Update: Covid-19 and Tax Residency

Update: Covid-19 and Tax Residency

The ATO has recently updated its guidance in relation to Australian tax residency and Covid-19.

The ATO’s latest guidance in relation to Covid-19 and tax residency is as follows:

If you are a foreign resident here temporarily for some weeks or months due to COVID-19, you will not become an Australian resident for tax purposes if you:

• usually live overseas permanently
• intend to return there as soon as you are able.

However, you will need to review your residency status for tax purposes if you:

• end up staying in Australia for a lengthy period
• don’t plan to or don’t return to your country of residency when you are able to do so.

In particular, you will need to consider your residency status in line with ATO guidance and taxation rulings (see below) If:

• you are an Australian citizen or permanent resident who returned to Australia due to COVID-19
• you have continued to stay in Australia throughout the 2021 income year.

You will need to consider all your facts and circumstances including:

• your intention and purpose of coming to and remaining in Australia.
• your living arrangements while in Australia.
• your family and business/employment ties to Australia.

Choosing to stay in Australia when you have been able to leave is a factor that will point towards you being a resident. This includes if you have been able to leave Australia but did not do so, because of conditions or restrictions that apply, or may apply. For example, quarantine requirements or restrictions on re-entering Australia.

Factors to consider in determining whether you have been able to leave Australia include:

• government restrictions preventing you from
  • leaving Australia
  • entering your usual country of residency.

• a lack of commercial flights available to enable you to return to your country of residency.

Accordingly, expats who remain stuck in Australia due to Covid-19 will need to carefully consider their tax residency status for the 2021 tax year. Consideration will need to be given to whether government restrictions have prevented you from either leaving Australia or entering your normal country of residence.

Please do not hesitate to contact us if you have any questions in relation to your 2021 tax residency status.