As a resident in your country, you have acquired numerous rights and obligations. The rights and obligations should be clearly determined by each individual residing in the country that is governed by rules and regulations. A certain government agency in Australia is very particular about your residency for taxation purposes. This is the Australian Tax Office. So the big question for the people in Australia is, “Are you an Australian resident?”
First, you must check if you meet the criteria for resides test[1]. This is the primary test of tax residency. Number one on the list is that you are residing in Australia when you dwell permanently in Australia, or stay for a considerable time.
The resides test applies to individuals entering Australia including;
- migrants (also refer to Taxation Ruling IT 2681 ‘Income tax: residency status of business migrants’);
- academics teaching or studying in Australia;
- students studying in Australia;
- visitors on holiday; and
- workers with pre-arranged employment contracts.
In addition, a strong factor to consider for your residency status is your behaviour while in Australia. Over a period of time, you have to present consistent behaviour like activities you do in a degree of continuity, routine, or habit.
This behaviour includes:
- intention or purpose of presence;
- family and business/employment ties;
- maintenance and location of assets; and
- social and living arrangements.
So the period of time you spent in Australia is not a conclusion of fact that you are an Australian resident. But generally, the six months rule is considered a considerable time when deciding whether your behaviour is consistent with residing here.
[ctt template=”9″ link=”fbLN_” via=”no” ]The period of time you spent in Australia is not a conclusion of fact that you are an Australian resident.[/ctt]
If you have multiple residencies, proper residency rule should also be established to avoid double taxation. Australia has entered a double tax agreement with other foreign countries that appropriately allocates your taxing rights over bilateral income flows between the respective treaty partners.
What if you do not satisfy the “resides test”, will you no longer be considered an Australian Resident? Definitely no, you may still be considered if you meet the statutory tests[2];
- The domicile test: You’re an Australian resident if your domicile (known as your permanent home) is in Australia unless you properly established that your permanent place of abode is outside Australia.
- The 183 day test: If you are physically present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.
- The superannuation test: This test ensures that Australian government employees working at Australian posts overseas are treated as Australian residents.
ATO’s primary concern is your earnings, and your residency greatly affects the decision on how much you should be taxed for a financial year. So why is it important to the Tax office to know your residency? Generally, this is because of the difference in tax rates from resident to non-resident. Of course, Australian residents are taxed less than non-residents.
[1] http://law.ato.gov.au/atolaw/view.htm?Docid=TXR/TR9817/NAT/ATO/00001
[2] https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/Residency-tests/
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