New to Australia? How tax residency affects your return

Your residency for tax purposes decides what income Australia taxes and at what rates. It is separate from your visa or citizenship status, and it can change during the year.

Why residency matters

• Australian residents are taxed on their worldwide income, receive the tax-free threshold and pay resident tax rates.
• Foreign residents are generally taxed only on Australian-sourced income, do not receive the tax-free threshold and pay higher rates on that income.

The residency tests

The ATO uses several tests. You are generally an Australian resident if you meet any one of them:

• The resides test: you live in Australia in the ordinary sense, considering factors like your intention, family, work and assets here
• The domicile test: your permanent home is in Australia, unless the ATO is satisfied your permanent place of abode is overseas
• The 183-day test: you are in Australia for more than half the income year, unless your usual home is overseas and you do not intend to live here
• The Commonwealth superannuation fund test: applying to certain Australian government employees working overseas

Most people who move here to live and work become residents under the resides test from the date they arrive.

Your first year

If you become a resident partway through the year, your tax-free threshold is reduced in proportion to the months you were a resident. You may also need to report foreign income earned after you arrived.

Foreign income

Once you are a resident, report all foreign income, including:

• Overseas employment or business income
• Rent from a property you still own overseas
• Interest, dividends and pensions from overseas

If you paid tax overseas on the same income, you can usually claim a foreign income tax offset, so you are not taxed twice on it. Tax treaties between Australia and other countries can also affect how some income is treated.

Temporary residents

Holders of most temporary visas are generally not taxed on most foreign investment income, although they are taxed on foreign employment income earned while in Australia. Whether you qualify depends on your visa and your spouse's status.

We advise on residency and foreign income as part of our individual tax return service, and work with many clients who have family, property or income overseas.