Tax residency is an essential element of Australia’s taxation system; however, it can appear complicated and confusing. While there are four tests that can assist you in determining your residency status for tax purposes, a new ATO ruling in June 2023 has taken into consideration modern global work practices and recent court decisions to make residency clearer to individuals this tax time.
TR 2023/1 replaces and consolidates three prior ATO rulings following several Federal Court appeal judgments handed down in 2019 and 2020 that considered residency for individuals.
The repealed cases included:
- IT 2650 Income tax: residency – permanent place of abode outside Australia
- IT 2681 Income tax: residency status of business migrants
- TR 98/17 Income tax: residency status of individuals entering Australia
However, the ruling does not change the following when it comes to tax residency status:
- You are a resident if you meet any of the four tax residency tests
- Each tax residency case is determined based on its own facts – there are no bright-line’ rules (clearly defined rule or standard composed of objective factors).
- You can be a tax resident of more than one country.
What Are The Four Tests?
Four tests are used to determine if you are an Australian resident for tax purposes. You will be an Australian resident if you meet any one of these tests.
| The Resides Test
Under this test, you are a resident of Australia if you reside in Australia according to the ordinary meaning of ‘reside’ – which means ‘to dwell permanently, or for a considerable time, to have a settled or usual abode, and to live in a particular place’. Some factors that can be used to determine residency status include physical presence, intention and purpose, family and business or employment ties, maintenance and location of assets, and social and living arrangements. |
The Domicile Test
Under this test, you are a resident if your domicile (permanent home) is in Australia.There are three types of Domicile:
You are not a resident if your permanent place of residence is outside of Australia. |
| 183 Day Test
You will be a resident under this test if you spend over half the year in Australia unless it is established that your ‘usual place of abode’ is outside Australia and you have no intention of taking up residence here. You do not need to maintain a physical domicile in your home country (you may have been renting and terminated your lease). In practice, this test only applies to individuals arriving in Australia. |
Commonwealth Superannuation Fund Test
This test only applies to certain Australian Government employees eligible to contribute to the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). If this is the case, you (and your spouse and children under 16) are considered residents of Australia regardless of any other factors. |
If you have questions about your tax residency status, consult a registered tax agent as soon as possible – this could have implications for your return, so it is vital to resolve these issues as soon as possible.
