Whether you are an Australian resident for tax purposes determines what income is taxed in Australia, which tax rates apply, and whether you can access the tax-free threshold and offsets. Tax residency is a legal concept — it is not the same as your visa status, physical location, or citizenship. You can be an Australian citizen living overseas and be a non-resident for tax purposes, or a foreign national living in Australia and be a tax resident.
Key Takeaways
- Tax residency is determined by the ATO using four legal tests — not visa status or citizenship
- Australian tax residents are taxed on worldwide income; non-residents are taxed only on Australian-sourced income
- Residents access the tax-free threshold, LITO, and other offsets; non-residents do not
- Non-residents pay a flat 32.5% from the first dollar (no tax-free threshold)
- Getting residency wrong has significant tax implications — seek professional advice if your status is uncertain
What Residency for Tax Purposes Means
Australian tax residents pay tax on all income, wherever in the world it is earned. They have access to the tax-free threshold, tax offsets (LITO, SAPTO), and resident tax rates.
Non-residents for tax purposes pay Australian tax only on income sourced in Australia. They do not get the tax-free threshold, pay flat withholding rates on most income types, and do not access most offsets.
This distinction matters enormously for people who move to or from Australia.
The Four Residency Tests
The ATO uses four tests to determine residency. You need to satisfy only one to be considered a resident.
1. The Resides Test (Primary Test)
You are a resident if you actually reside in Australia. This is a facts-and-circumstances test — the ATO considers the permanence and continuity of your presence, your intentions, your family situation, business ties, and lifestyle. Someone with a permanent home in Australia who lives here year-round clearly satisfies this test.
2. The Domicile Test
You are a resident if your domicile is in Australia, unless your permanent place of abode is outside Australia. Domicile is a legal concept related to the country you consider your permanent home. If you were born in Australia and have not formally established a domicile elsewhere, your domicile remains Australian.
3. The 183-Day Test
You are a resident if you are physically present in Australia for 183 days or more in the income year, unless your usual place of abode is outside Australia and you do not intend to take up residence.
4. The Commonwealth Superannuation Test
You are a resident if you are a member of certain Commonwealth government superannuation schemes (relates to government employees on foreign postings). This is a narrow test for specific circumstances.
Non-Resident Tax Rates
Non-residents do not access the tax-free threshold. The flat rate of 32.5% applies from the first dollar of Australian-sourced income (up to $135,000), then 37% up to $190,000, and 45% above that. There is no Medicare levy for most non-residents.
| Taxable income | Non-resident tax rate |
|---|---|
| $0 – $135,000 | 32.5% |
| $135,001 – $190,000 | 37% |
| $190,001+ | 45% |
Working holiday makers (visa subclass 417 or 462) have their own flat rate of 15% on income up to $45,000, then resident rates above that.
Changing Residency Status
When you leave Australia to live overseas, you may cease to be an Australian tax resident. When this happens:
- You are treated as an Australian resident from 1 July to your departure date
- You are a non-resident from departure until your return
- A capital gains tax deemed disposal event applies to most assets on departure (you are treated as having sold and immediately repurchased most CGT assets at market value on the day you leave)
When you return to Australia, you resume residency and the same deemed disposal rules may apply.
Getting the date of residency change right is important for calculating CGT and other income obligations.
Foreign Income of Australian Residents
Australian tax residents must declare all income from anywhere in the world — overseas wages, foreign bank interest, dividends from international investments, rental income from overseas property. A foreign income tax offset prevents double taxation where the income has already been taxed in another country.
See How Foreign Income Is Taxed in Australia.
Frequently Asked Questions
Am I an Australian resident for tax purposes if I live overseas? Not necessarily. If you have a permanent place of abode outside Australia and do not intend to return, you may cease to be a tax resident. The four residency tests apply — the ATO looks at the totality of your circumstances.
Does my visa determine my tax residency? No. Visa status and tax residency are separate. A permanent resident visa holder may be a non-resident for tax purposes if they live overseas. A temporary visa holder living in Australia may be a tax resident under the resides test.
What happens if I am uncertain about my residency status? Apply for an ATO private binding ruling, which gives you an official determination binding on the ATO. Alternatively, seek advice from a registered tax agent with experience in international tax. Getting this wrong can result in significant underpayment or overpayment of tax.
Can I be a tax resident of two countries at once? Yes — you can be a dual tax resident if both countries’ tests categorise you as a resident. Australia has double tax agreements with over 40 countries that include tie-breaker rules to determine which country has taxing rights in these situations.
This article provides general tax information. Tax residency determinations are fact-specific and can have significant financial consequences. For advice tailored to your situation, speak with a registered tax agent with international tax experience. Find one through the Tax Practitioners Board register.