Moving overseas or coming to Australia doesn’t automatically end your tax obligations. Your tax residency status is what determines where and how you’re taxed.
If you’re arriving in Australia, leaving Australia, or working across borders, understanding Australian tax residency rules is essential. Let's deep dive how tax residency is worked out in Australia and why getting it right matters before and after you pack your bags.
How do I work out if I’m a resident for tax purposes?
Whether you’re an Australian resident for tax purposes or a foreign resident depends on more than just your physical location, citizenship, or your visa. It also considers your family ties, assets and your business or employment situation.
You can work out your tax residency status by using our residency tests this opens in a new window . You only need to satisfy one of the tests to be an Australian resident for tax purposes.
We also have some online tools to help you work out if you’re an Australian tax resident for tax purposes. There are two different tools to use depending on your situation:
If you or your spouse aren’t Australian residents according to Services Australia, and you have a temporary visa, then you’re likely a temporary resident as well as a foreign or Australian resident for tax purposes.
As an Australian temporary resident, the way you’re taxed is adjusted so that:
You’ll declare all income earned in Australia (including dividends from Australian shares and interest your Australian bank account earns).
You’ll declare your worldwide income only from some employment or services you perform – other foreign income doesn’t need to be declared.
You’re only subject to CGT on taxable Australian property.
Capital gains and losses for other CGT assets don’t need to be declared.
Leaving Australia doesn’t trigger a CGT event.
If you cease to be a temporary resident but remain an Australian resident, you’re taken to have acquired your CGT assets (that aren’t taxable Australian property, or were originally acquired before 20 September 1985) for their market value at that time.
As a foreign temporary resident, the way you’re taxed isn‘t usually modified (aside from certain employment income like what you earn on a WHM visa). There’s also no change for most CGT assets.
What does becoming a foreign resident for tax purposes mean for capital gains tax (CGT)?
It’s all about timing! When your residency status changes from being an Australian resident, a CGT event this opens in a new window occurs at that time. This means you’re taken to have disposed of your CGT assets (that aren’t taxable Australian property this opens in a new window ). When this happens, you’ll still be able to claim the 50% CGT discount for that event for assets you've owned for more than 12 months.
However, you also have the option to choose not to dispose of your CGT assets that are not taxable Australian property (TAP) at that time, in which case all your non-TAP CGT assets will become taxable Australian property.
After you’ve stopped being an Australian tax resident, the full CGT discount won’t be available for future CGT events for any assets you acquired after 8 May 2012.
If you have income from overseas, the foreign tax department might ask for a certificate of tax residency to prove you’re already paying taxes in Australia.
You should receive your certificate in 28 business days.
What if my tax residency status changes?
When your tax residency status changes part-way through a financial year, you'll be entitled to a pro-rata tax-free threshold based on the number of months you've been a tax resident of Australia. Don’t worry, we work all this out for you when you submit your tax return. All you need to do in your return is:
let us know the date your tax residency status changed, and
the number of months you were an Australian resident for tax purposes.
You only need to tell us your residency status when you lodge your tax return but remember if it changes to tell your employer and complete a new withholding declaration this opens in a new window so they withhold the correct amount of tax.
If you were an Australian resident for tax purposes for part of the financial year, still answer ‘yes’ to the question ‘Are you an Australian resident for tax purposes?’
You’ll then enter the date your tax residency changed and how many months you were an Australian tax resident at question A2.
What do I do if my employer has been incorrectly taxing me as a foreign resident for tax purposes?
How do I declare my foreign income in my tax return? Can I claim a foreign income tax offset?
Whether or not you declare foreign income in your tax return depends on your tax residency.
As an Australian tax resident, who isn’t a temporary resident, you’re taxed on your worldwide income this opens in a new window . This means you declare all income you earn from anywhere in the world - unless it’s specifically exempt.
Have you earned income from overseas and paid taxes to a foreign country? You may be able to claim a foreign income tax offset. When you claim this in your tax return, you’ll receive a tax credit here in Australia.
As a foreign tax resident who isn’t a temporary resident, you don’t declare your foreign income to us. Therefore, you can’t claim a foreign income tax offset in your Australian tax return.
Regardless of your residency, when declaring foreign income, remember to convert the amount to AUD.
