In Australia, being a resident for tax purposes doesn’t necessary correspond with any residency permits that you may have, so understanding which bracket you fall into can make a lot of difference. Below is a guide on the varying categories of tax payer based on your current circumstances.
Australian Residents (for the purposes of tax)
There are currently 4 residency tests used to define whether you are considered an Australian resident – and if your criteria meets any of the following 4 tests, you will be deemed to be a resident of Australia for taxation purposes:
- The resides test
- The domicile test
- The 183 day test
- The Commonwealth superannuation fund test
If these tests categorise you as an Australian resident, you will be required to provide information on your worldwide income, even if that tax has already been paid (although foreign tax is typically offset against tax owed for Australian income).
Foreign Residents in Australia
If none of the aforementioned tests apply to your current standing within the country, you won’t have a tax-free threshold and you aren’t required to pay the levy for Medicare. You will still be required to declare any and all income that hails from Australia (including property tax and earnings, as well as capital gains).
If you are in the country for Higher Education purposes and have a loan, you will need to declare your global income, or provide evidence of non-lodgement advice.
Residents of a Temporary Nature
Anyone with a temporary visa to visit Australia will be considered a temporary resident – meaning that you will not be considered to be living in the country for the long term (although you can apply to extend your visa, or pursue another type). These visas typically apply if neither you nor your partner (through marriage) is an Australian resident.
You won’t need to declare any of your capital gains or your foreign income, unless that income was earned whilst you were a temporary resident of Australia (even for overseas employment). Furthermore, you’ll need to provide information relating to specific earnings from within Australia while you are considered a resident – even on a temporary basis.
In some cases, an individual can be considered to have dual residency if they are a resident of another country as well as Australia for tax purposes. To avoid confusion, Australia has a double tax treaty with many countries, so a test will often need to be taken to gauge which country is eligible to tax the individual for both their Australian income and that from a foreign country.
This measure was put into effect to avoid the concern of double taxation and although flexible, it can still apply to temporary residents with a limited visa, as well as permanent residents that may still be eligible to pay tax in their original country. For further information, always seek advice from a licensed expert, or by visiting the dedicated government portal.