with a residency test don’t look to have entirely succeeded, either, so tangled is this web.
Tax, therefore, remains dangerous territory for people with internationally mobile 21st century lifestyles, as well as fertile territory for litigators, with taxpayers often looking to the courts for answers. It is to be hoped, therefore, that Australia makes a better fist of things as it seeks to reform outdated tax residence laws that have remained largely untouched since the 1930s.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look