Am I an Australian Tax Resident or a Foreign Tax Resident?

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There are different tax rules between an Australian Tax Resident and a Foreign Tax Resident which is why it is important to understand which category you fall under.

The ATO has criteria to help you decide which category you fall under which we summarise below. This area can be confusing because there are scenarios where, even if you are not an Australian Citizen or a Permanent Resident, you can still be considered an Australian Tax Resident.  

The biggest rule of thumb is, if you mainly live and earn income in Australia then you be likely considered an Australian resident for tax purposes.

Still unsure? Find out if you’re an Australian tax resident below!

Understanding this distinction between Australian Resident and Australian Tax Resident will be very useful when complete your tax return.

Australian Tax Resident

The most significant indicators suggesting you are a Tax Resident of Australia are:

  • You have a permanent home in Australia
  • Intention to stay in Australia longer than 6 months
  • You plan to migrate to Australia to live here permanently
  • You hold a Working Visa and are working and living in Australia
  • You hold a Student Visa and enrolled in a course longer than 6 months at an Australian Institution

If you fall into the above, you are likely an Australian Tax Resident. This mean you will have to declare all income, domestic and foreign.

Foreign Tax Resident

The most important factors that will indicate you are a Foreign Tax Resident are:

  • You are visiting Australia for 6 months
  • You plan to leave Australian Permanently

If you fall into this category, you only need to declare Australian based income and you will be automatically exempt from paying the Medicare Levy.

Example 1

Jason is an Australian citizen who is leaving Australia to work in Korea under a 3-year contract with an option to extend for another 3 years. He is unsure if he will extend the stay after 3 years. While he is overseas, he rent out his apartment in Australia and rent an apartment in Korea. Jason is married, and his wife and 2 kids are moving to Korea with him.

In this scenario, Jason is not considered as an Australian resident for tax purposes. This is because Jason has committed to spend 3 years overseas, making majority of his income in Korea.

Therefore, Jason only need to declare his Australian income in his tax return. Because his Australian property is earning rental income in Australia, this will need to be declared.

Example 2

Jessica is an Australian citizen who is leaving Australia to work in Spain as an English teacher under a 1-year contract. She plans to return to Australia after the end of the 1-year contract. She is renting out her Australian property while she is abroad. She is renting an apartment in Spain. Jessica is single, and her parents are living here in Australia.

Jessica is considered as an Australian resident for tax purposes. This is because Jessica permanent home is in Australia, and she is only temporarily residing in Spain.

As an Australian resident for tax purposes, Jessica is required to declare her income from Spain and from Australia in her tax return.

Summary

The most important factors are where you are permanently living and earning income. If your situation is more complicated and would like further clarification, please open the chat on the bottom right to get in touch.

Other sections you may find helpful:

  • Personal Details
  • Offsets
  • Adjustments
  • General Questions
  • I’m due a tax refund
  • How do I pay tax?
  • I’m worried that I am doing it wrong

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