For Australian expats living overseas or foreign investors, understanding your residency status is crucial because it directly affects how much tax you pay and on what income.
Qualifying as a non resident for tax purposes in Australia involves considering various factors, such as the duration of your stay outside Australia, your intentions regarding your overseas residence, and your connections to the country.
By assessing these elements, you can determine your tax obligations accurately and ensure compliance with Australian tax laws. Let’s break this down step by step.
Non-resident for tax purposes — quick definition
A non-resident for tax purposes is someone the ATO determines does not ordinarily live in Australia. Non-residents pay Australian tax only on Australian-sourced income — wages, rental income, and capital gains from Australian property. Overseas income is not taxed in Australia. Your status is determined by applying four ATO tests: the Resides Test, Domicile Test, 183-Day Test, and Superannuation Test.
Being a non-resident for tax purposes means that the Australian Taxation Office (ATO) considers you to be living outside Australia. As a result, you will only pay tax on the income you earn within Australia. Income you earn overseas is generally not taxed in Australia.
But how do you know if you qualify? It comes down to your residency status for tax purposes, which the ATO determines based on your circumstances.
What Happens If You Get It Wrong?
Getting your residency status wrong can lead to problems like:
Paying too much tax.
Facing penalties from the ATO.
Having to lodge amended tax returns to fix errors.
If you’re unsure, it’s a good idea to speak to a tax professional to avoid costly mistakes.
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What Does "Australian Resident for Tax Purposes" Mean?
An Australian resident for tax purposes is someone the ATO considers to have Australia as their usual place of residence. This is a tax concept — it is not the same as citizenship, permanent residency, or where you hold a passport.
Australian residents for tax purposes are taxed on their worldwide income — meaning income earned in Australia AND overseas is included in their Australian tax return. They also receive the tax-free threshold ($18,200 for 2025–26) and are eligible for the 50% CGT discount on assets held over 12 months.
Key difference from non-residents:
| Australian Tax Resident | Non-Resident for Tax Purposes | |
|---|---|---|
Taxed on | Worldwide income | Australian-sourced income only |
Tax-free threshold | Yes ($18,200) | No |
CGT discount | 50% (assets held 12+ months) | Not eligible |
Medicare Levy | Applies | Exempt (if non-resident) |
The ATO does not let you self-declare your residency status — it is determined by applying the four residency tests to your actual circumstances.
How Do You Qualify as a Non-Resident?
To be a non-resident for tax purposes in Australia, you must meet one of the following criteria:
- You don’t have a permanent place of abode in Australia.
- You spend less than 183 days in Australia in a tax year.
- You don’t have a “settled intention” to live in Australia.
If you meet these criteria, you are a non-tax resident for Australian tax purposes. This means that you will only be liable to pay Australian tax on income that is sourced in Australia.
Australian-Sourced Income
Some examples of Australian-sourced income include:
- Wages or salary earned in Australia.
- Business income derived from a business that is carried on in Australia.
- Rental income from property that is located in Australia.
Interest earned from Australian savings accounts is also taxable Australian-sourced income. Read more about tax on bank interest for pensioners and non-residents.
Foreign-Sourced Income
Some examples of foreign-sourced income that would not be subject to Australian tax if you are a non-tax resident include:
- Wages or salary earned outside of Australia.
- Business income derived from a business that is carried on outside of Australia.
- Rental income from property that is located outside of Australia.
It is important to note that there are a number of exceptions to the rules for non-tax residents. For example, non-tax residents may still be liable to pay Australian tax on certain types of income, such as capital gains from the sale of Australian property.
How to Determine Your Tax Residency as an AU Expat
The ATO uses a sequential hierarchy of four tests to determine your residency status. You are considered a tax resident if you satisfy any of these tests — and the ATO works through them in order. Failing the first test doesn’t automatically make you a non-resident; the ATO moves to the next one.
The Resides Test
This is the primary test. The ATO looks at whether Australia is your usual place of residence based on your physical presence, lifestyle, and behaviour — not just where your passport is stamped.
You are likely a non-resident under this test if:
- You live overseas the majority of the time
- You don’t have strong ties to Australia such as owning a home or having close family here
- Your social and economic life is centred overseas
If you satisfy the resides test, you are a tax resident and the ATO stops there. If not, it moves to the domicile test.
Example — Passes the resides test (= tax resident):
Michael has lived in Hong Kong for four years, but last year he returned to Sydney for seven months to care for an ill parent. He stayed in his old bedroom, used his Australian bank account, and had no overseas lease during that period. The ATO would likely find that Australia was his usual place of residence during those months — making him a resident for that entire tax year.
Example — Fails the resides test (= moves to next test):
Emma lives and works in Singapore. She returned to visit family in Brisbane for five months, then flew back. She maintained her Singapore apartment, her overseas employment contract ran continuously, and she held a return flight from day one. Emma does not satisfy the resides test — the ATO would proceed to the domicile test.
The Domicile Test
Domicile is a legal concept distinct from residence. It is your permanent home — the place you intend to return to as your ultimate base. Australian citizens born in Australia are presumed to be domiciled in Australia unless they have clearly established a domicile elsewhere.
This is the test that catches expats off-guard. You can live in Dubai for a decade and still be domiciled in Australia if you:
- Own property in Australia that you haven’t sold or permanently rented out
- Have not established a permanent home overseas
- Still intend to return to Australia “one day”
Example — Caught by the domicile test (= tax resident):
Peter moved to Dubai for work in 2019. He earns well, pays tax in the UAE, and has lived there continuously. However, he kept his apartment in Bondi (“it’s an investment”), tells friends he’ll come home eventually, and hasn’t set up permanent roots in the UAE (renting year-to-year, no family in Dubai). Despite years abroad, Peter remains domiciled in Australia and is a tax resident — meaning he should have been declaring worldwide income all along.
Example — Passes the domicile test (= non-resident):
Sophie moved to Hong Kong in 2020. She sold her Melbourne apartment, signed a multi-year lease in HK, moved her partner and children over, and has no current property in Australia. Her permanent home is in Hong Kong with no clear intention to return. Sophie has established a domicile of choice in Hong Kong and is not domiciled in Australia.
The 183-Day Test
This is the simplest test — and the most common trap for expats visiting Australia frequently. If you spend 183 or more days physically present in Australia during the financial year (1 July to 30 June), you are a tax resident for that year. Full stop.
Important details:
- Any portion of a day in Australia counts as a full day
- The 183 days are cumulative, not consecutive — short visits add up
- Triggering 183 days makes you resident for the entire year, not just from day 183 onwards
Example — Triggers 183-day test (= tax resident):
James lives in Singapore but splits his time. In FY2025/26, he spent January–March in Sydney (90 days) helping a family business, April–May in Singapore, then returned in June for a property settlement and stayed six more weeks (42 days). Add a 60-day Christmas visit: total = 192 days. James is a tax resident for FY2025/26 and must declare his Singapore salary to the ATO.
Example — Stays under threshold (= non-resident):
Anna lives in the USA. She visited Australia for three weeks over Christmas and a two-week conference in March — 35 days total. Anna is nowhere near 183 days and remains non-resident.
Practical tip: If you’re regularly spending 130–170 days in Australia, you’re at risk. Track your day count from 1 July every year. A trip to New Zealand or Bali won’t help — those days simply aren’t counted, they don’t cancel Australian days already accumulated.
The Superannuation Test
This test applies exclusively to Australian Government employees working overseas (public servants, ADF personnel) who participate in a Commonwealth superannuation scheme. If you work for a private employer, this test does not apply to you.
How the Four Tests Compare
Not all four tests work the same way or catch the same situations. This table summarises the key differences:
| Test | What It Measures | Who It Typically Catches | Key Escape Hatch |
|---|---|---|---|
Resides | Your usual place of residence — physical presence, behaviour, and lifestyle | Expats on extended Australian stays (5–6+ months) | Documented plan to return overseas; maintain overseas lease and employment contract |
Domicile | Your permanent home and intent to return | Expats who kept Australian property and haven’t planted permanent roots overseas | Establish genuine domicile overseas: long-term lease or purchase, relocate family, sever AU property ties |
183-Day | Days physically present in Australia | Expats who visit frequently — cumulative days add up | Stay under 183 days per financial year (track from 1 July) |
Superannuation | Government employment + prior-year residency | Australian public servants and ADF personnel overseas | Not applicable to private sector employees |
Family and Economic Ties
The ATO also considers your family and economic ties to Australia. This includes factors such as whether you have a spouse or dependent children residing in Australia, whether you own or rent property in Australia, and whether you have active business or employment ties in the country.
Intention and Behaviour
The ATO will assess your intention and behaviour to determine if you have a permanent or long-term presence in Australia. This can include factors such as whether you have established social ties, maintain a bank account, hold an Australian driver’s license, or have registered for Medicare.
Examples: Resident vs. Non-Resident
Let’s clear up the confusion with a couple of examples.
Example 1: Sarah moves to London for a two-year work contract. She rents out her apartment in Sydney, doesn’t visit Australia, and doesn’t earn income here. Sarah would likely be considered a non-resident for tax purposes.
Example 2: James accepts a six-month role in Singapore but plans to return to his house in Melbourne. Since his time overseas is temporary and his permanent home is in Australia, James may still be considered a resident.
Grey-Zone Scenarios: When It's Not Obvious
Most residency determinations aren’t as clear-cut as the examples above. Here are three common patterns that come up in practice.
Scenario 1 — The “We’ll Come Back One Day” Domicile Trap
Mark and Tina moved to Singapore in 2021. They kept their house in Perth (“property prices are too good to sell”), Mark told his employer it’s a “two-to-three year rotation,” and they never signed a long-term lease in Singapore. In 2024, the ATO reviewed their returns. Despite three years overseas, both were assessed as Australian tax residents for the full period — because their domicile remained in Australia. They had to amend three years of returns and declare Mark’s Singapore salary as Australian income. The Perth property was the critical factor: keeping it signalled intent to return.
Scenario 2 — Two People, Two Different Non-Resident Start Dates
Richard moved to Singapore for a new role in June 2025. His wife Janine followed in April 2026. They filed their FY2025/26 returns as though they both became non-resident in June 2025. The ATO assessed Janine as a resident for the entire FY2025/26 year because she was still living in Australia until April 2026. The ATO assesses each individual’s residency separately — even people in the same household can have different non-resident start dates, and filing them incorrectly creates compliance risk.
Scenario 3 — The Day-Count Creep
Sarah has been non-resident for three years. In FY2025/26 she made four trips back: a week at Christmas, three weeks in February, six weeks in April–May, and two weeks in July. Running the total: 7 + 21 + 42 + 14 = 84 days — well under 183. She was safe. But if she had extended the April trip by another six weeks (common when helping with a family matter), she would have crossed 183 days and been assessed as resident for the entire year — including her overseas salary. The lesson: count your days before you book extended visits, not after.
New financial year, same residency question.
One wrong assumption on your FY2025-26 return can cost tens of thousands.
How to Prove You’re a Non-Resident
If you think you’re a non-resident, you need to be prepared to prove it. The ATO might ask for evidence, such as:
Your overseas address and visa details.
How long you’ve been out of Australia.
Details about your home and family.
Your income sources and where you pay tax overseas.
Keeping good records will make this much easier.
Tips for Australian Expats and Foreign Investors
Here are some tips for Australian expats and foreign investors who are trying to qualify as non-residents for tax purposes:
- Spend less than 183 days in Australia in a tax year.
- Maintain a permanent place of abode outside of Australia.
- Sever your ties to Australia, such as selling your property, resigning from your Australian job, and closing your Australian bank accounts.
- Get professional advice from a tax accountant.
If you are able to qualify as a non-resident for tax purposes, you will only be liable to pay Australian tax on your Australian-sourced income. This means that you will not have to pay Australian tax on your foreign-sourced income, such as your salary, investments, or rental income.
Benefits of Tax Non-Residency in Australia
There can be certain benefits associated with being a non-tax resident in a particular country, including Australia. However, it’s important to note that the specific advantages can vary depending on individual circumstances and the tax laws of the respective countries involved.
Here are some potential benefits of being a non-tax resident in Australia.
- Tax Exemption on Foreign Income: As a non-resident for tax purposes in Australia, you are generally not taxed on your foreign-sourced income, provided it is not derived from Australian sources. This can include income from investments, employment, or business activities conducted outside of Australia.
- Reduced Tax Compliance: Non-residents are generally subject to simplified tax reporting requirements compared to Australian tax residents. You may have fewer tax obligations, exemptions, and deductions to consider, which can streamline your tax compliance process.
- Avoidance of Capital Gains Tax (CGT) on Certain Assets: Non-residents are generally exempt from paying Australian CGT on the sale of certain assets, such as shares in an Australian company or real estate, unless the assets are classified as taxable Australian property.
- Potential Double Taxation Relief: Australia has tax treaties with various countries to avoid double taxation. Being a non-resident can allow you to benefit from these tax treaties and potentially claim relief from paying tax on the same income in both Australia and your country of residence.
- Flexibility for Overseas Investments: Being a non-resident may provide more flexibility for investing overseas, as your income and gains generated outside Australia may not be subject to Australian tax. This can enable you to explore international investment opportunities without the burden of Australian tax obligations.
Why Is Your Residency Status Important?
Your residency status determines:
What Income Gets Taxed: Residents pay tax on their worldwide income, while non-residents only pay tax on their Australian income.
The Tax Rates: Non-residents don’t get the tax-free threshold. They start paying tax on every dollar of Australian income they earn.
For example, if you’re a non-resident earning $10,000 from an Australian job, you’ll pay tax on the entire amount.
Qualifying as a non-resident for tax purposes in Australia comes down to your individual situation. The ATO will consider where you live, how long you’re in Australia, and where your home is.
If you’re planning to move overseas or have already done so, it’s worth double-checking your residency status. Understanding the rules can save you a lot of time, stress, and money when tax time rolls around.
Speak With Our Australian Expat Tax Expert
Qualifying as a non resident for tax purposes can save you a significant amount of money in Australian taxes. However, it is important to note that there are a number of restrictions and limitations that apply to non-residents. For example, non-residents may not be able to claim certain tax deductions or benefits.
If you’re an Australian expat or foreign investor who is considering qualifying as a non-resident for tax purposes, you should consult with a tax professional to discuss your specific circumstances.
Contact our tax specialist at Odin Tax today for expert guidance tailored to your unique circumstances as an Australian expat. Don’t hesitate, make an informed decision by speaking with our experienced tax advisors. Reach out now!
FAQs about Qualifying as a Non Resident for Tax Purposes in Australia
What is the difference between a resident and a non-resident for tax purposes?
A resident for tax purposes is someone who has a permanent place of abode in Australia and spends more than 183 days in Australia in a tax year. A non-resident for tax purposes is someone who does not meet these criteria.
What are the tax implications of being a non-resident for tax purposes?
Non-residents are only liable to pay Australian tax on their Australian-sourced income. This means that they will not have to pay Australian tax on their foreign-sourced income, such as their salary, investments, or rental income.
What are the restrictions and limitations that apply to non-residents?
There are a number of restrictions and limitations that apply to non-residents. For example, non-residents may not be able to claim certain tax deductions or benefits.
Who is a non-resident for tax purposes in Australia?
A non-resident for tax purposes in Australia is someone who:
- Does not live in Australia or only stays temporarily.
- Spends less than 183 days in Australia during the tax year.
- Has established a permanent home abroad and has no intention of residing in Australia permanently.
Non-residents are only taxed on Australian-sourced income and do not qualify for the tax-free threshold.
Do non-residents need to file a tax return in Australia?
Yes, non-residents need to file a tax return in Australia if they earn Australian-sourced income. This includes income from employment, rental properties, investments, or capital gains from the sale of Australian assets. Non-residents are taxed at higher rates and are not eligible for the tax-free threshold, so it is important to declare all Australian income to avoid penalties.
What does it mean to be a non-tax resident of Australia?
Being a non-tax resident of Australia means that you are not required to pay Australian tax on your worldwide income. However, you will still be taxed on any income sourced within Australia, such as rental income, dividends, or capital gains.
How do I know if I am an Australian resident for tax purposes?
To determine if you are an Australian resident for tax purposes, the Australian Taxation Office (ATO) uses several tests:
Resides Test: You are an Australian resident if you live in Australia. This test considers factors like your physical presence, lifestyle, and ties to Australia (e.g., family, home, or business connections).
Domicile Test: If your permanent home is in Australia, even if you live overseas temporarily, you may be considered a resident.
183-Day Test: If you are in Australia for 183 days or more in a financial year, you are likely a tax resident unless you have a permanent home overseas.
Superannuation Test: Australian government employees working overseas may automatically be considered tax residents if they contribute to an Australian superannuation fund.
You can also use the ATO’s online tool for further clarification on your residency status. For specific cases, it’s recommended to consult a tax advisor.
Do I have to pay tax in Australia if I live overseas?
If you live overseas but are still considered an Australian tax resident, you must pay tax on your worldwide income, including foreign income. However, if you are classified as a non-resident for tax purposes, you only pay tax on Australian-sourced income. To determine your residency status, the ATO applies several tests, such as the 183-day test and the domicile test.
How to become a non resident of Australia for tax purposes?
To become a non-resident for tax purposes, you can take these steps.
- Establish a Permanent Home Overseas: Move overseas for an extended period and shift your social and economic ties abroad.
- Sever Ties to Australia: Sell or rent your home, close local accounts, and inform authorities like the ATO.
- Notify the ATO: Update your tax residency status with the ATO.
- Use the ATO Residency Tool: Confirm your status using their online tool.
- Check Tax Treaties: Ensure compliance with tax rules in both countries.
This will help you avoid Australian taxes on worldwide income as an Aussie expat or non-resident.
What qualifies me as a non-resident for tax purposes in Australia?
To qualify as a non-resident for tax purposes, an Australian expat must have been living outside Australia for a prolonged period (typically more than 6 months) and established a permanent home overseas.
The Australian Taxation Office (ATO) considers several factors such as your intention to return, the location of your family, and your employment situation. If you’ve left Australia indefinitely, you’re likely to qualify as a non-resident.
Can an Australian citizen be classified as a non-resident for tax purposes?
Yes, an Australian citizen can be classified as a non-resident for tax purposes if they meet the criteria set by the Australian Taxation Office (ATO). This generally involves:
- Living overseas permanently or for an extended period (usually more than six months).
- Establishing a permanent home abroad and shifting your social, economic, and personal ties outside of Australia.
- Severing significant ties with Australia, such as selling or renting out property, closing local bank accounts, and reducing frequent visits.
Once classified as a non-resident, Australian citizens are only taxed on their Australian-sourced income, not their worldwide income. It is important to notify the ATO of your residency change and ensure compliance with both Australian and foreign tax laws.
