What Is Tax Residency in Australia?

Understanding the rules, tests, and implications for individuals and businesses

When it comes to Australian tax law, where you live isn’t always the same as where you’re a tax resident. Your tax residency status determines how the Australian Taxation Office (ATO) taxes your income, whether you need to declare overseas earnings, and which deductions or offsets you may be entitled to. Getting it wrong can lead to unexpected tax bills, penalties, or double taxation.

Let’s break down what tax residency means, how the ATO determines it, and why it’s important for anyone living, working, or investing across borders.

Why Tax Residency Matters

In Australia, tax is based on residency for tax purposes, not citizenship or visa status. If you’re a tax resident:

• You’re taxed on your worldwide income (both Australian and overseas).

• You may be eligible for the tax-free threshold and certain offsets.

If you’re a non-resident:

• You’re only taxed on Australian-sourced income.

• You can’t claim the tax-free threshold, and higher rates may apply.

The ATO’s Tax Residency Tests

The ATO applies four main tests to decide if you are a tax resident. Passing any of these can make you a resident for tax purposes.

1. Resides Test

• The most important and primary test.

• Looks at your behaviour, intentions, and living arrangements.

• Factors include how long you’ve stayed in Australia, your family ties, and your social and economic connections.

2. Domicile Test

• If your domicile (legal home) is in Australia, you’re a resident unless you have a permanent home overseas.

3. 183-Day Test

• If you’re physically in Australia for 183 days or more in a financial year, you may be a resident—unless your usual place of abode is overseas and you don’t intend to live in Australia.

4. Superannuation Test

• Automatically makes you a resident if you’re a member of certain Australian government superannuation schemes (usually applies to Australian government employees working overseas).

Common Scenarios

• Australian moving overseas: You may still be a tax resident if you keep strong ties—like owning a home, having family here, or visiting regularly.

• Foreign worker in Australia: You might become a resident if you stay long enough and integrate into Australian life.

• Dual residency: You could be considered a resident in two countries—tax treaties may help avoid double taxation.

Risks of Getting It Wrong

Incorrectly declaring your tax residency can lead to:

• Back taxes on unreported income.

• Interest and penalties from the ATO.

• Loss of treaty benefits.

How to Confirm Your Status

Tax residency is not always clear-cut. The ATO’s online residency tool can help, but it’s not a substitute for professional advice. Complex situations—like working remotely overseas, owning multiple properties, or splitting time between countries—need tailored planning.

Final Takeaway

Tax residency in Australia isn’t just about where you sleep at night—it’s about your ties, intentions, and patterns of living. Whether you’re an Australian heading abroad, a foreigner settling here, or someone with cross-border investments, the right residency classification can save you from costly mistakes.

At XTAS Partners & Sunfield Advisory, we help individuals and businesses navigate the ATO’s residency rules, minimise tax risks, and ensure compliance both in Australia and overseas.

📩 Contact us today to discuss your residency status and cross-border tax strategy.