Tax Residents of Australia

We have recently had a number of our clients receive pro-forma letters from the ATO asserting that they are tax residents of Australia and asking them to demonstrate that they are not. These letters are usually part of a bulk mail out based on the ATO data matching activities.

In our experience, expatriate Australians living and working overseas, but with some residual connections to Australia, are often targeted in ATO review and audit activity. This has become increasingly common as the ATO’s data matching capabilities increase.

The ATO default position in the letters we have seen is that if the client does not respond to the letters within 28 days and establish that they are not residents, the ATO will automatically issue assessments on the basis that the clients are Australian residents for tax purposes, which will include all known foreign source income.

If you are contacted by the ATO, it is important that you organise a detailed response and provide relevant evidence within the 28 day time frame or seek and extension of time if necessary. The first impression is the most important.

Given the ATO’s ‘threat’ to issue default assessments if clients cannot satisfy that they are not residents, the response will need to set out the client’s position in detail including:

  1. full details of the client’s specific circumstances;
  2. documents and other extrinsic evidence that the client is not an Australian resident; and
  3. technical submissions outlining how the Australian domestic laws and any double tax agreements apply to their circumstances.

Our experience is that these matters are best resolved prior to the ATO issuing an assessment and having to object to the assessment.

Please contact Harris Gomez on +61 2 8095 6441 if you would like to discuss.

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