Out of step: Why Australian tax residency rules need a rethink

Monash Business School lecturer and PhD candidate Swapna Verma.

22 July 2025

Monash Business School lecturer and PhD candidate Swapna Verma is taking on nearly a century of Australian tax law, arguing it’s time to overhaul an outdated system that no longer reflects today’s globally mobile workforce.

Australian tax residency laws date back to the 1930s - long before remote work, international freelancing and digital nomadism became part of everyday life.

With global mobility now the norm, Swapna Verma, a PhD candidate and lecturer with our Department of Business Law and Taxation, says the rules need urgent reform.

“I got into this field because tax residency has always been a complex topic, but really critical to understand as it is the backbone of Australia's tax system,” Ms Verma said.

“Any small change can really change the outcome of whether they are considered tax residents or not.”

That complexity took on new urgency during the COVID-19 pandemic, when border closures and lockdowns made the existing legislation even more difficult to apply.

“The then-Australian government endorsed a recommendation by Australia's Board of Taxation to completely rewrite Australia's individual tax residency rules,” Ms Verma said.

“The current law was labelled 'inappropriate for the 21st century'.”

However, while the reforms set out to simplify the law, Ms Verma argues they risk creating new problems instead of solving old ones.

The limits of physical presence

The proposed changes, currently under consultation by the federal government, mark a major shift away from the current facts-and-circumstances approach.

They introduce a prescriptive framework, starting with a primary test based on physical presence: an individual spending 183 days or more in Australia within an income year would automatically be deemed a resident.

Ms Verma believes this narrow focus fails to account for how mobility and work have changed in the digital age.

“Whilst I support modernising the law, the proposed reforms left me to question - why would the Australian government focus so much on physical presence, when the pandemic has severely curtailed individual mobility due to border closures and lockdowns?” she said.

“Shouldn't the Australian government factor in digital presence as a measure of individual tax residence as well?”

Her research proposes a new approach that includes those who don’t fit traditional residency models, such as digital nomads, backpackers, temporary visitors and remote workers.

She is building her case through detailed analysis of legislation, case law, international tax agreements and academic literature, identifying the legal foundations for a more inclusive and effective system.

“The aim is to generate reforms that are fairer and reduce complexity for the taxpayer and for tax authorities,” she said.

Rewriting the rules for a digital age

Professor John Bevacqua, Head of the Department of Business Law and Taxation, said Ms Verma’s work addresses the real-world consequences of applying outdated tax rules to a globally mobile population.

“Unfortunately, our existing laws have not kept pace with these fundamental changes in work and lifestyles, which threatens the longer-term ability of our government to raise sufficient tax revenue to fund critical social infrastructure and services,” Prof Bevacqua said.

Ms Verma hopes her work will shape national tax reform and contribute to global conversations on taxation in the digital age.
“My plans are for my research to have a wide-reaching impact, not just on Australian waters, but hopefully a worldwide effect,” she said.

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