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Tax return for foreign residents

Are you an Australian resident or a foreign resident for tax purposes? Here's how to find out.

If you're an Australian resident, you're required to file a tax return with the ATO and declare all income you've earned anywhere in the world in the past financial year. However, the standards used by the ATO to assess whether a person is a resident or not differ from the standards the Department of Immigration and Border Protection uses. So while Immigration may not consider you a resident, the tax man might.

Read on to find out if you're an Australian resident for tax purposes.

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    Australian Tax Office residency tests

    There are a few different tests the ATO uses to assess whether an individual is an Australian resident for tax purposes. These include:

    • 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.
    • The superannuation test. This test is designed to ensure that Australian Government employees working overseas at Australian posts are classified as Australian residents for tax purposes.

    ATO guidelines

    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 2017-18 financial year below:

    Taxable incomeTax payable on this income
    0 – $18,200Nil
    $18,201 – $37,00019c for each $1 over $18,200
    $37,001 – $87,000$3,572 plus 32.5c for each $1 over $37,000
    $87,001 – $180,000$19,822 plus 37c for each $1 over $87,000
    $180,001 and over$54,232 plus 45c for each $1 over $180,000

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

    If you're a foreign resident working in Australia:

    • You must declare any income earned in Australia on your tax return
    • 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 2017-18 are shown in the table below:

    Taxable incomeTax payable on this income
    $0 – $87,00032.5c for each $1
    $87,001 – $180,000$28,275 plus 37c for each $1 over $87,000
    $180,001 and over$62,685 plus 45c for each $1 over $180,000

    Remember...

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

    Am I a resident for tax purposes?

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

    Living and working overseas

    michaelMichael 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 four 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.

    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.

    Staying indefinitely in Australia

    frankHamish comes to Australia from New Zealand on a special category visa which allows him to remain in Australia indefinitely and also to work here. Hamish doesn't know where he will want to live in the future, so he holds onto his home and other assets back in New Zealand.

    For the first nine 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.


    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.

    Choosing an online tax agent

    Rates last updated October 23rd, 2017
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    One Minute Tax
    One Minute Tax
    Lodge a basic tax return online from just $99.
      One Minute Tax could help you:
    • Lodge your individual tax return
    • Lodge a company tax return
    • Maximise your return
    • Online bookkeeping
    Go to site More info
    Refund Express
    Refund Express
    Lodge a basic tax return online from just $29.
      Refund Express could help you
    • Lodge your tax return online
    • Maximise your tax return
    • Claim various income streams and deductions
    Go to site More info
    Commonwealth Financial Planning
    Commonwealth Financial Planning
    Free initial consultation offer with a financial planner Commonwealth Financial Planners could help you:
    • Grow your super
    • Insure your family and assets
    • Plan your investments
    • Prepare for retirement
    Go to site More info

    Where are you looking to find a tax agent?

    Have a look at tax agents in each of the capital cities.

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    Jacob Joseph

    Jacob is a writer and video journalist with finder.com.au. Credit cards, personal loans and savings accounts are his bread and butter, and he likes nothing more helping people understand the sometimes overly complex world of personal finance.

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    2 Responses

    1. Default Gravatar
      AndrewOctober 14, 2017

      Am I an Australian resident?

      • Staff
        LiezlOctober 14, 2017Staff

        Hi Andrew,

        Thanks for reaching out.

        If you’re not an Australian citizen or permanent resident, you can be an Australian resident for tax purposes if you satisfy primary test of tax residency is called the ‘resides test’ or one of three statutory tests mentioned above. Alternatively, you may visit ATO’s website or call them on 13 28 61 to determine your residency status.

        Cheers,
        Liezl

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