Moving to Australia to live and work brings with it important tax considerations that are often overlooked. Understanding your tax residency status is crucial, as it often determines how your income is taxed.

How will my tax residency impact my tax?

There are three main categories of tax residency status, with different tax implications:

1. Non-Resident: Taxed only on Australian sourced income (some examples include salary for work performed in Australia and investments physically located in Australia).
2. Resident – Temporary: Taxed on Australian sourced income and foreign income from employment or personal services rendered. Not taxed on other foreign income (such as foreign investment income).
3. Resident – Not Temporary: Taxed in Australia on worldwide income.

If you are taxable in Australia on foreign sourced income, you may be eligible for a foreign income tax offset in recognition of tax paid overseas, reducing your Australian tax liability.

Am I a resident of Australia for tax purposes?

The tests to determine tax residency are complex, and everyone’s circumstances are different.

An individual will be a tax resident of Australia if they satisfy any one of four statutory tests. The “resides test” and the “183-day test” are most relevant to those arriving in Australia.

If your behaviour while in Australia is consistent with someone who lives in Australia, the resides test will typically be satisfied. The test relies on several factors. No one factor is decisive, but intention, family/employment ties and living arrangements are particularly relevant.

You will also be a tax resident under the 183-day test if you spend more than 183 days physically in Australia in any one financial year, unless your “usual place of abode” is outside of Australia and you have no intention to take up residence in Australia.

How do I know if I am a “temporary resident” for tax purposes?

Often you will be a “temporary resident” for tax purposes if:

1. You enter Australia on a temporary visa or as a New Zealand citizen (special category visa holder);
2. You do not have an Australian resident spouse (including de facto); and
3. You and your spouse (if applicable) have never been non-temporary Australian tax residents previously.

These rules are complex, and change in status over time is common.

Contact Pilot

This is a general overview only of the Australian tax residency rules. Each individual’s personal circumstances are different and it is imperative that you obtain appropriate advice if you believe you might be impacted by these rules.

If you would like to talk to us about determining residency, please contact Josh Meggs or your Pilot advisor on (07) 3023 1300.