the difference between Tax residency Australia vs Citizenship
Suppose you abide from a different country and have been temporarily living in Australia for some time. In that case, you might wonder if you are Tax Resident Australia. The answer simply would depend on the duration and nature of your stay. In this article, we have discussed Tax residency Australia vs Citizenship.
Additionally, if you only come to Australia for a short visit and have no intention of permanently staying in the country. During your stay would you be a foreign or a full Tax Resident Australia.
You might not hold an Australian passport but would be considered a resident for tax purposes if you qualify under the Australian tax residency test.
It is a legally binding matter, and it is advisable to understand that Tax residency Australia vs Citizenship.
Thereafter, to understand ATO’s latest tax residency rules. First, you need to identify which tax resident category you fit into. Secondly, determine if you pass any of the residency tests. So in this article, we’ll discuss about tax residency vs citizenship in Australia.
Tax residency Australia vs Citizenship
Tax residency and citizenship are two different things, and they have different implications for your income tax in Australia.
Australian citizenship is a legal status that gives you certain rights and responsibilities, such as the right to vote and the right to hold an Australian passport. You can become an Australian citizen by meeting certain requirements, such as living in Australia for a certain period of time and passing a citizenship test.
Tax residency is a determination of where you live for tax purposes. You can be a tax resident of Australia even if you are not an Australian citizen. You can also be an Australian citizen and not be a tax resident of Australia.
To determine your tax residency status, the Australian Tax Office (ATO) considers a number of factors, including:
- Your permanent place of abode
- Your domicile
- The amount of time you spend in Australia each year
- Your economic ties to Australia
If you are a tax resident of Australia, you are liable to pay Australian income tax on all of your income, regardless of where it is earned. If you are a foreign resident of Australia, you are only liable to pay Australian income tax on your income that is sourced from Australia.
ATO Tax Resident Individual Categories:
Broadly, ATO identifies three broad categories for individual tax residents. You are required to test yourself to see if you fit into one of these three categories:
| Tax Residents | Foreign Residents | Temporary (Visa) Residents | |
|---|---|---|---|
| Residency Test | Satisfied | Not Satisfied | Satisfied |
| Declaration Requirement | Worldwide Income | Income from Australia only | Income from Australia & foreign sources* |
| Tax Lodgement Requirement | On overall Income | Australian Income only | Australian Income only |
| Caveats | Foreign Tax offset available | No tax on foreign income | Foreign Capital gain income exempted |
| Examples | People born in Australia New Migrants to Australia Australian passport holders residing overseas | New Migrants who spend more time living in country of birth Australian citizens residing abroad for longer periods(2 or more years) | People residing in Australia on temporary visa including; student visas, working holidaymakers, temporary work visas, temporary activity visas, backpackers visa |
*Not all foreign sources of income need to be declared; details at ATO.
What is a Tax residency test?
ATO residency test provides four parameters to test if an individual qualifies as a tax resident in Australia.
Generally, you must meet any one of these tests to qualify.
Types of Residency Tests
1. The resides test
Definition: You are a resident if you reside permanently in Australia or for a considerable time.
Factors: Primary residence, physical presence, intention and purpose, family, business or employment ties, location of assets, social and living arrangements.
2. The domicile tests
Definition: You are considered a resident if your domicile is from Australia. Domicile is a place that is your primary place of origin. It can be understood as a place of birth, permanent residence, social and living location.
Factors: Place of birth would determine mostly which country you domicile from. However, if you have relocated or migrated to a different place – your usual permanent place of residence would be considered to satisfy the domicile test.
3. The 183-day test
Conditions: If you live in Australia for over half the year, you would be considered a resident for tax purposes.
This test is usually applied to new arrivals in Australia. For temporary residents, they must determine if they spent over 183 days in Australia in the financial year; they should declare and lodge their tax returns as residents.
Factors: If your usual place of abode is outside Australia, you can apply for an exemption to the ATO Commissioner.
4. The Commonwealth Superannuation Fund test
Definition: This test is exceptional and applies only to certain Australian Government employees. Additionally, details about this can be found on the ATO website.
The information and tool provided on this page should be enough to determine your residency level.
Conclusively, please visit to read further examples of Australian and foreign residents.
Or to check tax rates applicable to residents in Australia see tax rates for the current year.
Individual circumstances may affect your eligibility for these tests. You can use the Online tool on the ATO website to accurately determine your residency status.
You can simplify tax determination with our Pay Calculator Australia.
Key Questions To Determine If You Are Tax Resident?
Do you reside or intend to reside permanently in Australia?
Do you satisfy any of the conditions in the ATO residency test?
Are you registered as a voter at the Australian electoral registry?
Do you have assets such as property and business in Australia?
Do you have any foreign legal documents? Are you a dual national?
Do you have any assets overseas?
Do you have a permanent foreign address?
Are you claiming health insurance benefits or services in Australia?
In a nutshell, if you are deriving any of the following Australian income, you would likely be considered a tax resident:
- Employment Income from activities carried out in Australia
- Return on investment from an Australian property or business in the form of rental or dividends
- Interest Income
- Capital gains tax from trading any Australian assets
- Medicare levy
- Pensions or annuities from Australia
In understanding the financial differences Tax residency Australia vs Citizenship, it’s also important to understand the role of your Tax File Number. You can maximize tax benefits using your TFN, as explained in our comprehensive guide on ‘Maximizing Tax Benefits with Your Tax File Number (TFN)‘.
