The Australian Taxation Office (ATO) uses a few different tests to assess whether you are an Australian resident for tax purposes. In Australia we have residency tests, all of which operate differently, and all of them a based on the facts and circumstances of your life. These tests are created to determine whether you are an Australian resident for tax purpose.
Resides test is the primary test of tax residency. Its assets a range of factors to determine whether you reside in Australia and are a resident for tax purposes. If you reside in Australia such as your physical presence where you are primely live, connections regarding business and employment.
Domicile test, if your domicile is in Australia, your permanent residency or citizenship and where you intend to make your home indefinitely, you’ll be classified as an Australian resident for tax purposes.
183-day test means that you are considered an Australian resident as you have been living for over half of the year in Australia. If these requirements are meet, then you are “constructive resident in Australia” and considered a resident for tax purposes in that year.
Within all these tests if you are an Australian resident for tax purpose, you must lodge an income tax return in Australia. You must declare the income you have earned from all around the world. You are entitled to the tax-free threshold which mean you don’t have to pay tax on specific portion of your income, and you have to pay for Medicare Levy.
If you are not an Australian resident for tax purposes, you still must complete an Australian tax and declare any income earned in Australia. Also, you are not entitled to the tax-free threshold, which means you must pay tax on every dollar earned in Australia, and you don’t pay the Medicare levy which means you can’t access subsidies health care under Medicare.
In June 2023, The Australian Taxation Office finalised Taxation Ruling 2023/1 Income tax: residency tests for individuals (TR 2022/D2) outlining the Commissioner of Taxation’s view of Australia’s tax residency rules. Taxation Rulings consolidates and replaces the material in the following rulings withdrawn:
• Taxation Rulings IT 2650 Income tax: residency ̶ permanent place of abode outside Australia;
• IT 2681 Income tax: residency status of business migrants; and
• TR 98/17 Income tax: residency status of individuals entering Australia on residency for individuals
If you are still confused and unsure about your Australian Tax Residency status, speak to an Australian tax specialist any day.
Feel free to contact Lana and her team at Matovic Business Accountants if you would like to discuss your Australian Tax Residency status. Email us at info@matovicaccounting.com.au or call (07) 3557 5721.
Leave a reply