The ATO has put taxpayers on notice that it will be increasing its attention towards any undeclared foreign income, and has indicated it will contact those taxpayers where they have information from a foreign revenue authority or other third parties that they may have received income from another country.

Taxpayers who are residents of Australia are required to include income from all sources in their annual income tax returns (undeclared foreign income). For Australians working in other countries, the recent decision in Harding v Commissioner of Taxation [2019] FCAFC 29 concerned the definition of “resident” and “resident of Australia” in our income tax law and its application to individuals.

In this decision, a person is not only a resident if they reside in Australia but includes a person whose domicile is in Australia and who does not have a “permanent place of abode” outside Australia.

The Court held that when assessing the tax residency of an individual, the phrase “permanent place of abode” should be interpreted more widely than by reference to the individual’s house or dwelling and consideration be given to whether the individual is living permanently in a particular country or state. In this case, the Court found that Mr Harding had ceased his residence in Australia and was permanently based in Bahrain.

The decision provides a definitive test for Australians working in other countries as to whether they have established a home in that country and have ceased their ties with Australia.

Common Reporting Standard (CRS)

Many people will have had to comply with the CRS when they opened new bank accounts and report their tax residency status to their bank or financial institution. The CRS is the single global standard for the collection reporting and exchange of financial account information. Since September 2018, the ATO receives and exchanges financial account information with participating foreign tax authorities to ensure Australian resident taxpayers are complying with their tax obligations.

ATO data matching

The ATO follows strict data matching protocols to match external data with that held by the ATO (such as interest, dividends and other sources of income), and has announced that it will be focusing on capital gains made on shares, property and cryptocurrency. This includes capital gains on assets held overseas.