Am I an Australian Resident for Tax Purposes?

How to find out, how it affects you, and what to do if your residency status changes

How to determine your residency, how it affects you, and what to do if it changes

If you’re a working holidaymaker visiting Australia, you’ll probably need to file taxes. But before you can lodge your return with the ATO, or even prepare it, you’ll first have to figure out if you are an Australian resident for tax purposes.

Who qualifies as a resident?

Residency for tax purposes is different from immigration residency, so you’ll have to make a fresh determination when you do your taxes. Even if you are the citizen of a foreign country you may in fact qualify as an Australian resident for tax purposes.

You are a resident for tax purposes if you

  • have always lived in Australia
  • moved to Australia and now live here permanently
  • have been in Australia continuously for six months or more and for most of that time you worked the same job and lived in the same place
  • have been in Australia for more than half of the financial year, unless
    • your usual home is overseas, and
    • you do not intend to live in Australia
  • go overseas temporarily and you do not set up a permanent home in another country, or
  • you are an overseas student who has come to Australia to study and are enrolled in a course that is more than six months long.

The Determination of Residency tool on the ATO site can help you make the determination if there’s any ambiguity.

It’s a good idea to figure out your residency status early on so you can make sure your employer is withholding taxes at the appropriate rate.

What difference does it make?

Residency makes a big difference in terms of how you are taxed.

First off, residents are taxed on their worldwide income. Nonresidents, on the other hand, are taxed only on their income from Australian sources.

Residency also changes the tax rate you have to pay. Starting on 1 July 2012, the marginal tax rate for Australian nonresidents earning less than $37,000 will shoot up from 15% to a whopping 32.5%. This means that all Australian nonresidents making less than $80,000 are taxed at 32.5%.

Australian residents, by contrast, aren’t taxed at all beneath an income threshold of $6,000, are taxed at 15% between $6,001 and $37,000, and at 30% between $37,001 and $80,000. So, Australian residency can be quite advantageous from a tax perspective.

What if my residency changes?

It’s not uncommon for people who begin the financial year as nonresidents to become residents halfway through. If that’s the case, answer “Yes” on your return to the question, “Are you an Australian resident?”

Your income will be taxed at the same rate as an Australian resident, but because you were a nonresident for part of the year, you will be taxed at a lower tax-free threshold. You are entitled to a pro-rata tax-free threshold for the number of months you were an Australian resident.

Don’t forget, nonresidents don’t have to pay the Medicare levy, so you can claim an exemption for the number of days that you were a nonresident. Also, once you officially become an Australian resident, you will need to declare the worldwide income you receive from the time you become a resident.

E-Lodge makes doing taxes easy for residents and non-residents. Not only that, but most online tax sites don’t offer international bank transfer. With E-Lodge, you can even have your refund deposited into a foreign bank account!

Photo via paul bica on Flickr.

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30 Responses to “Am I an Australian Resident for Tax Purposes?”

  1. Ryan says:

    What is the difference between a foreign resident for tax purposes, an Australian resident for tax purposes and a non Austrlian resident for tax purposes?

  2. Tax Advisor says:

    Hi Ryan,

    A foreign resident for tax purposes and a nonresident for tax purposes are the same thing. Generally the ATO will refer to these people as nonresidents. The biggest difference between nonresidents and residents is that they are taxed at different rates. Nonresidents do not get to take advantage of the tax-free threshold, which exempts your first $18,200 of income from taxes, so they tend to owe more than residents in comparable situations.

  3. Dawn says:

    My son has been living in Canada for a number of years. He recently found out that he needed to do a tax return for a couple of years ago when he had been working there for a few months then travelled overseas for a few months arriving here in November 2010. He then worked here until June 2011. He did the July 10- June 11 tax return and then it was claimed what he earned in late 2009/early 2010 in Canada should have been included in his 2011 Australian tax return. He has sorted that out with the tax department here but can’t get a clear idea on whether he has to do a 2012 and 2013 tax return for Australia. He has not resided in Australia in those years as he left here in June 2011 and has only worked in Canada during those two financial years. Does he have to do an Australian tax return for these years?

    It is very hard for him to contact anyone and too expensive to keep trying to phone.

    Thanks

  4. Tax Advisor says:

    Hello,

    As you most likely know, the ATO sets regulations on who needs to lodge and who does not. To be sure if he does or does not have to lodge, I suggest going directly to the ATO website. The following link will help you; http://www.ato.gov.au/individuals/lodging-your-tax-return/do-you-need-to-lodge-a-tax-return-/

    On that page, under “Work it out”, the ATO provides a helpful tool called “Do I need to lodge a tax return?” tool. By using this tool, your question should be answered.

  5. Holly says:

    Hi,

    My boyfriend is having a lot of problems with claiming back his Australian tax. He went out there on a year working holiday visa working in numerous places in Sydney and Melbourne. When he arrived back to the UK, he applied to get his tax back and he was chosen by the Australian tax people for review. After months of hearing nothing, he was told he had to provide evidence that he had lived in one place for six months or more otherwise he would not receive a penny of his tax back. This is problem because he did not live anywhere for more than six months, let alone have a utility bill or bank statement to prove it.

    I think it is ridiculous seeing as a lot of people who are on a working holiday visa do not stay in the same place for more than six months. And just because he was chosen for review, he has been screwed over. I have done a lot of research and can’t find anything at all to help. Do you have any advice?

    Thank you, Holly

  6. Tax Advisor says:

    Hi Holly,

    The reason for this problem is because your boyfriend most likely marked he was a resident on his tax return, when he maybe shouldn’t have. Residency for tax purposes does not mean citizenship. In order to be a resident for tax purposes in Australia, you need to live in Australia for more than half of the income year and you will be able to take advantage of the tax-free threshold. If your boyfriend lived in the UK for six months and in Australia for six months and claimed he was an Australian tax resident, this probably raised a red flag to the ATO.

    This link on the ATO website will help you and your boyfriend understand this situation more clearly; http://www.ato.gov.au/Individuals/Income-and-deductions/How-much-income-tax-you-pay/Are-you-an-Australian-resident-for-tax-purposes-/

    Hope that helps!

  7. May says:

    I have the same issue as Holly’s boyfriend.

    Her boyfriend was in Australia FOR A YEAR but didn’t stay at the same address for more than six months. He was on a holiday visa. Of course he would travel around Australia.

    I work in VFX and 90% of jobs are short contracts. I was in Australia for 11 months and moved from Sydney to Melbourne and then to Brisbane due to work. My tax rate remained at 29% because I wasn’t at the same address for longer than 6 months even though I was in Australia the whole time.

  8. Zandra says:

    I am under my husbands visa which is 457 visa and i am working now for casual. The company gave me tax decleration form to be filled up by me. Do i answer yes to the question there that-Are you an australian resident for tax purposes?-even if we are not yet a permanent residence in australia?we are going to apply for pr this year.thank you

  9. Tax Advisor says:

    Hi Zandra,
    Generally, if you have lived in Australia for more than 6 months, you are considered an Australian resident for tax purposes. However, I suggest using the ATO Residency Calculator to better determine if you are considered a resident for tax purposes or not.

  10. Jo says:

    Hi, my partner and I are currently living and working In Australia. We are staying in the same place living with the family I am au pairing for and have got a consistent job which we intend to keep until we leave so my partner is being taxed as a resident which is great. However there is a chance we may have to go home a bit earlier than expected which would mean we were only here for 5 months not 6. What will this mean for her tax? Will she still be able to claim the tax back as a resident would? Thanks

  11. Jennifer Sheppard says:

    I am an Australian resident, born here. I have only worked for five and a half months of this financial year. Do I get most of my tax back.Thankyou

  12. Tax Advisor says:

    Hi Jennifer,

    I suggest referring to the ATO Tax Calculator to determine your estimated refund amount or estimated amount due.

  13. Linda says:

    I migrated to Australia many years ago. I lived and worked here and was resident taxpayer. I am now retired and am planning to travel for most of the next financial year. …..perhaps 8-9 months away intermittently visiting my birth country and other countries.
    Will I be qualified as a non-resident taxpayer? Thank you.

  14. Tax Advisor says:

    Hi Linda,

    I suggest referring to the ATO website’s “Going Overseas” section. This will be able to provide you further information about filing as a resident or not.

  15. Zoe says:

    I live in Australia but will be out of the country for 250 days this financial year. I will have both income earned in Australia, and income paid to me by an Australian company, for work done outside Australia. Am I a “resident for tax purposes” ?

  16. Tax Advisor says:

    Hi Zoe,

    I suggest taking a look at the ATO Residency tool to determine your residency for tax purposes based on your circumstances.

  17. David says:

    I’m originally from Australia, but I moved to the UK on a youth mobility visa with my wife last august.
    The visa goes for 2 years (so I’m just over half way now).
    I didn’t work at all in Australia for that financial year, but have been working in the UK since October.
    We are not sure when we will return, but we plan on returning in the second half of 2015.
    Am I considered an Australia tax resident still? Do I need to declare my UK tax income? Do I need to fill in a tax return at all?
    In regards to my wife, she worked for about a month and half in Australia for that financial year, and had a some tax withheld from her during that time. But hasn’t worked much whilst in the UK. How can this be claimed back? And the other questions also apply to her as well.
    I have asked a tax person back in Australia and he is getting mixed messages from his colleges, so I thought I would ask here.
    Thanks for the assistance.

  18. Tax Advisor says:

    Hi David,

    As far as figuring out if you are an Australian resident for tax purposes, I suggest taking a look at the ATO’s residency tool. When it comes to your wife claiming her tax back, she will need to lodge a tax return to do so.

  19. Luke says:

    I resided in Australia between 22 Sep – 29 March 2014. I resided in the same place to play cricket for a local club. During this time i had two jobs also. I lodged my tax return on my return to England and have been told not only am i not entitled to claim any tax back, but I now owe $147 which I must pay before 1 Dec or the amount increases. I have looked on the ATO website but am still struggling to understand the complexities of the ruling.
    Thanks for any assistance if you can help.

  20. Tax Advisor says:

    Hi Luke,

    I suggest contacting the ATO directly. As you will see on their website, they strongly advise that you contact them if you believe that the amount you owe is incorrect.

  21. adam says:

    Hi,
    I am a non resident for tax purposes. I left oz 12 years ago. I plan to resign from my job and go travelling for a few years and live off my investments. As I won’t have a permanent address outside of Oz, will I become liable to pay tax to oz. I do not plan to return to oz for more than a month or two each year. I won’t use oz bank account and I have no assets in oz. Please advise if my tax status will change. Kind regards.

  22. Tax Advisor says:

    Hi Adam,

    According to what you have stated above, you will still be considered a non resident for tax purposes.

  23. Guy says:

    I left australia 20 years ago, work and live in oversea. I return to oz once a year usually stay less than 3 weeks for family visit purpose. Please advise what is my tax status?

  24. Tax Advisor says:

    Hello Guy,

    Based on what you have stated above, it seems as though you would be considered a foreign resident of Australia for tax purposes. Just to be sure, you may want to take a look at the Resident tool on the ATO website. This will allow you to answer a few specific questions and help determine your residency status. It should take you less than 5 minutes to complete. Once you are done with that, the next step would be to determine if you actually need to lodge a tax return this year. The ATO has a website application for that as well.

  25. rob says:

    I live and work in OZ. I do have some income from NZ , share dividends and a bit of interest. No more than $300. NZ tax year(Starts April) is different to OZ (Starts July). Can i just use the NZ issued interest Tax Statement to cover the OZ year. or do I have to work it to suit the OZ year.What about dividend ?

  26. Alex says:

    Hi,

    I’m Australian and run my online business from home – I buy goods from US suppliers and sell to customers in the US. Do I have to pay income tax and sales tax in the US or do I just pay my taxes in Australia? I similarly do the same in the UK so do I have to pay VAT and income tax in the UK?

    Regards,
    Alex.

  27. Tax Advisor says:

    Hi Alex,

    This is a fairly complicated situation. In all likelihood, you would not be subject to U.S. tax on your sales seeing as there is a treaty between the U.S. and Australia. However, you are most likely subject to Australian tax seeing as ALL earned income in Australia is taxable. Consult the following documents on international tax for individuals and the treaty between both countries from the IRS.

    When it comes the UK, you should consider a similar situation to occur.

  28. Tax Advisor says:

    Hi Rob,

    Depending on what type of share income and if you have any franking credits as well, you can report it with the AU tax year in mind. Also, refer to the ATO page HERE about reporting foreign source income. After reviewing this, it goes into more depth on other questions you may have.

  29. Toki says:

    Hi,

    I have been living in Australia for 2.5 years and working for 2 years with dependent student visa as a tax resident. I have just applied employer sponsorship visa and now I have bridging visa. I am thinking to sell my property in overseas and transfer the money to Australia. At the moment am I a tax resident or not. If I am a tax resident what s the tax amount for me?

    Thanks
    Toki

  30. Tax Advisor says:

    Hi Toki,

    I am unable to determine your residency based solely on your comment above. My advice to you would be to take a look at the ATO’s website to work our your tax residency. There are several tests that must be met in order to qualify as an Australian resident for tax purposes, that of which are left unclear.

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