Important NoticeThis article is general information only and does not constitute personal tax advice. ODIN Tax is a Registered Australian Tax Agent and can only provide specific tax advice in formal consultations. Your residency determination depends on your individual circumstances. Please consult a Registered Australian Tax Agent for advice tailored to your situation.
If you are an Australian living in the USA, your tax residency status is not automatically settled by the fact that you have moved. The ATO uses four distinct statutory tests to determine whether you remain an Australian tax resident for a given income year, and meeting any single one of them is enough to keep your worldwide income in the Australian tax net [3]. The stakes are high: Australian tax residents pay tax on global income, while foreign residents pay tax only on Australian-sourced income. Getting this wrong in either direction creates real financial risk, and the difference is not always obvious from the outside.
TL;DR: Key Takeaways
- The ATO applies four tests to determine tax residency: the Resides Test, the Domicile Test, the 183-Day Test, and the Commonwealth Superannuation Test [3].
- Meeting any one of the four tests is sufficient to be treated as an Australian tax resident, regardless of where you physically live [5].
- Non-residents and foreign residents face different Australian tax obligations, including lost access to the 50% CGT discount and exposure to foreign resident CGT withholding on property sales.
- Residency determinations are fact-specific and turn on details like intention, family ties, property ownership, and lifestyle, not just days counted on a calendar.
Why Does Tax Residency Matter So Much for Australians in the USA?
Tax residency is the foundational question that determines which set of Australian tax rules applies to you. If you are an Australian tax resident, you pay Australian tax on your worldwide income, including your US salary, investment returns, and any capital gains, wherever the asset is located. If you are a non-resident for Australian tax purposes, you pay Australian tax only on income sourced in Australia.
The practical consequences of residency classification extend well beyond income tax rates:
- CGT discount: Australian tax residents can access a 50% CGT discount on assets held for more than 12 months. Non-residents cannot claim this discount on taxable Australian property, meaning the full capital gain is assessed.
- Foreign resident CGT withholding: When a foreign resident sells Australian real property valued above the relevant threshold (for the 2025-26 income year), the buyer is required to withhold 15% of the purchase price and remit it directly to the ATO. This is foreign resident CGT withholding, and it applies regardless of whether there is an actual gain on the sale.
- Tax-free threshold: Non-residents do not have access to the tax-free threshold, meaning Australian-sourced income is taxed from the first dollar at non-resident rates for the 2025-26 income year.
- Medicare Levy: Non-residents are generally exempt from the Medicare Levy.
Given these consequences, correctly classifying your Australian tax residency is not a formality. It directly shapes your compliance obligations, your tax exposure on Australian property, and the structuring of any future transactions.
What Is the Resides Test and How Does It Apply to Expats?
The Resides Test is the primary test in Australian tax residency law [1]. Under this test, a person is an Australian tax resident if they “reside” in Australia according to the ordinary meaning of that word. It is deliberately broad and deliberately flexible.
For Australians living in the USA, the Resides Test is typically the first question to resolve, and it is also the one that catches the most people by surprise. Courts and the ATO consider a cluster of factors, not a single criterion [2]:
- Physical presence in Australia and its regularity
- The nature and purpose of your absence from Australia
- Maintenance of a home or place of abode in Australia
- Family ties and social connections in Australia
- Business and professional connections in Australia
- Whether your absence is intended to be permanent or temporary
An Australian who moves to the USA for a two-year work contract with a clear intention to return, retains the family home, and visits Australia regularly is more likely to satisfy the Resides Test than one who has sold all Australian assets, relocated a family permanently, and established a clear life in the USA. The subjective element of intention carries real legal weight here.
What Is the Domicile Test and Can It Override a Clear Physical Move?
Building on the Resides Test above, if the Resides Test does not produce a clear resident outcome, the ATO next considers the Domicile Test [1]. This test asks a harder question: even if you are physically living in the USA, is your permanent place of abode still Australia?
Under the Domicile Test, a person is an Australian tax resident if their domicile is Australia, unless the ATO is satisfied that their permanent place of abode is outside Australia [3]. The burden of demonstrating a permanent place of abode overseas rests on the individual. A permanent place of abode does not require a property purchase overseas; it requires evidence of a settled, non-transient home outside Australia. Relevant factors include:
- Whether you have abandoned your Australian home or retained it
- How long you intend to live overseas and whether that intention is fixed
- Whether you have set up a stable home in the USA (lease or property, settled lifestyle)
- The durability and degree of your connections to Australia versus the USA
This test regularly produces unexpected outcomes. Australians who rent out their Australian home and move to the USA on an indefinite employment contract can still fail to establish a permanent place of abode overseas if their living arrangements in the USA remain temporary or transient in character. The ATO has published a finalised ruling that provides guidance on how this test is applied in practice [2].
What Is the 183-Day Test and Is It Really Just About Counting Days?
A related but distinct question is whether physical presence in Australia during a given income year can independently create tax residency. The 183-Day Test addresses exactly this scenario [4]. Under this test, a person who is physically present in Australia for more than half of the income year (i.e., more than 183 days) is treated as an Australian tax resident unless they can demonstrate that their usual place of abode is outside Australia and they do not intend to take up residence in Australia.
For most Australians living year-round in the USA, the 183-Day Test is unlikely to apply directly. However, it becomes relevant in transition years, for example, the year of departure or the year of return, when someone may have been physically present in Australia for a substantial period before or after relocating to the USA.
It is also worth noting that this test runs in the opposite direction to common intuition: spending fewer than 183 days in Australia does not automatically make you a non-resident. The Resides Test and Domicile Test can still capture you regardless of how many days you spent in Australia.
What Is the Commonwealth Superannuation Test and Who Does It Actually Affect?
Stepping back from the technical detail, a separate concern is the fourth test: the Commonwealth Superannuation Test [4]. This test applies to a narrow group of individuals: Australian government employees posted overseas who are members of a Commonwealth superannuation scheme (such as CSS or PSS). If you meet this test, you are treated as an Australian tax resident regardless of any other factor.
For most private-sector Australians working in the USA, this test will not be relevant. It is worth noting here only because it is one of the four statutory tests, and missing it can produce errors in residency analysis for public servants on overseas postings.
How Do the Four Tests Work Together in Practice?
The four tests are not a hierarchy that you work through sequentially until you find one that applies. Rather, you satisfy the tests in parallel: if you meet any one of the four, you are an Australian tax resident for that income year [5]. This is summarised in the table below.
| Test | Key Question | Primarily Applies To | Most Common Outcome for US-Based Expats |
|---|---|---|---|
| Resides Test | Do you ordinarily reside in Australia? | All individuals | Depends on intention, ties, and conduct |
| Domicile Test | Is your permanent home still Australia? | All individuals | Non-resident if permanent abode is clearly in the USA |
| 183-Day Test | Were you in Australia for more than half the year? | Transition year arrivals/departures | Rarely triggered for year-round US residents |
| Commonwealth Superannuation Test | Are you a government employee on an overseas posting? | Australian government employees | Not relevant for private-sector expats |
The interaction of these tests means that a single fact-pattern can produce different outcomes depending on the year, the individual’s conduct, and how the ATO interprets ambiguous evidence. This is precisely why Australian expat tax advice from a specialist matters: a general accountant applying a single-variable analysis to a multi-variable legal framework routinely produces wrong answers.
What Happens If You Get Your Residency Status Wrong?
Incorrect residency classification creates compounding risk over time. Common consequences include:
- Unpaid Australian tax on foreign income: If you have been filing as a non-resident while actually satisfying one of the four tests as a resident, your US salary and investment income may have been assessable in Australia for years.
- Incorrect non-resident tax returns: A non-resident Australian tax return filed without proper residency analysis may contain errors that attract ATO scrutiny.
- CGT exposure on property: Selling Australian property while misclassified can trigger unexpected CGT liability, including the loss of the 50% discount and exposure to foreign resident CGT withholding.
- Penalties and interest for late or incorrect lodgments: The ATO has mechanisms to raise amended assessments for prior years where residency was incorrectly stated.
Frequently Asked Questions
- Does moving to the USA automatically make me a non-resident for Australian tax purposes?
- No. The ATO applies four statutory tests to determine residency. Moving overseas does not automatically change your status. Your residency is determined by your intention, ties to Australia, and conduct across those tests [3].
- Can I be a tax resident of both Australia and the USA at the same time?
- Yes, dual residency is possible under each country’s domestic law. Australia and the USA have a Double Tax Agreement (DTA) that includes tie-breaker rules to determine which country has primary taxing rights where both countries claim residency. This is a complex area that requires specialist analysis.
- What is foreign resident CGT withholding and does it apply to me?
- Foreign resident CGT withholding is a mechanism by which the buyer of Australian real property sold by a foreign resident withholds 15% of the purchase price and pays it directly to the ATO. It applies above the relevant threshold for the 2025-26 income year. If you are a non-resident selling Australian property, this will likely apply to your transaction.
- Do I need to lodge an Australian tax return if I am a non-resident?
- If you have Australian-sourced income (such as rent from an investment property), you are generally required to lodge a non-resident Australian tax return. Your specific obligations depend on your income types and residency status for each income year.
- If I have not lodged Australian tax returns for several years, what are my options?
- The ATO has processes for managing overdue lodgments, including in some circumstances, the ability to manage penalty exposure. Acting proactively rather than waiting for ATO contact is generally the better outcome. A Registered Australian Tax Agent can lodge multiple years of returns and manage the compliance process on your behalf.
- Does renting out my Australian property affect my tax residency status?
- Retaining and renting out a property in Australia is one of the factors considered under both the Resides Test and the Domicile Test. It does not automatically make you an Australian tax resident, but it is a relevant indicator that the ATO will weigh alongside other evidence of your connections to Australia.
- How do I formally establish that I am a foreign resident for Australian tax purposes?
- There is no single registration or declaration that creates foreign resident status. Your residency is determined by the facts of your situation as assessed against the four tests each income year. A formal tax residency determination from a Registered Australian Tax Agent, supported by documentary evidence, is the most defensible approach if the ATO ever reviews your position.
About ODIN Tax
ODIN Tax is Australia’s specialist tax agent practice for Australian expats and non-residents, and part of the ODIN Group alongside Odin Mortgage. As a Registered Australian Tax Agent, ODIN Tax prepares Australian tax returns, resolves overdue lodgments, and provides tax residency determinations and CGT advice for Australians living overseas across 40+ countries. For Australians in the USA navigating non-resident tax in Australia, foreign resident CGT withholding, and ATO tax residency tests, ODIN Tax has deep regulatory knowledge and practical experience working with clients in the same expat corridors. Led by Tax Director Pau Lam with over 10 years of specialist experience, ODIN Tax has served more than 10,000 Australian expats and holds a 4.9/5 Google rating from over 330 verified client reviews.
Not sure whether you are still an Australian tax resident?
ODIN Tax works exclusively with Australian expats and non-residents. Whether you need a formal tax residency determination, help with overdue non-resident Australian tax returns, or specialist Australian expat tax advice, our team is ready to help.
Disclaimer: This article contains general information only and does not constitute personal tax advice. Australian tax residency rules are complex and fact-specific. The information in this article is current as of the 2025-26 income year and is based on publicly available ATO guidance. Individual circumstances vary significantly. Please consult a Registered Australian Tax Agent for advice tailored to your personal situation.
References
- Understanding the Australian Tax Residency Test (atlaswealth.com)
- Australia – New Tax Ruling on Residency (kpmg.com)
- Understanding the Australian Tax Residency rules (www.expattaxonline.com)
- 2025 Australian Tax Residency Rules: Temporary Residents Guide (itp.com.au)
- A Comprehensive Comparison of Tax Residency Tests in Canada, Australia, and the UK (www.gfp.institute)
