You will often hear Australian expats talk about whether they are a resident or non-resident for Australian tax purposes. But why is this important and what are the implications?
Determining whether you are a resident or non-resident for Australian tax purposes is one of the most important questions you need to answer when moving abroad. We addressed the rules in our article Am I an Australian resident for tax purposes?
There are two primary differences in tax treatment between a resident and non-resident for Australian tax purposes. These differences relate to the income that will be taxed in Australia, and the rate of tax that will apply on your income in Australia.
Resident For Australian Tax Purposes
If you are a resident for Australian tax purposes, then you will be subject to Australian tax on your world-wide income (subject to any double taxation agreements in place, and any foreign income tax offsets you are eligible for). As a resident for Australian tax purposes you will also be liable for the medicare levy, but you will be entitled to claim the tax free threshold in Australia (as you would had you not moved overseas). If you are not holding private health insurance and your income exceeds the relevant thresholds, you will also be liable for the medicare levy surcharge.
If you are resident for Australian tax purposes, then you will be required to file an Australian tax return every year.
Non-resident for Australian Tax Purposes
Non residents are not entitled to the tax free threshold, and will be taxed only on their Australian-sourced income (other than that income subject to non-resident withholding taxes).
The most common categories of income that are defined as Australian sourced income are rental property income and wages and salary earned in Australia. Interest and dividend income is generally not classified as Australian sourced income, but will be subject to non-resident witholding taxes.
Australian tax rates applying if you are a resident and non-resident for Australian tax purposes
The two tables below summarise the different tax rates for Australian residents and non-residents. If you are non-resident for Australian tax purposes then while your overseas income will not be subject to Australian tax, any Australian sourced income (eg. Rent from investment properties) will be taxed in accordance with the non-resident income tax thresholds.
In essence this means, you will start paying tax at the rate of 32.5 cents in the dollar on the first $87,000 of Australian sourced income, as opposed to Australian tax residents who only start paying 32.5% tax when they reach $87,000 pa income.
If you are a Non resident for tax purposes, you will however no longer be liable for the medicare levy and medicare surcharge.
Resident for Australian tax purposes (2017-2018 Financial Year)
– excludes medicare and other temporary levies
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $87,000||$3,572 plus 32.5c for each $1 over $37,000|
|$87,001 – $180,000||$19,822 plus 37c for each $1 over $87,000|
|$180,001 and over||$54,232 plus 45c for each $1 over $180,000|
Non-resident for Australian tax purposes (2017-2018 Financial Year)
|Taxable income||Tax on this income|
|0 – $87,000||32.5c for each $1|
|$87,001 – $180,000||$28,275 plus 37c for each $1 over $87,000|
|$180,001 and over||$62,685 plus 45c for each $1 over $180,000|
Whether you are a resident or non-resident for Australian tax purposes is not the only thing you need to understand when moving abroad. Make sure you understand the tax implications of being an Australian Expat – Download our Special Report Now!
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