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Tax return for foreign residents

Updated

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.

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 2019–20 financial year below:

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $90,000 $3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000 $20,797 plus 37c for each $1 over $90,000
$180,001 and over $54,097 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 2020–21 are shown in the table below:

Taxable income Tax on this income
0 – $90,000 32.5c for each $1
$90,001 – $180,000 $29,250 plus 37c for each $1 over $90,000
$180,001 and over $62,550 plus 45c for each $1 over $180,000

Need help lodging your tax return? Compare online tax agents

Data indicated here is updated regularly
Name Product Fee for unlimited income items (Wages) Deduction Item Fees Online tax returns
FinTax Group
$79*
$0 for up to $1000 of deductions
$65 for an investment property
Australia wide
Lodge individual & company tax returns online or in-person. Fast online form with additional options to complete tax returns for investment properties, sole trader tax and share investments.
Refund Express
$79*
$0 when you purchase the $49 income package
Australia wide
Option to pay with your tax refund for an extra fee of $10 for basic returns. Lodge individual & company tax returns. Fast online form & free live chat.
Everest Tax & Business Advisors
$80*
Business tax: starting from $250
General deductions: $0
For motor vehicle expenses: $15
Australia wide
A boutique firm that provides personalised experiences for all customers. Ideal option for individuals and small businesses based in Perth.
One Minute Tax
$99*
$0
Australia wide
Option to pay with your tax refund for an extra fee of $20. Lodge individual & company tax returns. Fast online form & free live chat. Special offer for business owners: Register your new company for only $499 (includes $488 worth of government fees and $100 cashback into your new business bank account). Click 'Go to site' to find out more. T&Cs apply.
Taxgain
$99*
$0 for up to 2 deductions
$29 for additional deductions
Australia wide
Option to pay with your tax refund for an extra fee of $29. Online and in-person tax services for individuals, sole traders and companies.
Hotman & Brown
$99*
Business tax: starting from $179
$29 for up to 2 deductions
Additional $29 for extra deductions
N/A
Option to pay with your tax refund for an extra fee of $29. Basic tax returns over the phone Australia-wide. In-person individual and business tax returns in Melbourne.
Bennetts Tax & BAS service
$155*
finder Exclusive: $5 discount
$0 for all work related deductions
Australia wide
finder Exclusive: $5 discount when you apply for a tax return with Bennetts Tax through finder. Click 'Go to site' and complete the contact form to find out more. Income item fee includes returns on interest, dividends, Superannuation and pension. A flexible option for individuals, sole traders and companies.
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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.

Am I a resident for tax purposes?

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

Living and working overseas

michaelLet'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 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

frankNow let's pretend Hamish 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.

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12 Responses

  1. 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

  2. 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

  3. 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 this ATO page.

      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

  4. Default Gravatar
    AJSeptember 13, 2018

    I’m not sure if you can answer this but: I have been an Australian Citizen for over 20 years. Born in New Zealand though. Last year I got a job offer in New Zealand and packed up and had every intention of living there permanently. So, of course, I was paying tax to New Zealand once I started working, unfortunately, due to the company falling apart I ended up coming home to Australia after 9 months (April – December). My understanding is that because I was a New Zealand resident I do not need to declare that income on my Australian tax return for both 2017 & 2018. Is that correct?

    • Avatarfinder Customer Care
      JhezSeptember 13, 2018Staff

      Hi AJ,

      Thank you for your comment.

      According to ATO, if you’re an Australian resident for tax purposes, you are taxed on your worldwide income, so you must declare any foreign income in your income tax return. If you’re not an Australian resident for tax purposes, you are only taxed on your Australian-sourced income, so you generally don’t need to declare income you receive from outside Australia in your Australian tax return. You’re best to check the reporting your foreign employment income page from ATO to get more details.

      You’re best to seek advise from a tax expert so they can explain the taxations further.

      Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.

      Regards,
      Jhezelyn

  5. Default Gravatar
    AnupMay 1, 2018

    I am 457 VISA holder and landed in Australia( Sydney) by last week of March’2018 and getting salary from end of April’2018. I may be staying an year or more in Australia for completion of my contract. My yearly salary 94 K ( consolidated) What would be the percentage of tax which I should pay for 2017-18 financial year?

    • Default Gravatar
      NikkiMay 1, 2018

      Hi Anup!

      Thanks for your message and for visiting finder – the leading comparison website & general information service built to give you advice in your buying decision needs. How are you doing today?

      Please note that we’re a product comparison website and we hold no affiliation with any company we feature on our site. We provide general information on products to assist you in your buying decision process hence we cannot recommend product / service that is rightfully fit for you.

      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)

      What would be the percentage of tax which I should pay for 2017-18 financial year?

      Based on the information on our website: You’re estimated income tax is below:
      $87,001 – $180,000 $28,275 plus 37c for each $1 over $87,000

      Hope this helps! Feel free to message us anytime should you have further questions.

      Best,
      Nikki

  6. Default Gravatar
    AndrewOctober 14, 2017

    Am I an Australian resident?

    • Default Gravatar
      LiezlOctober 14, 2017

      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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