Are you an Australian resident for tax purposes?

Visa holders would need to work out their tax situation while in Australia. This is particularly true for those who are working in Australia. To understand your tax situation, you would need to find out if you are an Australian or foreign resident for tax purposes.

Residency test

The meaning of resident for taxation purpose is different from that of the Department of Home Affairs (DoHA). That is, you can be an Australian resident for tax purposes without being an Australian citizen or permanent resident.

The Australian Taxation Office (ATO) uses the ‘reside test’. Essentially, to determine if someone is a resident or not, the ATO will look into the following factors:

  • Intention or purpose of presence
  • Family and business or employment ties
  • Maintenance and location of assets
  • Social and living arrangements

ATO has a calculator which can help you determine if you are a resident for tax purpose. You can find the calculator here.

Some common scenarios where a visa holder is considered to be an Australian resident for tax purposes:

  • International students enrolled in a course that is more than six months long.
  • Working and living in the one location and have taken steps to make Australia your home.
  • Migrate to Australia and intend to live in Australia permanently.

Usually, you are considered to be a foreign resident if you are:

  • Visiting Australia for less than 6 months
  • Visiting Australia and you are travelling and working in various locations around Australia

Working Holiday Makers

Working Holiday Makers on subclass 417 Working Holiday Visa or Subclass 462 Work and Holiday Visa are considered to be foreign residents for tax purposes. Therefore, working holiday makers will be taxed at 15% on the first $37,000 of income, while residents get their first $18,200 tax-free.

Are you a resident for tax purposes?

 
If you: You are generally:
leave Australia temporarily and do not set up a permanent home in another country an Australian resident for tax purposes
are an overseas student enrolled in a course that is more than six months long at an Australian institution an Australian resident for tax purposes
are visiting Australia, working and living in the one location and have taken steps to make Australia your home an Australian resident for tax purposes
are visiting Australia and for most of that time you are travelling and working in various locations around Australia a foreign resident for tax purposes
are either holidaying in Australia or visiting for less than six months a foreign resident for tax purposes
migrate to Australia and intend to reside here permanently an Australian resident for tax purposes
leave Australia permanently treated as a foreign resident for tax purposes from the date of your departure

Related: Buying a Property in Australia – Temporary Residents

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.

Disclaimer: No Tax Advice or Legal Advice

The Content does not constitute tax and/or legal advice and should not be relied upon as such. You should seek tax, legal or other professional advice before acting or relying on any Content.

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