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Tax return for foreign residents

Here's how to find out if you're considered an Australian resident for tax purposes. If you are, then you need to lodge a tax return.

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If you live in Australia you need to fill in a tax return to declare all of the income you've earned over the past year. One of the first questions you'll find on your tax return is whether or not you're an "Australian resident for tax purposes". The important thing to note here is that your tax status as a resident is not the same as your immigration status as a resident.

Here, we explain how to work out whether you're an Australian resident for tax purposes and what it means for your tax return.

Am I an Australian resident for tax purposes?

The Australian Taxation Office (ATO) uses a few different tests to assess whether an individual is an Australian resident for tax purposes. (Note: This not only includes assessing foreigners as tax residents, but also whether Australian citizens count as tax residents.)

  • The "resides" test. This is the primary test of tax residency. It assesses a range of factors to determine whether you reside in Australia and are therefore a resident for tax purposes. The test takes into account factors such as the purpose of your presence in Australia, your family and business ties, whether you open bank accounts and your social and living arrangements.

If you don't satisfy the "resides" test, you'll need to satisfy one of the following tests to be considered a resident for tax purposes:

  • The domicile test. If your domicile (your permanent home) is in Australia, you'll be classified as an Australian resident for tax purposes.
  • The 183-day test. To satisfy this test, you'll need to be present in Australia for at least half the income year, either continuously or with breaks. If you are, then you're considered a resident for tax purposes in that year.

Examples of resident vs non-resident for tax purposes

The ATO guidelines explain situations when you will qualify as an Australian resident for tax purposes. Check out the table below for some common examples:

Example Australian resident Reason
Leave Australia temporarily and do not rent or buy a home overseasYesPrimary place of residence is Australia
Leave Australia permanentlyNoAustralia is no longer primary place of residence
Visiting Australia for more than 6 months and spend most of your time in the one placeYesBehaviour of a resident
Visiting Australia for more than 6 months and spend your time in multiple locationsNoBehaviour of a traveller
Studying at an Australian institution for more than 6 monthsYesBehaviour of a resident

What does it mean if I’m an Australian resident for tax purposes?

  • You must lodge an income tax return in Australia
  • You must declare the income you’ve earned from all around the world
  • You're entitled to the tax-free threshold, which means you won't have to pay tax on a specified portion of your income
  • You will usually have to pay the Medicare levy

Check out the marginal tax rates that apply to Australian residents for the 2021–22 financial year below:

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $45,000 19 cents for each $1 over $18,200
$45,001 – $120,000 $5,092 plus 32.5 cents for each $1 over $45,000
$120,001 – $180,000 $29,467 plus 37 cents for each $1 over $120,000
$180,001 and over $51,667 plus 45 cents for each $1 over $180,000

What does it mean if I’m not an Australian resident for tax purposes?

If you're a foreign resident working in Australia:

  • You must still complete an Australian tax return and declare any income earned in Australia.
  • The income you must declare includes employment income, rental income, Australian pensions and annuities and capital gains on Australian assets.
  • You're not entitled to the tax-free threshold, which means you'll have to pay tax on every dollar you earn in Australia.
  • You don't pay the Medicare levy (and you can't access subsidised health care under Medicare).
  • You don't need to declare any Australian-sourced interest, dividends or royalties (as long as the Australian financial institution or company that pays you has already withheld tax from the payments you have received).

Make sure you take a look at the ATO website to discover the marginal tax rate that applies to the income you earn. The foreign resident tax rates for 2021–22 are shown in the table below:

Taxable income Tax on this income
0 – $120,000 32.5 cents for each $1
$120,001 – $180,000 $39,000 plus 37 cents for each $1 over $120,000
$180,001 and over $61,200 plus 45 cents for each $1 over $180,000

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Remember...

If you're a foreign resident for tax purposes, you can't declare foreign income on your Australian tax return.

Examples: Am I a resident for tax purposes?

To help you answer this question, let's take a look at a couple of fictional examples.

Example: Living and working overseas

Let's say Michael has left Australia to work for a UK-based accounting firm on a 3-year contract. He doesn't own his home in Australia and he plans on renting an apartment in London, returning home to visit Australia no more than once a year.

Under the 4 residency tests listed above, Michael is considered a foreign resident for tax purposes. As such, Michael only has to declare any income earned in Australia to the ATO. As he did not work in Australia and didn't earn any income in Australia during the past financial year, he is not required to complete a tax return.

* This is a fictional, but realistic, example.

It can be difficult to determine your residency status if you don’t know how long you will be out of the country. If you’re emigrating to live permanently in another country, you’re subject to foreign tax laws and you will not need to lodge an Australian tax return. However, if you’re only planning on working overseas for a year and you’re staying with friends, you’re still an Australian resident for tax purposes.

The ATO website has a handy tool you can use if you’re leaving the country to calculate your residency status.

Example: Staying indefinitely in Australia

For the first 9 months of his stay, Hamish travels around the country visiting major tourist attractions. He does odd jobs and takes up short-term employment along the way to help fund his travels, but has no concrete plans about where he wants to settle. During this holiday period, Hamish is considered a foreign resident for tax purposes.

However, when Hamish finds a job in Melbourne and decides he wants to settle there permanently, he sells his home and assets in New Zealand. As his intention has changed and he now wants to live in Australia, and his behaviour (selling his property in New Zealand and buying an apartment in Melbourne) is consistent with residing in Australia, Hamish then becomes an Australian resident for tax purposes.

* This is a fictional, but realistic, example.

Working holiday visas

For many on temporary working holiday visas it can be confusing to know whether you count yourself as a resident for tax purposes. The answer is it really depends on your lifestyle while you're in Australia.

If you're moving around every few weeks working in temporary or casual jobs as you travel and your existing plan is to leave Australia after the first year, you are considered a foreign resident for tax purposes.

If you're working but have based yourself in one location and you are planning on extending your visa so you can stay in Australia for a longer term, you may be an Australian resident for tax purposes. Factors such as whether you live in a rented apartment or share house and whether you shop at the same supermarket each week can contribute to you being considered an Australian resident for tax purposes.


In some cases, determining your residency status for tax purposes can be quite complicated. If you have any questions about your personal situation, it’s best to contact the ATO for specific information. You can contact the ATO on 13 28 61 from 8am to 8pm Monday to Friday and 10am to 4pm Saturday.

You might also like to consider paying a tax agent to complete your tax return for you. They can assess your personal situation and ensure your tax return is completed accurately and properly lodged with the ATO. For help choosing an online tax agent who can assist you no matter where you're based, consult our table below. Or visit our city guides to find a tax agent near you.

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15 Responses

  1. Default Gravatar
    RasikMarch 17, 2022

    Hi, I have landed in Australia in Dec 2021 on Skilled professional visa till 2025. I need to submit the TFN declaration form to my employer where I have to list my residency status for 2021-2022. What do I check under residency status- Australian resident for tax purpose or foreign resident for tax purpose?

    • Avatarfinder Customer Care
      AlisonApril 6, 2022Staff

      Hi Rasik,

      You can take the “Residency test” available on the Australian Tax Office (ATO) website to assess if you’re considered an Australian resident.

      If you need further assistance after you have done the residency test, you can contact the ATO directly at 13 28 61.

      It would also be worth seeking professional assistance from a tax lawyer to get personalised advice.

      I hope this helps!

      Regards,
      Alison

  2. Avatarfinder Customer Care
    AlannaAugust 2, 2021Staff

    Hi Anand,
    It doesn’t sound like you’d be considered an Australian Resident for Tax Purposes. You can find all the details about it on the ATO website but the guidelines are as follows:

    Generally, we consider you to be an Australian resident for tax purposes if you:

    – have always lived in Australia or you have come to Australia and live here permanently
    – have been in Australia continuously for six months or more, and for most of that time you worked in the one job and lived at the same place
    – have been in Australia for more than six months of the 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
    – are an overseas student who has come to Australia to study and are enrolled in a course that is more than six months long.

  3. Default Gravatar
    JenniferOctober 10, 2019

    Hi,
    Recently as a New Zealand resident for most of my life but with an Australian passport, because I was born in Sydney, I will be acquiring a shares portfolio which originates from Australia and I am keen to transfer this to NZ. I could leave it in Australia if necessary, though not keen, what are my tax obligations? I’m hoping none. What if I were to sell the shares?

    • Default Gravatar
      NikkiOctober 23, 2019

      Hi Jennifer,

      Thanks for your comment!

      Interesting question and a tough one as it relates to New Zealand tax and commercial law. Unfortunately, we can’t advise you on what the best steps are to take, but yes, it is possible to open an account with a New Zealand broker and transfer Australian shares over to them. It’s best you first seek advice from a legal practitioner that specializes in NZ commercial law, as they should be able to advise you on the best action to take to save you the most money. From the Australian side, if you choose to sell your shares you may need to pay capital gains tax depending on how long you hold the portfolio for and when the original shares were purchased. If you choose to keep the shares in Australia, you will be subject to NZ tax rules on offshore investment.

      Hope this helps and feel free to reach out to us again for further assistance.

      Best,
      Nikki

  4. Default Gravatar
    AndrewNovember 30, 2018

    Hi, I am non-resident Australian citizen living offshore for the past 5-6 years. This coming year one of my sons will return to Australia to study at a university. My wife and my other son are planning to go back as well but I will remain offshore with couple of visits of no more than 3 months each back to Australia. I am thinking to mortgage a house in Australia so my family live in. With this situation, Do I be considered resident for tax purposes because of my family situation or I still be non-resident?
    Many thanks, Andrew

    • Avatarfinder Customer Care
      JohnDecember 6, 2018Staff

      Hi Andrew,

      Thank you for leaving a question.

      You may need to try the “Residency test” available on the guide we are on to assess whether an individual is an Australian resident for tax purposes. There are 4 factors that you need to check on this. Please see below:

      The ‘resides’ test.
      The domicile test.
      The 183-day test.
      The superannuation test.

      If you need further assistance after you have done the residency test, you may contact the ATO directly to get further details on your residency classification. Hope this helps!

      Cheers,
      Reggie

  5. Default Gravatar
    RichardOctober 22, 2018

    Hi,

    My wife and I are Australian Citizens for over 20 years and we are now in a third world country to do some voluntary educational work. we intend to stay here for two years. We have two children who are living in Australia permanently. In Australia we have car, banks account, Medicare cards, private health funds, superannuation and two rented properties to get income to support our expenses in this third world country. My wife will travel to Australia 4 times a year to visit our family. I can only travel to Australia once or twice a year. My question is that, can I and or my wife claim the Australian residency tax status? We are willing to report all our income overseas and in Australia in the tax return every year.

    Please advice. Thank you.

    • Avatarfinder Customer Care
      JeniOctober 30, 2018Staff

      Hi Richard,

      Thank you for getting in touch with Finder.

      If you’re currently overseas and you don’t set up a permanent home in the current country, you will generally remain an Australian resident for tax purposes. Therefore you or your wife must lodge an Australian tax return and declare all your foreign employment income – if you have, including any exempt income. You can lodge your return online from overseas by logging in to your myGov account.

      Please note that if your residency status changes, your tax situation will change in a number of ways. It is recommended to seek professional advice from a tax agent on this matter.

      You may see more of tax return in for Australian residents overseas like you on ATO’s tax residency guide.

      I hope this helps.

      Please feel free to reach out to us if you have any other enquiries.

      Thank you and have a wonderful day!

      Cheers,
      Jeni

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