WHO IS AUSTRALIAN RESIDENT FOR TAX PURPOSE?
Understanding the residency for tax purpose is bit complex. Firstly, you need to work out if you are an Australian or foreign resident for tax purposes. ATO don’t use the same rules as the Department of Immigration. You can be an Australian resident for tax purposes without being an Australian citizen or permanent resident !
Your residency makes a big difference to how you are taxed in Australia. You must ensure that wherever you reside, according to the ATO’s standards, you are taxed (and refunded) appropriately. May have a valid visa to enter and stay Australia but might not have residency status for tax purposes.The primary test that the Australian Tax Office provides is the ‘Resides Test’. If you don’t satisfy the resides test, the ATO will expect you to take one of three other tests to prove your residency status:
The Domicile Test
The 183 Day Test, and
The Commonwealth Superannuation Test
1) THE RESIDES TEST:
What is the resides test? The resides test is used to determine whether you reside in Australia according to the ordinary meaning of the word. There are several aspects to the resides test. The meaning of ‘resides’- The courts and the ATO rely on the normal definition of ‘resides’ when deciding who is an Australian resident for income tax purposes, as the term is not defined within income tax legislation.
According to Taxation Ruling TR 98/17 Income tax: residency status of individuals entering Australia outlines the circumstances in which an individual is considered as residing in Australia. It considers people entering Australia such as:
migrantsacademics teaching or studying in Australiastudents studying in Australiatourists, andthose on pre-arranged employment contracts.
2. THE DOMICILE TEST:
The domicile test is the first statutory test. You are an Australian resident if your domicile is in Australia, unless ATO satisfied that your domicile is the place that is:
considered by law to be your permanent homeusually something more than a residence.
You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places.
Determine your domicile.If not in Australia, the domicile test is not satisfied.If in Australia, go to step two.
Determine your permanent place of abode.If not in Australia, the domicile test is not satisfied.If in Australia, you are considered an Australian resident for income tax purposes.
The domicile test of residency usually applies where an Australian resident goes to work in an overseas country for an extended period of time.
3. THE 183 DAY TEST:
This is the second statutory test. Under this test, if you are present in Australia for more than half the income year, whether continuously or intermittently, you may be said to have a constructive residence in Australia unless it can be established that:
your usual place of abode is outside Australiayou have no intention to take up residence here.
Your presence in Australia need not be continuous for the purposes of the 183-day test. All the days you are physically present in Australia during the income year will be counted. This includes the day of your arrival and departure. It is important to note that the 183-day test applies in relation to the year of income, not the calendar year.
4. THE SUPERANNUATION TEST:
The superannuation test is the third statutory test. This test covers certain Australian government employees. Under the test, you are an Australian resident if you are a contributing member of:
the Public Sector Superannuation Scheme (PSS), orthe Commonwealth Superannuation Scheme (CSS).
The test does not apply if you are a member of the Public Sector Superannuation Accumulation Plan (PSSAP). If you are an Australian resident under this test, your spouse and any children under the age of 16 are also Australian residents for income tax purposes
You only need to pass one of these four tests to be considered as a resident of Australia. If you don’t satisfy any of these tests, then you may be considered a non-resident for Australian tax purposes.
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