How residency affects your tax return

If you arrived in Australia during the tax year or left the Australia, this shall impact your tax status as well. There are certain prescribed tests to work out the tax residency status. Your immigration status and tax resident status are two different things.

If you become an Australian tax resident, then you are taxable in Australia for your world income. If you are not a tax resident, then generally you are taxed based on your Australian source income.


If you remain an Australian resident

You will generally remain an Australian resident for tax purposes if:

  • you’re overseas temporarily and you don’t set up a permanent home in another country
  • you work overseas.

You must lodge an Australian tax return and declare your worldwide income – both assessable income and exempt foreign employment income – even if tax was taken out in the country where you earned the income.

To understand your tax situation, you first need to work out if you are an Australian or Foreign resident for tax purposes.

The ATO website provide further details on how to work out your tax residency status.


If you become a foreign resident

You will need to lodge a tax return if you have Australian income, including:

  • employment income
  • rental income
  • Australian pensions and annuities, unless an exemption is available under Australian tax law or a tax treaty
  • capital gains on Australian assets.

The capital gain on your Australian home may need to be included if you are a foreign resident at the time you sign the contract of sale.

You can ignore any income from which non-resident withholding tax has been deducted, such as bank interest and unfranked dividends.

If you have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt and you’re a non-resident for tax purposes – you’ll need to declare your worldwide income or lodge a non-lodgement advice. You can do this using ATO online services via myGov or through a registered Australian tax agent.

Note: Your worldwide income may include income that ATO allows you to ignore for determining your income tax obligations.

If you are leaving Australia permanently you will become a foreign resident.

There are other obligations and tax implications when you become a tax non-resident.


If your residency status changes

If your status has changed from resident to foreign resident during the income year, answer ‘yes’ to the question ‘Are you an Australian resident?’ on your tax return.

This ensures you are taxed at resident rates for the income year. You are entitled to a pro-rata tax-free threshold for the number of months you are an Australian resident.

To claim a tax offset for a dependent spouse, you must both be Australian residents for tax purposes. You will need to reduce your claim to take into account the period you were both foreign residents.

Foreign residents do not have to pay the Medicare levy. In your tax return you can claim the number of days in the income year that you are not an Australian resident as exempt days.

From the date you cease to be an Australian resident, there is no need to show your foreign-source income in your tax return. Also, all Australian-sourced interest, dividends and royalties you received after you ceased to be an Australian resident are subject to the withholding tax provisions as a final tax. They should not be included in your tax return.

If you have a HELP or TSL debt, you’ll need to include these amounts as they are used to work out your worldwide income and your repayment obligations against these debts.

You may refer the ATO website for further details and if you need clarification or our assistance, we shall be glad to provide you the service.

( Source ATO)

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