With COVID almost a distant memory and international travel becoming the ‘norm’, taxation issues, including tax residency, should be on everyone’s mind when departing from or arriving to Australia, whether for work or leisure.
Why? Because the Australian Taxation Office (ATO) can follow your footprints and, if you’re not careful, spring unexpected taxes on you.
How does the ATO do this? Simply, because the ATO has extraordinary powers to gather information from third parties. These third parties include government departments such as the Department of Home Affairs.
There are two current data-matching protocols with the Department of Home Affairs – the passenger movement records protocol (the Movements Protocol) and the visa data-matching protocol (Visa Protocol).
Note: There are many other data-matching protocols that the ATO have on foot, spanning lifestyle assets, crypto assets and AUSTRAC transactions – to name a few. Again, it demonstrates the extraordinary breadth of the ATO’s information gathering powers that you and your clients should be aware of.
The Movements Protocol
As the name suggests, the Department of Home Affairs provides passenger movement data for individuals to the ATO. The data collected will be used, amongst other things to:
- verify identity and residency status for registration purposes;
- profile, determine and assess candidates for residency status for Australian tax and superannuation;
- identify and address several taxation risks, including:
- incorrect reporting of income within income tax returns and activity statements; and
- failure to meet registration and lodgment obligations within the tax and superannuation system.
The data will supplement the ATO’s visa data-matching protocol by ensuring that the most current movement records are made available.
As of the date of this article, the Australian Bureau of Statistics provisionally estimates that there were 1.93 million arrivals and 1.66 million departures, which is over three million travel movements in and out of Australia – . All of this data, and data from previous months and years, can be collected and used by the ATO.
The Visa Protocol
As the same suggests, data items that the ATO will also collect relates to visas, including:
- address history for visa applicants and sponsors;
- contact history for visa applicants and sponsors;
- address history for migration agents;
- contact history for migration agents;
- active visas meeting the criteria;
- visa grants;
- visa grant status by point in time;
- migration agents;
- all international travel movements undertaken by visa holders (arrivals and departures);
- sponsor details (457 visa); and
- visa subclass name.
The ATO states a number of objectives of the visa protocol. These include:
- helping ensure that individuals and businesses are fulfilling their tax and super reporting obligations;
- helping encourage taxpayers to comply with their tax and super obligations;
- ensuring visa populations fulfil their registration, lodgement, correct reporting and payment of tax and super obligations; and
- supporting compliance activities under Australia’s foreign investment rules.
Under this protocol, the ATO estimates that records relating to approximately nine million individuals will be obtained each financial year. That’s data for more than one in three people in Australia.
How does this impact me?
The information gathered by the ATO under the protocols can be used to launch investigations, reviews and audits of both individuals and businesses for any one or more of these taxation or other legal compliance issues:
- assessing the tax residency of an individual;
- assessing the tax residency of a company;
- assessing the tax residency of a trust;
- assessing a business’ compliance with respect to superannuation guarantee charge (including with respect to non-Australian employees working and living in Australia under a visa);
- assessing a visa holder’s tax compliance history;
- determining if an individual may be considered a “foreign person” under Australia’s foreign investment rules;
- determining if an individual being in Australia (and any other activities that the individual may undertake) would lead you to have a “permanent establishment.”
In our experience, ATO reviews, audits and investigations can come at any time, including when you least expect it.
As is often the case, “prevention is better than cure.”
Knowing that the ATO has the ability to gather such information, it is best to plan and have all documentation prepared and ready to meet ATO audit activities.
There is no better time than the present to get specific and tailored tax and legal advice, for any of the following events or transactions:
- when you wish to migrate or otherwise travel to Australia;
- when you wish to depart Australia, either permanently or temporarily;
- if you wish to bring funds and assets from overseas into Australia;
- if you wish to employ individuals from overseas to work in Australia;
- if you wish to acquire real estate in Australia (including residential property), particularly if you are not an Australian citizen;
- if you wish to dispose of real estate or other significant assets in Australia;
- if you wish to travel back and forth from Australia on a frequent or regular basis;
- if you wish to expand business operations overseas;
- if you wish to expand your business operations in Australia;
- if you wish to leave a gift in your Will to a non-resident of Australia; or
- any other event or transaction that has a cross-border element.
To discuss or explore further, please contact Coleman Greig’s Taxation Law team.
