The courts and the ATO rely on the ordinary meaning of 'resides' when deciding who is an Australian resident for income tax purposes, as the term is not defined within income tax legislation.
The Shorter Oxford Dictionary defines reside as:
'...to dwell permanently, or for a considerable time, to have one's settled or usual abode, to live, in or at a particular place...'
TR 2023/1 Income tax: residency tests for individuals outlines the residency tests for individuals for tax purposes. It considers people entering Australia such as:
- academics teaching or studying in Australia
- students studying in Australia
- those on pre-arranged employment contracts.
The way in which you organise your domestic and economic affairs as part of your life is an influential factor in determining residency status.
You may be considered an Australian resident if your day-to-day activities in Australia are relatively similar to your behaviour before entering Australia.
Your residency is determined by considering all the relevant facts and circumstances. No single factor is likely to be decisive, and many will be interrelated.
We may take into account any or all of the following factors in determining where you reside:
- period of physical presence in Australia
- intention or purpose of presence
- behaviour while in Australia
- family and business or employment ties
- maintenance and location of assets
- social and living arrangements.
Intention or purpose of presence
Sometimes your stated intentions will be in contrast to your intentions as shown through your behaviour or actions.
Markus expressly states that he has no intention of staying in Australia. However, the way he has organised his personal life – bank accounts, 12-month lease on rental property – reveals that he's well prepared for a lengthy or ongoing stay. In this case, Markus is likely to be considered an Australian resident for tax purposes.End of example
Example: foreign resident
Juliette states that she intends to stay in Australia for at least the next 10 years. Unfortunately, her visitor's visa only permits her to stay in Australia for a period of 6 months. The visa also forbids her to apply for a permanent resident's visa while in Australia.
The transitory nature and intended short duration of Juliette's stay mean that she will generally not be considered to be an Australian resident for income tax purposes.End of example
Family and business or employment ties
The presence of your family may indicate that you reside in Australia.
Example: family and business or employment ties
Yusef comes to Australia to work. His wife and 4 children remained in Iran. This particular aspect of Yusef's behaviour is not generally consistent with the activities associated with residing in a particular place.
However, the absence of his family doesn't mean that he'll never be regarded as residing here. Other factors, like the state of the marital relationship and other aspects of Yusef's behaviour while in Australia could have a bearing on this.End of example
Maintenance and location of assets
The place where you organise your financial affairs (for example, paying bills, operation of bank accounts, insurance policies and so on) is an indicator of where you reside.
The purchase and maintenance of assets are also indicators that you intend to reside in Australia. Such assets can include:
- a dwelling (purchased or leased)
- motor vehicles
- household effects.
However, maintaining a place of residence isn't the same as actually residing in that place. A person may have residences in various countries, but this doesn't mean that they would be considered to reside in each of those countries during a particular income year.
Social and living arrangements
In applying this factor, consideration will be given to the ordinary course of your life. To establish what is 'the ordinary course of your life', your actions and habits before and after the period in question may be examined. The place where you carry out the ordinary course of your life is usually considered your country of residence.
Your social life and living arrangements may include:
- playing social sport in a local competition
- being a member of a local community club
- redirecting mail to Australia, or
- enrolling your children at the local school.
Work commitments may require you to visit different countries frequently and you may not establish a permanent home in any country. However, it will be the place where you carry out the above and other activities usually associated with a person's ordinary course of life that will most likely be considered your country of residence.
To reside in Australia, you need to display behaviour over a period of time that is consistent with residing here, such as:
- a degree of continuity
Therefore, the period of time that you spend in Australia is not, by itself, decisive in determining your residency status.
We consider that 6 months is a considerable time when deciding whether your behaviour is consistent with residing here. That's not to say that if you're here for less than 6 months, you'll always be considered a foreign resident, and if you're here for more than 6 months, you'll always be considered an Australian resident. Generally, it's a combination of the factors of time and behaviour while in Australia that will determine your residency status.
A resident in one country visits another
Where you're a resident in one country and visit another, important factors to be considered in determining whether you're also resident in the other country are both the frequency and the duration of your visits.
Short visits to another country don't always exclude residency in that country, if the visits are in regular mode of your life.
In Australian cases, no specific time limit can be set to determine if your stay is long enough for you to be considered to have resided in Australia. The surrounding circumstances must be looked at in each case.
This factor is almost irrelevant in determining where you reside. However, in a borderline case, your citizenship may be useful where all other relevant facts aren't conclusive.
You can be a resident of more than one country at the same time. In determining your residency status, it is important to consider your circumstances in deciding whether you're an Australian resident.
When you have dual residency, any relevant double tax agreements may determine which country has taxing rights over certain classes of income to prevent double taxation. In some cases, this may have the effect of limiting Australia's taxing rights. For more information on double tax agreements, see International tax agreements.
If you don't satisfy the resides test, you may still be considered an Australian resident for taxation purposes if one of the statutory tests is satisfied.
For information on the other 3 residency tests, read:
- Residency – the domicile test
- Residency – the 183 day test
- Residency – the superannuation test
- Australian and foreign resident examples.
If you've recently arrived in Australia, the Are you a resident?This link opens in a new window tool can help you to work out your residency status.
If you have recently entered Australia, you can find more detailed examples in TR 2023/1.
If you need to lodge a tax return, see Lodging an Australian tax return.The resides test is the primary test for working out if you're a resident of Australia for tax purposes.