ATO Data-Matching: Residency for Tax Purposes

The ATO has announced a new data-matching program that will use information collected from the Department of Home Affairs. It is designed to determine whether business entities and individuals are Australian residents for tax purposes, and whether they have met their lodgment and registration obligations. This is in addition to the existing visa data-matching program, which has been operating for more than 10 years. The new program will include data about passenger movements during the income years 2016–2017 to 2022–2023.

While there are four statutory tests to determine residency (the resides test, domicile test, 183-day test and Commonwealth superannuation test), the ATO will generally consider someone to be an Australian resident for tax purposes if they satisfy any of the following:

• they have always lived in Australia or have come to Australia and live here permanently;
• they have been in Australia continuously for six months or more, and for most of that time worked in one job and lived at the same place;
• they have been in Australia for more than six months of the year, unless their usual home is overseas and they do not intend to live in Australia;
• they go overseas temporarily and do not set up a permanent home in another country; and
• they are an overseas student who has come to Australia to study and are enrolled in a course that is more than six months long.

Note: Separate rules exist for working holiday makers and individuals who are tax residents of more than one country.

Business Entities

For business entities, the residency criteria differ depending on the structure (sole trader, ordinary partnership, company, corporate limited partnership or trust). Businesses with the sole trader or ordinary partnership structures are considered to be Australian residents with resident tax obligations if the individuals behind them are residents.

A company is considered to be a resident if it is incorporated in Australia; also, a company that isn’t incorporated in Australia may be an Australian resident if its central management and control is in Australia or its voting power is controlled by shareholders who are residents of Australia. The tests for corporate limited partnerships are similar to companies, while the tests for trusts differ based on the type of trust.

The data collected by ATO will include full names, personal identifiers, dates of birth, genders, arrival dates, departure dates, passport information (including travel document IDs and country codes), and status types (eg visa status, residency, lawful, Australian citizen). It is expected that the personal information of approximately 670,000 individuals will be collected and matched each financial year.

According to the ATO, the compliance activities from data obtained will largely be confined to verification of identity and residency status for registration purposes, as well as identifying ineligible claims for tax and superannuation entitlement. In addition to compliance activities, the data will be used to refine existing ATO risk detection models, improve knowledge of overall level of identity and residency compliance risks, and identify potentially new or emerging non-compliance and entities controlling or exploiting ATO methodologies.

The data collected for the 2016–2017 to 2022–2023 income years will be retained for five years from the receipt of the final instalment of verified data files from the Department of Home Affairs. The ATO notes that this will allow it to use the data for multiple risk models, including models that establish retrospective profiles of travellers over multiple years.

Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.