Low angle shot of Australian flags waving from a Government Building against a cloudy sky

ATO Seeks to Eliminate Digital Nomad Lifestyle

In a move, that is probably not a surprise to anyone within the industry, the Australian Taxation Office (ATO) is undertaking a major review of their tax regime. In particular, the government agency is looking to clamp down on the, in their eyes, avoidance of tax by digital nomads. So, get set for taxation based on your citizenship to be imposed in the very near future.

What Tax Changes are the ATO Proposing?

ATO to Tax Digital Nomads
New Tax Rules Could Impact Digital Nomads

The ATO is seeking to introduce new rules that will impose tax residency upon any Australian citizen regardless of their location. In practice, this means that an Australian digital nomad residing in Bali is likely to be required to submit a tax return regardless of the fact they do not live within Australia.

The details are still to be determined but it appears to be the case that the 183-day test for tax residency is likely to abolished and replaced with an onerous system that basically guarantees that you end up in the ‘Tax Paying’ category regardless of your actual living arrangements.

Why a Tax Policy Shift Now?

The tax rules in Australia have been relatively static for some years. However, post-COVID, increasing levels of government overreach have been observed in the Antipodes. Largely, both State and Federal governments have found that they have had little pushback from the public and have therefore started to incrementally increase their level of control.

Additionally, most legacy brand western nations have experienced significant tax revenue base pressures and are looking at any avenue that they can find to grab additional cash. Also, digital nomadism and the trifecta method have been an increasingly popular conversation amongst entrepreneurs as they struggle to deal with the increasing government regulation and rules around business.

Implications for Digital Nomads and Expats

Digital nomads may need to start thinking about tax residency
Digital nomad working on beach

If the aforementioned changes are enacted, it is likely you are going to be assessed for taxes as if you were living in Australia. Failure to lodge an annual return could see your Australian Passport cancelled or additional pressure placed upon you to return home.

Second Citizenship as a Solution

We have been preaching the benefits of having a back up plan in place for some time. The addition of a second passport to your internationalization plans is an important tool in ensuring your own freedom. Dual citizenship doesn’t have to be complicated or expensive and there are multiple ways that you can attain a new nationality.

  • Citizenship via Descent
  • Citizenship via Investment
  • Golden Visa to PR programs

Ultimately, a second nationality may allow you to avoid the dragnet that the ATO is likely to start building. Otherwise, you are likely to be subject to the whims of bureaucrats cancelling your passport and attempting to pressure you to return back to Australia and face the music and back taxes!

Renouncing Your Citizenship

One option would be to renounce your Australian citizenship and opt-out of their ridiculous tax system. However, to be able to do this you need an appropriate citizenship and passport to travel upon. The process is relatively simple, but you need to be very certain of your long-term plans.

Ultimately, I would recommend you are settled in a location long-term before making the radical choice to renounce. In most cases, once you renounce your Australian citizenship, they can be very difficult to get back.

Planning for the Future

Relocating to establish a new tax residency is an option to consider
Rethinking Your Tax Residency is Important

Ultimately, domestic changes such as these are to be expected post the radical upheaval that was COVID. It is inevitable that we are likely to see great changes to the way we live and interact, and, for this reason, you need to be personally resilient.

Developing personal resilience takes knowledge and education and you shouldn’t simply rely upon a consultant. The best investment is in yourself, and I hope that this brief article gets you to start thinking about how your future might look if your home country changed markedly.

Second Citizenships, Offshore Structures and Asset Protection, Banking, and Alternative Investments are all things that we specialize in here at OCBF. Feel free to contact us if we can help you out in anyway.

Steven James

Meet Steven James, an offshore tax advisor splitting his year between Thailand and St. Lucia. With expertise in trust and company structures, he guides clients to financial success. In his spare time, Steven is a passionate writer and researcher, exploring diverse topics with curiosity and dedication.