Australia — Tax: Tax Residency

Why this matters

Understanding tax residency is crucial for relocating individuals to determine whether worldwide income is taxable in Australia, and to correctly apply any relevant tax treaty tie-breaker rules.

Key facts

• Resides test: an individual who simply resides in Australia (ordinary meaning) is a tax resident.
• Domicile test: an individual whose domicile is in Australia is a resident, unless the ATO is satisfied they have a permanent place of abode outside Australia.
• 183-day test: an individual present in Australia for more than half the income year (183+ days) is generally a resident, unless their usual place of abode is outside Australia and they don't intend to take up residence here.
• Commonwealth superannuation test: certain Australian government employees working overseas (members of specified Commonwealth super schemes) are treated as residents regardless of physical presence.
• Residents are taxed on worldwide income; non-residents are taxed only on Australian-sourced income and do not get the tax-free threshold.

Steps

1. Apply the resides test first — The ATO first considers whether an individual resides in Australia under the ordinary meaning of the word, looking at physical presence, intention, family, and business/employment ties.
2. Apply the domicile and 183-day tests if the resides test is inconclusive — If not clearly a resident under the resides test, the domicile test (Australian domicile + no permanent abode elsewhere) or the 183-day test (183+ days present in the income year) may independently establish residency.
3. Check the Commonwealth superannuation test for government employees — Australian government employees posted overseas who are members of specified Commonwealth superannuation schemes (and their families) are residents regardless of the other tests.

Costs

• Tax professional fees for residency determination: Varies; often recommended for borderline cases

Timelines

• Residency determination: Residency is assessed for each income year (1 July - 30 June); status can change part-way through a year

Required documents

• Australian Tax File Number (TFN) application
• Proof of identity and address
• Evidence of physical presence dates and intention (e.g. visa, lease, employment contract)

Common mistakes

• Assuming tax residency is the same as citizenship or visa/migration status
• Assuming only a day-count (183-day) test applies — the resides and domicile tests can establish residency independently of days present
• Not considering how a tax treaty tie-breaker rule interacts with Australian domestic residency tests when dual residency arises