Am I An Australian Resident For Tax Purposes?

Am i an australian resident for tax purposes

The most important question you need to ask yourself when you prepare to move overseas and become an Australian Expat is Am I an Australian resident for tax purposes or not?  The answer will have some fundamental implications for your income tax obligations, but also on your investments.

Why is answering the question Am I an Australian resident for tax purposes? – so important?  If you are an Australian resident for tax purposes you will generally be taxed by the Australian government on your worldwide income from all sources.  Non-residents or foreign residents for tax purposes will only be taxed by the Australian government on their Australian income (subject to some exceptions).

A comparison of the tax implications for residents and non-residents from an Australian tax point of view are shown in the table below

Australian Resident For Tax Purposes  Non-resident For Tax Purposes
Better tax rates Higher tax, No tax free threshold
Taxed on global income Taxed on Australian income
Pay Medicare levy No Medicare levy
Capital gains tax on global assets Capital Gains tax only on ‘real Australian property’, not shares

For more information on the tax implications of your tax residency, download my Free Special Report – Tax Implications For Australians Working Abroad. Click on the button below.

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Am I an Australian Resident For Tax Purposes?

Am i an australian resident for tax purposes

The ATO uses a range of tests to ascertain whether you are an Australian resident for tax purposes

  1. The Resides Test : You are an Australian resident if you reside in Australia;
  2. The Domicile Test : You are an Australian resident if your permanent place of abode is in Australia ;
  3. The 183 Day Test : If you are 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;
  4. The Superannuation Test : You are an Australian resident if you are a Commonwealth government employee (or spouse) working at an Australian post overseas.

As an Australian expatriate, your residency status for Australian tax purposes very much depends on your individual circumstances, and there are no conclusive rules for determining your tax residency.  As an Australian Expat, the domicile test will generally be the most relevant test.  To avoid being considered an Australian resident for tax purposes you need to demonstrate that your permanent place of abode is outside Australia.

In determining whether you have established a permanent place of abode outside of Australia various tax rulings outline a number of factors that need to be considered.  The weight given to each factor will vary with the individual circumstances, and no single factor is considered conclusive.  The factors you need to consider are :

  • The intended and actual length of stay in the overseas country
  • Any intention to return to Australia at some definite time or travel to another country
  • The establishment of a home outside Australia
  • The abandonment of any residence in Australia
  • The duration and continuity of the person’s presence in the overseas country; and
  • The durability of association the person has with a particular place in Australia.

In most cases, should an Australian expatriate intend to reside outside of Australia for more than 2-3 years, establish a principal place of abode overseas, and rent out their home in Australia, it is likely the ATO will consider them as a non-resident for tax purposes. The outcome however is determined on a case by case basis, based on each individual’s personal circumstances.  All relevant facts and circumstances need to be taken into account and no single factor is determinative.

You should seek professional advice in determining your tax residency.  More information can be found at www.ato.gov.au.  For more information on the implications of your tax residency please download my free ebook by entering your details below.

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What issues have you faced in determining your tax residency, and answering the question – Am I an Australian resident for tax purposes?  Share your experience…

Related Articles you may be interested in :

Australian Expat Stories : ATO Challenges Tax Residency of Returning Aussie Expat
Do I need to complete an Australian Tax Return While Living Overseas?

Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.

Do you need tax planning advice from a company experienced in dealing with expat tax issues?

If you need to file an Australian tax return, or need tax planning advice as an Australian expat, contact GM Expat Tax using the form below.  GM Expat Tax is a firm of accountants specialising in assisting Australian expats living and working around the world.

GM Expat Tax

  • GM Expat Tax Inquiry Form

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Craig

Craig is an Australian Expat and the founder of The Australian Expat Investor.Craig is passionate about investing, and while Craig cannot give personal financial or tax advice, Craig enjoys sharing investing, tax, and other tips for Australian expats to help them to build their wealth while living abroad and get the most out of their time living overseas.Get his free ebook on 9 Financial Surprises That Could Cost Australian Expats Thousands of Dollars at the link above.
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