We're a Baker Tilly network member
Learn more
Back to top
Treasury Consultation Paper – Modernising the individual tax residency rules
Technical article

Treasury Consultation Paper – Modernising the individual tax residency rules

Treasury is consulting on a new individual tax residency framework that is based on recommendations made by the Board of Taxation in 2019.

In 2019, the Board of Taxation released a report titled “Individual Tax Residency Rules – a model for modernisation” (“2019 Report“) containing a proposed model to modernise the existing individual tax residency rules. Subsequently, the former Federal Government announced in its 2021-22 Budget that the existing individual tax residency rules would be replaced by a new framework based on the recommendations proposed by the Board of Taxation in its 2019 Report.

The Board of Taxation’s 2019 Report was prepared prior to the COVID-19 pandemic. Since the pandemic has redefined how the world operates, Treasury is seeking submissions to determine the appropriateness of the proposed individual tax residency rules in this new post-pandemic environment.

What are the Board of Taxation’s proposed rules?

The proposed individual tax residency tests put forward by the Board of Taxation, are based on a ‘two-step’ model:

Step 1 – Primary tests

The first step provides two bright line (primary) tests under which an individual that (a) spends 183 days or more in Australia during the income year; or (b) is a Government official deployed overseas on foreign service, will be a tax resident.

Step 2 – Secondary tests

The second step applies where the primary test is not met for the relevant income year and provides different tests depending on whether the individual is commencing residency (i.e. was not a tax resident in the prior year) or ceasing residency (i.e. was a tax resident in the prior year).

In the case of the latter, the individual must meet one of three threshold requirements depending on the circumstances of the individual, being (1) the Overseas Employment Rule; (2) Ceasing Short-Term Residency Rule; or (3) Ceasing Long-Term Residency Rule.

Built into each of the secondary tests is a factor test that is based on four objective factors:

  • Right to reside permanently in Australia;
  • Australian family;
  • Australian accommodation; and
  • Australian economic interests.

Taxpayers are only required to satisfy a fixed number of factors to determine their residency status.

We have only provided a brief overview of the Board of Taxation’s proposed model. Further detail can be found in the Board of Taxation’s 2019 Report and Treasury’s Consultation Paper.

What is the Consultation Paper about?

The Consultation Paper provides a brief summary of the key principles underpinning the operation of the Board of Taxation’s proposed individual tax residency rules and sets out a list of questions that Treasury is seeking consultation on.

Treasury’s questions target the crux of the Board of Taxation’s proposed individual tax residency rules to seek feedback to assist in determining whether the rules should be redesigned.

It is anticipated that submissions provided as part of the consultation process will aid the current Federal Government in deciding what changes, if any, should be made to Australia’s individual tax residency rules.

Where to from here?

Treasury is inviting interested parties to comment on its Consultation Paper with submissions due on 22 September 2023.

As of the date of this article, it is still uncertain as to whether the current Federal Government will proceed with implementing the proposed individual tax residency rules.

Until further notice, the existing individual tax residency rules continue to apply when determining an individual’s tax residency status. This requires a detailed analysis of all the facts and circumstances of the individual.

This content is general commentary only and does not constitute advice. Before making any decision or taking any action in relation to the content, you should consult your professional advisor. To the maximum extent permitted by law, neither Pitcher Partners or its affiliated entities, nor any of our employees will be liable for any loss, damage, liability or claim whatsoever suffered or incurred arising directly or indirectly out of the use or reliance on the material contained in this content. Pitcher Partners is an association of independent firms. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities. Liability limited by a scheme approved under professional standards legislation.

Our experts

Andrew Beitz

Andrew Beitz



View profile
Tom Splatt

Tom Splatt



View profile
Denise Honey

Denise Honey



View profile
Michael Minter

Michael Minter

Managing Partner

Newcastle and Hunter

View profile
Leon Mok

Leon Mok

Managing Director


View profile
Alison Wood

Alison Wood



View profile

Pitcher Partners insights

Get the latest Pitcher Partners updates direct to your inbox

Thank you for you interest

How can we help you?

Business or personal advice
General information
Career information
Media enquiries
Contact expert
Become a member
Specialist query
Please provide as much detail to ensure appropriate allocation of your query
Please highlight a realistic time frame that will enable us to provide advice within a suitable and timely manner. Please note given conflicting demands with our senior personnel, we will endeavour to respond to you within the nominated time frame. If you require an urgent response, please contact us on 03 8610 5477.
CPN Enquiry
Business Radar 2024
Tax facts 2023-24
Student careers 2023-24
Search by industry