Qualifying as a non-resident for tax purposes causes a lot of confusion amongst Australian expats.
The issue of whether you are deemed to reside in Australia or not, which in turn may dictate whether you are a resident or non-resident for tax purposes, can be determined by a number of tests outlined by the ATO.
The 'Resides' Test
The period of physical presence or length of time in Australia is not, by itself, conclusive when determining whether an individual resides here.
The ATO has, however, indicated that six months (which does not need to be continuous) would be an appropriate time to decide whether the individual’s behaviour is consistent with living in Australia.
To reside in Australia, a person needs to display behaviour over a period of time that is consistent with residing here, such as a degree of continuity, a routine or habit.
An individual may be considered an Australian resident if their day-to-day activities in Australia are similar to their behaviour before entering Australia.
Factors the ATO take into account in determining whether a person is a resident include:
Intention or purpose of presence.
Maintenance and location of assets.
Social and living arrangements.
A person would be considered an Australian resident if their domicile is in Australia, unless the ATO is satisfied their permanent place of abode is outside Australia. A domicile is the place that is considered by law to be a person’s permanent home. An individual may have no fixed place of abode but the law considers that they will always have a domicile. This test of residency normally applies when an Australian resident goes to work overseas for an extended period.
When determining whether a person has a permanent place of abode outside Australia, the ATO will consider the factors outlined in Taxation Ruling IT 2650 including the:
Intended and actual length of stay overseas, and continuity of that stay.
Existence of a residence in Australia (while overseas).
Existence of an established home overseas.
Family and financial ties.
183 Day Test
Under this test, if an individual is present in Australia for more than half of the income tax year (whether continuously or intermittently), they may be considered an Australian resident unless it can be established their usual place of abode is outside Australia and they have no intention of taking up residence here.
This test covers Commonwealth Government employees and states that to be considered an Australian resident, the person must be:
A member of the superannuation scheme established under the Superannuation Act 1990.
An ‘eligible employee’ for the purposes of the Superannuation Act 1976.
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