Are you an Australian resident for tax purposes?
In this global interconnected world, many Australians will no doubt leave Australia to work in many different countries in a vast array of professions. However, just because you leave Australia for a period of time, that does not mean that your Australian tax obligations are no longer relevant. Australian tax is based on the concept of “residency”. If you are considered to be a tax resident of Australia then you will be taxed on your worldwide income with a tax offset available for any foreign tax paid.
To work out whether or not you are a tax resident of Australia, there are several tests. The main test is the “resides” test under common law.
Some of the factors considered to be relevant in determining residency under this primary test include:
- your living arrangements (ie whether your usual place of abode is in Australia and whether you have family here);
- the purpose, frequency and duration of visits to Australia;
- extent of any business/employment ties with Australia;
- extent of family/social ties with Australia;
- ownership of real estate in Australia;
- location of other assets and personal effects;
- where bank accounts are maintained;
- and nationality and citizenship.
This primary test is entirely dependent on the individual circumstances of each case, and one change could sway the residency test one way or the other.
If it is clear that you do not satisfy the “resides” test, you will still be considered to be an Australian tax resident if you satisfy one of the following three statutory tests:
- Domicile and permanent place of abode – you will be considered to be an Australian resident if Australia is your permanent home.
- 183-day test – if you’re present in Australia for more than half of the income year, whether continuously or with breaks, then you will have constructive residence in Australia
- Commonwealth superannuation test – if you’re a member of a Commonwealth government superannuation scheme or have a relationship to a member of such a scheme then you will be considered to be a resident of Australia.
A person’s residency is determined on a year-by-year basis and the Commissioner may treat an individual to be a resident of Australia until it can be clearly established that they have cut all relevant ties with Australia. Residency is a complex area, if you are unsure or you think you are on the borderline of being an Australian resident, please contact our office for more information.