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  • Work out your tax residency

    To understand your tax situation, you first need to work out if you are an Australian or foreign resident for tax purposes.

    We don't use the same rules as the Department of Home Affairs (formerly known as the Department of Immigration and Border Protection). This means you:

    • can be an Australian resident for tax purposes without being an Australian citizen or permanent resident
    • may have a visa to enter Australia, but are not an Australian resident for tax purposes.

    For a summary of key information about residency status, download Residency for tax purposes (PDF, 1.03MB)This link will download a file

    On this page:

    Work out your residency status

    As an individual you will fit into one of the following three categories:

    There are separate rules for working holiday makers and individuals who are tax residents of more than one country.

    Residency tests

    Resides test

    The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and you don't need to apply any of the other residency tests.

    Some of the factors that can be used to determine residency status include:

    • physical presence
    • intention and purpose
    • family
    • business or employment ties
    • maintenance and location of assets
    • social and living arrangements.

    If you don't satisfy the 'resides test', you'll still be considered an Australian resident if you satisfy one of three statutory tests.

    Domicile test

    You're an Australian resident if your domicile (broadly, the place that is your permanent home) is in Australia, unless we are satisfied that your permanent place of abode is outside Australia.

    A domicile is a place that is considered to be your permanent home by law. For example, it may be a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

    A permanent place of abode should have a degree of permanence and can be contrasted with a temporary or transitory place of abode.

    183-day test

    This test only applies to individuals arriving in Australia. You will be a resident under this test if you're actually present in Australia for more than half the income year, whether continuously or with breaks.

    You may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here. If you have already taken up residence in Australia, this test will not generally apply regardless of the number of days you spend overseas.

    The Commonwealth superannuation test

    This test applies to Australian Government employees working at Australian posts overseas and who are members of the CSS or PSS schemes. It does not apply to members of the PSSAP scheme. If this is the case, you (and your spouse and children under 16) are considered to be a resident of Australia regardless of any other factors.

    It does not apply to members of the PSSAP scheme.

    Example – Australian resident under the domicile test

    Emily leaves Australia to work in Japan as a teacher of English. Emily has a one-year contract after which she plans to tour China and other parts of Asia before returning to Australia to continue work here.

    Emily lives with a family in Japan during her time there and rents out her property in Australia. Emily is single. Her parents live interstate and her brother has moved to France. Emily is an Australian resident for tax purposes even though she is residing in Japan because, under the domicile test:

    • her domicile is in Australia (as she is a resident who has lived in Australia and will generally retain a domicile here when absent overseas), unless she chooses to permanently migrate to another country)
    • her permanent place of abode remains Australia.
    End of example

    Example – foreign resident for tax purposes

    Bronwyn, an Australian resident, receives a job offer to work overseas for three years, with an option to extend for another three years. Bronwyn, her husband and three children decide to make the move.

    They rent out their house in Australia as they intend to return one day. While overseas they rent a house with an accommodation allowance provided under Bronwyn's contract.

    Bronwyn is unsure if she will extend her contract to stay for another three years. She will decide later depending on how the family like life.

    Bronwyn is considered a foreign resident for tax purposes because she does not satisfy 'the resides' test. This is due to:

    • the length of her physical absence from Australia
    • the surrounding circumstances not being consistent with residing in Australia (such as, establishing a home overseas with her family and renting out her family home in Australia) even though she has retained the family home.

    Bronwyn has also not satisfied the domicile test, as:

    • her permanent place of abode is outside Australia due to  
      • the length of time committed to being overseas
      • the establishment of a home overseas
      • her family accompanying her overseas
       
    • the fact that she won't be selling the family home in Australia, although relevant, is not persuasive enough to overcome the finding on the basis of the other factors
    • it can be argued that she has abandoned her home in Australia for the duration of her stay, by renting it out.
    End of example

    Failure to cut connection with Australia

    A legal decisionExternal Link in 2013 shows that a person who fails to cut their connection with Australia will be treated as an Australian resident.

    See also:

    Residency and tax categories

    Foreign residents

    If you're a foreign resident for tax purposes you must declare on your tax return any income earned in Australia, including:

    • employment income
    • rental income
    • Australian pensions and annuities
    • capital gains on Australian assets.

    As a foreign resident:

    • you have no tax-free threshold
    • you do not pay the Medicare levy
    • the capital gain on your Australian home may need to be included if you are a foreign resident at the time you sign the contract of sale

    If you have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt you'll need to declare your worldwide income or lodge a non-lodgment advice. You can do this using our online services via myGov or through a registered Australian tax agent. The Study and training loan repayment calculator will help you find out your compulsory repayment or overseas levy amounts.

    To work out if you need to lodge, use our Do I need to lodge a tax return.

    See also:

    Australian resident for tax purposes

    If you're an Australian resident for tax purposes, you have to declare all income you earned both in Australia and internationally on your Australian tax return (even if you've already paid tax on it overseas).

    A foreign income tax offset is generally available to reduce the Australian tax on the same income.

    Temporary residents

    If you have a temporary visa, and neither you or your spouse is an Australian resident within the meaning of the Social Security Act 1991 (that is, not an Australian citizen or permanent resident), you're a temporary resident. This means you only declare income you derived in Australia, plus any income you earn from employment or services performed overseas while you are a temporary resident of Australia.

    Other foreign income and capital gains don't have to be declared.

    See also:

    Working holiday makers

    If you come to Australia for a working holiday under visa subclass 417 or 462, you have fixed tax rates regardless of your residency status.

    Dual residents

    You are considered to be a dual resident if you are a resident of Australia for domestic income tax law purposes, and a resident of another country for the purpose of that other country’s tax laws. Where Australia has a double tax treaty with a foreign country, a treaty tie breaker test would usually determine which country has the right to tax Australian and foreign sourced income.

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    Last modified: 13 Jun 2019QC 59296