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How to establish whether you are an Australian tax resident

Understanding if you are an Australian tax resident or not is essential to know if you spend time in Australia and want to ensure you pay the correct tax. This article looks at how you establish your Australian tax residence status

Written on 14 February 2023

Australian residents are subject to Australian tax on worldwide income while non-residents are subject to Australian tax on Australian-source income only. This means that if you are Australian or spend time in Australia, establishing whether you are an Australian tax resident is vital to ensure you are paying the correct amount of Australian tax.

Determining your Australian tax residence status is rarely straightforward and getting it wrong can be an expensive mistake to make. While this article provides a guide to establishing your tax status, you should always seek advice from a qualified professional before making any decisions.

If you need help, or want confirmation, please request a free introduction to a trusted Australian tax specialist who will offer you an initial  free consultation to see if they can assist. Please be aware that the initial consultation provides basic guidance only and establishing your residence status will require a paid for service for legal reasons, however, there is not obligation to proceed with paid advice following the introduction.

Request your free introduction to a trusted Australian tax specialist >

Am I an Australian Tax Resident?

To be classed as a tax resident of Australia, the Australian Taxation Office requires at least one the following criteria to be met:

  • You have come to Australia to live on a permanent basis
  • You have always lived in Australia since birth
  • You have resided in Australia for six months or more (living and working in the same place for the majority of your stay)
  • You are studying in Australia for more than a period of six months as an international student
  • You go overseas on a temporary basis, but do not purchase a permanent home in any other country

However, officially determining whether you are a tax resident of Australia is not based on the black and white criteria listed above.

Primary and secondary tests can be passed to confirm your Australian tax residency in the eyes of the Australian Taxation Office.

These include:

The Resides Test

This is a test that essentially confirms your permanent reside in Australia. Passing this test and showing that you live in Australia on a permanent basis means that no further tests are necessary.

Not passing this test will mean further testing on one of the three other’s that are available.

The Resides test uses criteria such as your physical presence in Australia, your intention and purpose, family factors, business and employment ties, social and living arrangements and your overall assets including location and maintenance, to determine your residency status.

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The Domicile Test

Domicile refers to your permanent home by law and has three basic types;

  • Domicile by origin (attributed to everyone at birth)
  • Domicile by choice (inferred by law, when a change in residence is planned to be made permanent)
  • Domicile by operation of law (imposed by law)

The domicile test of residency usually applies where an Australian resident goes to work in an overseas country for an extended period of time, which can commonly be the cause of an individual failing the resides test.

This would be due to raising doubt in the case of their permanent reside because of their absence from Australia

The ATO define and separate their domicile test in to two steps:

1: Determine your domicile - If not in Australia, the domicile test is not satisfied.

If in Australia, go to step two.

2: Determine your permanent place of abode - If not in Australia, the domicile test is not satisfied.

If in Australia, you are considered an Australian resident for income tax purposes.

The 183-Day Test

This test essentially determines whether or not you are ‘physically present’ in Australia for more than half of the income year (which is a total of 183 days), regardless of whether it be on a continuous basis or with breaks in between.

If you reside overseas and decide you want to move to Australia, you could be deemed a tax resident of Australia if you end up being physically present within Australia for more than a total of 183 days in the tax year.

It applies to anyone arriving in Australia as a foreign resident and as an Australian expat who might be returning to Australia on a regular basis, they could also quite often meet the correct criteria.

If becoming an Australian tax resident this way was unintentional, you would need to be able to clearly prove to the Australian Taxation Office that your actual residence is overseas and elsewhere, and that you have no intention of settling in Australia on a permanent basis.

The Commonwealth Superannuation Test

Under this test, you will be classed as an Australian resident if you contribute to one of the following;

  • the Public Sector Superannuation Scheme (PSS), or
  • the Commonwealth Superannuation Scheme (CSS).

If you are an Australian resident under this test, your spouse, and any children under 16 years old are also Australian residents for income tax purposes.

The test does not apply if you are a member of the Public Sector Superannuation Accumulation Plan (PSSAP).

This test was created to help ensure that all government employees of Australia that work at Australian posts overseas are treated as Australian residents, as well as their spouses and any children under 16 years old. (Examples of these types of government employee include diplomats and officials of the Departments of Foreign Affairs and Trade).

Changing your residency status and ceasing residency

Despite moving overseas, you still need to declare that you are a tax resident of Australia due to your income tax liabilities that you earned whilst still present in Australia.

However, partial exemption can be claimed for the total number of days that you were not an Australian tax resident during that tax year.

If this is done, foreign sourced income will no longer need to be declared on your tax return, as not being an Australian tax resident means you are no longer liable to be tax on worldwide sourced income. This will only be the case if you do not return to reside in Australia on a permanent basis.

Providing evidence to the Australian Taxation Office is what you will need to do in order to prove why you should no longer be classed as tax resident of Australia.

Some actions to do this will include;

  • Taking the stated tests above (reside, domicile, 183 day and commonwealth superannuation)
  • Submitting evidence of your new and permanent living situation outside of Australia (proof of home purchase in another country/ signed tenancy agreements etc)
  • Cutting ties with your original Australian property to symbolize no interest or intentions of returning to reside in Australia at any point in the future (for example selling or leasing out these properties)
  • Providing them with evidence of frequent use of your foreign bank accounts, as opposed to your old Australian bank
  • Obtaining a driver's licence within your new home country
  • Removing yourself from the electoral registry in Australia to demonstrate you are no longer interested in permanent stay
  • Showing you purchased a one-way ticket to leave Australia to demonstrate your lack of intentions to return to live in Australia at any time.

Temporary Australian tax residence and exemptions

An exemption from Australian tax on certain income is available for individuals, potentially expats, who qualify as a temporary resident. Temporary residents are generally exempt from Australian tax on foreign-source investment income (but not foreign employment income) and capital gains realised on assets that are not taxable Australian property (TAP).

Speak to an Australian tax specialist to determine your tax residence status

It is possible to work out your Australian tax residence status yourself, however, it isn't straightforward and the cost of making a mistake will be much greater than seeking help from an experienced Australian tax specialist.

When you request an introduction to one of our trusted Australian tax partners, you will also receive an initial free consultation where you will be able to ask basic questions and get an idea of your situation and decide whether you wish to proceed with formal, paid services.

All of our partners are fully qualified and experienced in assisting Australian expats as well as people who have connections to Australia whether they still live there or not.

Request your free introduction to an Australian tax specialist >

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