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Are you an Australian Resident for Tax Purposes?

A common question we get is “am I an Australian resident for tax purposes”? Let’s delve into how the ATO looks at this question and help you to work out the answer for you, as well as what Aus tax rates & non resident tax rates you may need to pay.

Below is a list of common situations as described by the ATO to assess your residency status in Australia . Your tax residency status can also depend on whether the country you are going to or coming from has a tax treaty with Australia, and if you’re considered an Australian resident working overseas for tax reasons. But first let’s start with the most common scenarios.

Australian Resident for Tax Purposes
Scenario:Common outcome for tax purposes:
Leave Australia temporarily and do not set up a permanent home in another countryan Australian resident
Are an overseas student enrolled in a course that is more than six months long at an Australian institutionan Australian resident
Visiting Australia, working and living in the one location and have taken steps to make Australia your homean Australian resident
Visiting Australia and for most of that time you are travelling and working in various locations around Australiaa foreign resident
Are either holidaying in Australia or visiting for less than six monthsa foreign residen
Migrate to Australia and intend to reside here permanentlyan Australian resident
Leave Australia permanentlytreated as a foreign resident for tax purposes from the date of your departure

To summarise the table above:

You are likely to be an Australian resident for tax purposes if:

  • You have always lived in Australia or you have come to Australia and live here permanently
  • been in Australia continuously for six months or more, and for most of that time you worked in the one job and lived at the same place
  • been in Australia for more than six months of the year, unless your usual home is overseas and you do not intend to live in Australia
  • go overseas temporarily and you do not set up a permanent home in another country
  • are an overseas student who has come to Australia to study and are enrolled in a course that is more than six months long.

Part-year Australian resident

If you are an Australian resident for part of the year, your tax-free threshold will be reduced on a prorated basis and will end up less than the full tax-free threshold of $18,200 that applies to Australian residents. This would occur if you:

  • became an Australian resident for tax purposes, or
  • ceased being an Australian resident for tax purposes.

If you became or ceased to be an Australian resident for tax purposes during the financial year, you will receive the part-year tax-free threshold and resident tax rates will apply to your income.

Interestingly, part-year residents have a tax-free threshold of $13,464 plus $4,736  pro-rated according to the number of months during the financial year you were a resident for tax purposes.

When you complete your tax return there is a section to enter in whether you are an Australian Resident for Tax Purposes and if you were only a part-year resident. This allows you to enter in the date you became or stopped being an Australian resident for tax purposes and the number of months that you were an Australian resident. The tax free threshold is automatically calculated on this information is entered.

How to become a non resident of Australia for tax purposes 

There’s more than 1 way to skin a cat, and more than one way to pay Australian non resident tax rates, aka no longer have to deal with the ATO. Here’s 9 things to consider: 

  1. Submit your evidence of permanent living abroad to ATO
  2. Update your electoral registration 
  3. Take the ATO residency tests 
    • The domicile test 
    • The 18th day test 
    • The commonwealth superannuation test 
  4. Sell or rent your home in Australia 
  5. Prove your overseas finances 
  6. Show your one way plane ticket to prove you’re not coming back 
  7. Show the ATO your fereign driver’s licence 
  8. Buy overseas investment assets 
  9. Show your overseas health insurance 

Can I ask for help?

Of course you can! Our numbers geeks are always available to help. Either book a meeting to discuss, message us when you’re completing your return, email us at [email protected], or if you prefer just to call, our number is 1300 707 117.