Figuring out your tax residency status in Australia can be a bit tricky. It’s important to understand that your tax residency and your immigration status are not the same thing.
There are three main categories for tax residency: Australian Resident, Foreign Resident, and Temporary Resident. If you’re considered an Australian resident, you’re generally taxed on your worldwide income.
You can check specific tests to determine your residency for tax purposes. If you don’t qualify on those tests, you’re usually considered a Foreign Resident or Non-Resident for tax purposes.
According to the ATO, Australian tax residents must meet the following objective criteria:
- You have always lived in Australia or come to Australia to live here permanently.
- You have lived in Australia for six months or more, living and working in the same place for most of your stay.
- You go overseas temporarily and don’t purchase a permanent home in another country.
- You are an international student studying in Australia for over six months.
If you’re an Australian expat who has moved into a permanent place of abode abroad, you may not be an Australian resident for tax purposes.
On the other hand, if you’re a foreign national who has moved to Australia for six months or more or intends to stay permanently, you may meet the criteria for an Australian tax resident.
Residency Tests: Are You a Tax Resident?
Determining individual tax residency is more nuanced than simply asking yourself the above criteria. If you pass any of the following four tests, you will be a tax resident of Australia to the Australian Taxation Office (ATO). The statutory tests to determine your residency are:
Test 1: The Resides Test
The resides test is the ATO’s primary assessment. If you pass it, the other three tests don’t apply. It asks one question: does Australia remain your usual or ordinary place of abode?
Unlike the other tests, the resides test has no statutory definition. The ATO applies a holistic assessment weighing multiple factors together — no single factor is conclusive.
Factors the ATO considers:
- Physical presence — how long, how often, and how continuously you are in Australia
- Intention and purpose — whether you intend to return, and on what timeline
- Family ties — whether your spouse and children remain in Australia
- Employment ties — where your income-producing activities are based
- Property — whether you own, rent out, or retain a home in Australia
- Social and living arrangements — where your day-to-day life is centred
Who typically passes: Expats who left recently, maintain a family home, have a spouse or school-age children still in Australia, and plan to return within a defined period.
Who typically fails: Expats with a firm overseas relocation, their entire family abroad, their Australian property leased or sold, and no fixed return date.
If you’re unsure, don’t guess — the ATO can reassess your declared residency status, and getting it wrong has significant consequences.
Test 2: The Domicile Test
The domicile test applies if you fail the resides test. It asks: is Australia your domicile — your permanent home by law?
Domicile is not the same as where you currently live. It’s a legal concept with three forms:
- Domicile of origin — where you were born, or where your father was domiciled at your birth
- Domicile of dependence — follows the parent’s domicile for minors
- Domicile of choice — acquired by relocating to a country with the genuine intention to remain there permanently or indefinitely
If you were born or grew up in Australia, your domicile of origin is Australian. That domicile stays until you establish a domicile of choice elsewhere — which requires both physical relocation and the intention to remain permanently.
The critical point: the ATO presumes you are a resident. Under the domicile test, you are treated as an Australian tax resident unless you prove your permanent place of abode is outside Australia. The burden of proof is on you.
What establishes a permanent place of abode overseas (per ATO Ruling TR 98/17):
- Stable overseas accommodation — ideally a lease of 12+ months, or property ownership
- Your family relocating with you
- Duration and continuity of overseas presence
- Setting up a life abroad: overseas bank accounts, local registration, driver’s licence
- No Australian property maintained for your personal return
“Permanent” does not mean forever — it means settled and fixed, as opposed to temporary or transient.
Test 3: The 183-Day Test
The 183-day test is more mechanical than the other tests. It applies primarily to foreign nationals arriving in Australia — it’s less commonly triggered by Australian citizens who are living abroad.
The test asks: were you present in Australia for 183 days or more during a financial year (1 July – 30 June)?
The 183 days can be aggregated — they do not need to be consecutive. A day of arrival and a day of departure each count as a full day.
Two conditions must both be met to pass this test:
- Physical presence in Australia for 183 days or more
- Your usual place of abode is not outside Australia
The second condition is the key. Even if you’ve spent 183+ days in Australia, you can rebut this test by demonstrating that your usual place of abode remains overseas — your settled home, your family, your life, is elsewhere.
Example: A Hong Kong-based expat spends 7 months in Australia managing a project. Their family remains in Hong Kong, they rent a serviced apartment in Sydney, and their permanent home is in Hong Kong. They’ve exceeded 183 days — but can argue their usual place of abode is overseas. They may not pass this test.
When it does apply: A foreign national relocating to Australia for a work assignment, who spends 6+ months here and has no established home overseas, would typically pass this test and be treated as an Australian tax resident for that year.
Test 4: The Commonwealth Superannuation Test
The Commonwealth Superannuation test is the most specific of the four. It applies only to Australian government employees posted overseas who are active contributing members of either:
- The Public Sector Superannuation Scheme (PSS), or
- The Commonwealth Superannuation Scheme (CSS)
If you meet both criteria — contributing member status and an overseas posting by an Australian government agency — you are automatically an Australian tax resident for the full income year, regardless of where you live or how long you’ve been away.
Family inclusion: Your spouse and children under 16 who accompany you overseas are also treated as Australian tax residents under this test.
“Active contributing member” is key. You must currently be accruing benefits under the PSS or CSS — not a deferred benefit member or former contributor. Former government employees who moved to private sector roles overseas are not covered.
Who this commonly affects: Federal public servants, DFAT officers, Australian Defence Force members posted overseas, and their families.
This test exists because these individuals serve Australia’s interests abroad and remain tied to Australian government employment — their tax obligations mirror those of domestic employees.
Example: Australian Resident Under the Domicile Test
Camille was born in Australia but moved to Hong Kong to work. She has a one-year work contract. Afterwards, Camille plans to travel before returning to Australia to live and work permanently. Camille rents out her property in Australia while abroad and stays with her family in Hong Kong.
Under the domicile test, Camille counts as an Australian resident for tax purposes because her permanent address is in Australia (she intends to return). She is domiciled in Australia, as she has lived here as a resident. This domicile usually continues even when she’s overseas unless she decides to move to another country permanently.
On the other hand, Toby – also born in Australia – plans to move to the US. He buys a property there and sells his Australian home. While in the US, he works for a US company. Therefore, he no longer counts as an Australian resident for tax.
Example: Foreign Resident for Tax Purposes
Sophie, an Australian resident, accepts a job overseas for three years, with the option to extend another three. She, her husband, and their three children relocated, renting out their Australian home while living abroad in a rented house provided under her employment contract.
- Resides Test: Her extended absence, the establishment of a home overseas, and renting out her Australian home indicate she is no longer residing in Australia.
- Domicile Test: Her permanent place of abode is overseas, evidenced by her family’s relocation and the significant time committed to living abroad.
Thus, Sophie is classified as a foreign resident for tax purposes as she fails both the ‘resides’ test and the domicile test.
New financial year, same residency question.
One wrong assumption on your FY2025-26 return can cost tens of thousands.
The Impact of Tax Residency on Your Australian Tax Return
Your tax residency status significantly influences the amount of tax you owe to the Australian Taxation Office (ATO).
As an Australian tax resident, you are generally liable for tax on your worldwide income, regardless of where it was earned. This means you must declare all your income sources on your tax return, including income earned overseas.
In contrast, if you are considered a foreign resident for tax purposes, you are typically only taxed on income sourced within Australia. This can have a substantial impact on your overall tax liability, particularly if you have significant income earned outside of Australia.
If you’ve already paid tax on that overseas income, the Foreign Income Tax Offset (FITO) allows you to credit that foreign tax against your Australian liability to avoid double taxation.
What if My Residency Status Changes During the Year?
So, what happens if your residency status changes during the year? Well, you still need to declare that you’re an Australian resident on your tax return. You’ll be taxed for the income you earned while residing in Australia.
However, you can claim an exemption for the number of days that you were not an Australian resident in that tax year.
After ceasing residency, you no longer need to declare foreign source income on your tax return. As long as you do not return to reside permanently in Australia, you won’t need to pay tax on any worldwide sourced income. If you don’t earn anything in Australia (e.g. you don’t rent out your house there), you won’t need to pay any Australian tax.
Ceasing Residency
When you live overseas, paying tax in Australia is not in your best interest. So, how can you prove to the ATO that you should no longer be a tax resident?
- Submit evidence of your permanent living situation abroad – if you can do so, buy a house in your foreign country or show proof of a year-long tenancy agreement.
- Remove yourself from the Australian electoral registry to show that you’re no longer a permanent resident.
- Take the ATO residency tests we outlined above.
- Sell or lease out your Australian property to prove that you have no intention of returning to live in Australia permanently. However, bear in mind the Foreign Resident Capital Gains Withholding tax when selling a property.
- Share evidence of overseas finances – such as a foreign tax return or opening a foreign bank account. Show that your day-to-day expenses are with your foreign account, not your Australian bank.
- Buy a one-way ticket. If you have no return date, it’s easier to prove that you don’t intend to go back to live in Australia.
- Obtain a foreign driver’s licence from your new country.
Advantages and Disadvantages of Being a Tax Resident
Advantages of Being a Tax Resident
- Access to Tax-Free Threshold: Australian tax residents can benefit from the tax-free threshold, meaning no tax is payable on the first $18,200 of income earned annually.
- Lower Tax Rates on Income: Progressive tax rates are applied to residents, with lower rates for the lower income brackets than non-residents.
- Entitlement to Deductions and Offsets: Tax residents can claim various deductions, such as work-related expenses, education costs, and healthcare-related deductions. They can also access offsets like the Low and Middle Income Tax Offset (LMITO).
- No Withholding Tax on Australian Investments: Dividends, interest, and royalties paid to residents typically avoid the higher withholding taxes that apply to non-residents.
- Access to Medicare: Being a tax resident often qualifies individuals for Medicare, Australia’s public healthcare system, funded through the Medicare levy.
- Superannuation Contributions: Employers must contribute to superannuation (retirement savings), which grows tax-free until retirement, offering long-term financial security.
- International Tax Agreements: Tax residents benefit from Australia’s tax treaties with other countries, which aim to prevent double taxation on income earned abroad.
- Eligibility for Government Benefits: Tax residency may also be tied to eligibility for certain government benefits or incentives, such as first-home buyer grants.
Disadvantages of Being a Tax Resident
- Worldwide Taxation: Tax residents must declare and pay tax on their worldwide income, including foreign earnings, investments, and assets.
- Complex Reporting Requirements: Declaring foreign income and assets can add complexity to tax returns, with additional documentation and potential penalties for non-compliance.
- Higher Tax Rates on Foreign Income: Foreign income may be subject to Australian tax rates, which could be higher than those in the country where the income is earned.
- Medicare Levy and Surcharge: Tax residents are liable for the Medicare levy (2% of taxable income) and, if earning above a certain threshold without private health insurance, the Medicare Levy Surcharge (up to 1.5%).
- Loss of Non-Resident Tax Benefits: Non-residents often enjoy flat tax rates on Australian-sourced income, which could result in lower tax for some individuals, such as investors.
- Superannuation Restrictions:While contributions are tax-advantaged, accessing superannuation is restricted until retirement age or special circumstances — though temporary residents leaving Australia permanently may be eligible for claiming your super when you leave Australia (DASP).
- Capital Gains Tax (CGT): Tax residents are subject to CGT on worldwide assets, whereas non-residents are typically only taxed on Australian-sourced gains.
Advantages and Disadvantages of Being a Tax Resident
| Aspect | Advantage | Disadvantage |
|---|---|---|
Income Tax | Progressive rates; tax-free threshold | Worldwide income taxed |
Deductions/Offsets | Access to broader deductions/ offsets | Reporting foreign deductions can be complex |
Healthcare | Medicare access | Subject to Medicare levy/ surcharge |
Investments | No withholding tax on dividends | CGT on worldwide assets |
International Income | Tax treaties to avoid double taxation | Potential for double taxation in rare cases |
If you live outside Australia, you should seek professional advice about proving you’re no longer an Australian tax resident. Understanding the tax residency rules is challenging but it’s a crucial aspect of staying compliant and optimising your tax situation.
FAQs about Tax Residency in Australia
How do you determine residency for tax purposes in Australia?
Generally speaking, if you have lived and worked in Australia for six months or more, you’re a tax resident. The Australian government has four tests you can complete to determine how much tax you should pay in Australia.
These include the reside test, domicile test, 183-day test, and commonwealth superannuation test. If you pass one test, you’re a tax resident.
What is the difference between Domicile and Residency?
Domicile refers to your permanent home. This could be where you were born or choose to move permanently.
Your residency is where you decide to live temporarily. If you only go abroad for a few months of the year, your domicile is Australia. However, if you’re abroad for years, your new country becomes your domicile.
What is the legal definition of residence?
Your legal residence is where you live at any one time. It doesn’t have to be your permanent home. For example, your residence might be in Australia while your long-term abode is in another country.
How do I know if I am an Australian resident for tax purposes?
The Australian Taxation Office (ATO) uses several tests to determine whether you are a tax resident:
- The Resides Test: This is the primary test. If you live in Australia and it is your usual place of residence, you are considered a resident for tax purposes.
- The Domicile Test: If your permanent home or domicile is in Australia, you are likely a tax resident, even if you are living overseas temporarily.
- The 183-Day Test: If you are in Australia for 183 days or more in a financial year, and you have a usual place of abode in Australia, you may be considered a tax resident.
- The Superannuation Test: This applies to Australian government employees working overseas who are still contributing to Australian superannuation funds.
If you meet any of these tests, you are likely a tax resident.
What is a foreign resident for tax purposes in Australia?
A foreign resident (non-resident) for tax purposes in Australia is someone who:
- Does not live in Australia permanently.
- Spends less than 183 days in Australia during the financial year.
- Does not have their domicile or permanent home in Australia.
- Does not meet the superannuation test.
Foreign residents are taxed only on their Australian-sourced income, typically at higher rates, and are ineligible for the tax-free threshold.
How many days in Australia to be a resident for tax purposes?
The 183-Day Test states that if you are present in Australia for 183 days or more in a financial year, you may be considered a resident for tax purposes, provided:
- You have a usual place of abode in Australia, or
- Your stay in Australia reflects an intention to make it your home.
However, this is just one of the tests, and the intention to stay and other circumstances are also evaluated.
Are you an Australian resident for tax purposes or a working holiday maker?
If you’re in Australia on a working holiday visa (subclass 417) or a work and holiday visa (subclass 462), you are treated as a Working Holiday Maker (WHM) for tax purposes.
WHMs pay a 15% tax on income up to $45,000, regardless of residency status, and progressive rates apply for income above $45,000.
If you meet the residency tests, you may qualify as a tax resident, even on a WHM visa. Tax residents are eligible for the tax-free threshold and pay progressive rates on income.
Your status will depend on the length and nature of your stay and whether you meet residency criteria.
What is the new tax residency rule in Australia?
Australia’s tax residency rules have been updated to provide clearer guidelines for determining an individual’s tax status. Currently, the Australian Taxation Office (ATO) applies tests such as the Resides Test, Domicile Test, 183-Day Test, and the Superannuation Test to assess tax residency.
These tests consider physical presence, domicile, and ties to Australia, such as family or economic interests. In 2023, the ATO issued Taxation Ruling TR 2023/1, which consolidates recent case law and provides more practical examples to ensure compliance.
The proposed changes aim to simplify the process by introducing a Primary 183-Day Rule, which states that individuals spending 183 days or more in Australia during a financial year would automatically be considered residents for tax purposes.
For those spending fewer days, a Factor Test would assess residency based on criteria like citizenship, family ties, accommodation, and economic interests in Australia. While these changes have not yet been legislated, they are expected to reduce ambiguity and enhance certainty for individuals navigating tax residency obligations.
What is the definition of foreign resident for tax purposes?
A foreign resident for tax purposes in Australia, also known as a non-resident, is an individual who does not meet the criteria for Australian tax residency as defined by the Australian Taxation Office (ATO). Generally, foreign residents:
- Do not reside in Australia or have a permanent home in the country.
- Spend less than 183 days in Australia during the financial year.
- Have their domicile or usual place of abode outside Australia.
- Do not meet the superannuation test, which applies to certain Australian government employees working overseas.
Does Australia allow dual residency?
Yes, Australia allows dual residency, but it is important to understand how it is handled under Australian tax law and international tax treaties.
Dual residency occurs when an individual qualifies as a tax resident in both Australia and another country under the respective tax laws. Australia does not prohibit being a dual resident, but specific rules determine how tax obligations are managed to prevent double taxation.
