Australian Tax Resident for Tax Purposes

Am I an Australian tax resident?

Introduction

Determining your Australian tax residency position is important. In general, an Australian tax resident is subject to Australian income tax on their worldwide income. 

The Australian tax residency rules are complex and there are a number of factors to consider to determine if you will be an Australian or foreign resident for tax purposes.

Residency Tests

Under Australian tax law, the primary test for an individual’s tax residency is whether that person resides in Australia according to the ordinary meaning of the word ‘resides’ (the common law test).

If the common law test is not satisfied or is inconclusive, then regard must be had to the three statutory tests:

1. Domicile test: The domicile test asserts that the taxpayer holds Australian domicile unless one can establish that their permanent place of abode lies outside Australia.
2. 183-day test: The taxpayer is actually present in Australia for a total period of more than half of the income year (the 183-day test), unless the Commissioner is satisfied that the taxpayer’s usual place of abode is outside of Australia or the person has no intention to take up residence here; and
3. Superannuation test: The taxpayer is a contributing member of the superannuation fund for Commonwealth government employees, or is a spouse or child (under 16) of that person (this test is not relevant as you are not a Commonwealth government employee)

When figuring out if an individual “resides” in Australia, we don’t rely on a single factor to determine residency, such as the duration of physical presence or time spent in Australia. The weight of each factor and an individual’s behaviour in their time spent in Australia can shed some light in determining if their actions are consistent with residing in Australia. 

When determining residency based on ordinary concepts, you need to consider several factors. These factors include:

• The intention or purpose of presence;
• Family and business/employment ties;
• Maintenance and location of assets; and
• Social and living arrangements.

To meet non-residency criteria via the domicile test, establish a lasting abode beyond Australia. Typically, relocate to a foreign nation for at least 2 years with your family. Emphasizing that the duration of your stay outside Australia, whether actual or planned, is not the sole determinant. All factors must come into consideration.

To figure out whether you qualify as a non-resident for Australian tax purposes, seek tax advice to assess your tax residency status. Having a written legal opinion will assist in the event the ATO was to question your Australian tax residency status and can help reduce penalties.

Make sure you accurately fill out your Australian and foreign tax returns to clearly show your tax residency position.

Please do not hesitate to get in touch with us to discuss your circumstances further and we would be happy to assist you further.