The recently released Federal Budget announced on 11 May 2021, contains modifications to tax regulations that may impact our foreign clients. Particularly for accountants in Sydney who need to be prepared in the following areas, it is essential to pay attention to the forthcoming alterations in legislation, pending approval from both Houses of Parliament.
Tax Residency of Trusts and Corporate Limited Partnerships
The October 2020 Budget proposed an amendment to the corporate residency test. It will treat a company incorporated offshore as an Australian resident for tax purposes if it has a “significant economic connection to Australia”. This requires that:
- Core commercial activities are undertaken in Australia; and
- Central management and control in Australia.
The Government has now announced that it will consult on broadening these amendments to extend to trusts and corporate limited partnerships.
New individual residency test
In our international newsletter of September 2018, we discussed a Board of Taxation review of the tax residency rules for individuals. The Government has now announced that it will adopt the Board’s recommendations.
Once implemented, it is expected that the new simplified individual residence test will comprise:
- A bright line test (183+ days presence), and
- A secondary test considers factors such as the individual’s rights to reside permanently, Australian accommodation, Australian family and Australian economic connections.
Introduction of ATO early engagement service
The Government has announced that the Australian Taxation Office (ATO) will introduce a new early engagement service to encourage and support new foreign business investments into Australia. The aim of the service is to provide foreign investors some assurance and support in relation to Australian tax law and obligations.
It is intended that the service will integrate with tax aspects of the FIRB approval process so that information is not required to be provided more than once. It is also intended that the early engagement service will incorporate expedited private binding rulings and advance pricing agreements.
The ATO anticipate the service being available to eligible investors from 1 July 2021.
If you have any queries in relation to the budget measures mentioned above, please contact us.
Correct as of 26 May 2021
DISCLAIMER
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
