Frequently Asked Questions (FAQ’s)

Am I an Australian resident for tax purposes?

To be considered an Australian Resident for Tax purposes in Australia, you must pass one of the four statutory tests. 

  1. Resides test 
  2. Domicile test
  3. 183-day test
  4. The Commonwealth super test

The first two tests are the most common yet confusing. The 183-day rule is used mainly for inbound residents and the Commonwealth Super test relates to Australian government employees working at Australian posts abroad.

If you need help assessing your tax residency, please check out our Residency Research Tool or contact us.

What’s the major difference between being a resident and a non-resident?

If you are deemed to be an Australian tax resident, you are obligated to file an Australian tax return and report all worldwide income. If you are a non-resident, you need to report only income derived in Australia (i.e. Interest on Australian bank accounts, capital gains on sales of Australian stocks, etc).

Why is it so important to determine your residency?

Residency is independently determined from citizenship or VISA rights. Determining residency is crucial in assessing where and how much tax you are obligated to pay under the Australian tax regime. If incorrectly assessed, you could be liable for thousands in tax and possibly even interest and penalties on any amounts accrued to the ATO. If you’re an Australian tax resident, you are obligated to file a tax return reporting all worldwide income. If dealt with correctly, you can avoid double taxation.

What is a foreign resident for tax purposes Australia?

A foreign resident for tax is when you are no longer an Australian tax resident. This may occur if you have effectively cut ties to Australia and have moved abroad. If you need help assessing your tax residency, please check out our Residency Research Tool or contact us.

How do I avoid paying tax twice in both Australia and the country I am working in?

Australia has several double tax agreements with various countries. By determining your residency, you can ensure you are paying tax in the right country without being taxed twice.

 

What are some examples of Australian and non-Australian residents for tax purposes?

The ATO has some good examples. Check them out per this link attached.

What if I have HELP/HECS loan? Does that affect anything?

If you have a HELP/HECS or trade debt loan, you have to file an Australian tax return each year attaching an overseas earnings schedule, disclosing your worldwide income, converted to AUD. Then the ATO will assess you just for a HELP Levy repayment. This also applies if you are earning below the HELP/HECS debt threshold.

I moved abroad mid tax year. How does my situation get affected? For example, I departed Australia for good in November?

Residency is determined from the date your circumstances change. If you are truly determined to be a non-resident from November, you will still need to file a tax return for that financial year declaring the income you earned from July – October and the date you ceased residency. You may be eligible for a part year tax free threshold and part year Medicare levy exemption.

Do I still have to complete an Australian tax return even though I did not earn any money in Australia this financial year?

.If you are a non-resident and have either a HECS/HELP debt or have at least $1 of Australian sourced income, you are still obligated to file an Australian tax return. If you have none, it is still good practice to inform the ATO via MyGov or your tax agent that you’re not required to lodge. Otherwise they will still expect a return.

What are the potential repercussions for not completing an Australian tax return while living abroad?

Failure to lodge a return can result in late lodgement penalties of up to $900 per return, in addition to general interest charges on top of the debt. 

What dates are BAS's due?

The business activity statement (BAS) is a form submitted to the ATO by registered business entities to report their tax obligations, including GST, pay as you go withholding (PAYGW), pay as you go instalments (PAYGI) and others. BAS due dates can be found here. 

Tax Calculator Australia

We found this nifty Tax Calculator for Australia from Atotaxrates.info which we wanted to share. This spreadsheet allows you to confirm the tax, offsets and Medicare charges you would pay as an individual in Australia. Its extremely useful for tax planning for your business and determining the best structure.

How to file Australian tax return from overseas?

An Australian tax return can be lodged through the myGov ATO portal or through a registered Australian tax agent (like us!). Please be aware if you are lodging a return yourself, the deadline is 31 October of that tax year. Should you lodge it with a tax agent, that deadline is extended to May the following year.

When choosing an Australian Tax Agent, ensure they are registered with the Australian Tax Practitioners Board. To see our registration, please click here

Does residency need to continually be assessed? If so, how often?

Residency needs to be determined at each change of habitual lifestyle – for example, if you change countries, VISA rights, purchase different assets/investments. With each change, you should proactively assess whether you remain a resident or non-resident. Your intention is equally important – if you now intend to stay as an expat for the long term – your residency may change.

Will the Australian government know if you don't declare my income from where I am currently working?

Yes, the ATO have several data matching facilities at their disposal to determine where and how much you earned while abroad. They also have agreements with various countries to allow data sharing. The recent Common Reporting Standard initiative streamlines the ability for the ATO to gather relevant information from local and foreign banks. This is another international strategy aiming at combatting tax avoidance.

What is the Medicare Levy and Medicare levy surcharge? Can I avoid paying it?

The Medicare levy is a 2% charge on your taxable income used to help fund some of the costs of Australia’s public health system, i.e. Medicare.

The Medicare levy surcharge is levied on certain Australian taxpayers who are above certain income thresholds ($90k for singles and $180k for families) and do not have appropriate levels of private patient hospital cover.

If you are have ceased your Australian tax residency and are considered a foreign resident for tax purposes, you may be eligible for a Medicare levy and Medicare surcharge exemption. See this ATO article for more information on this.

How to apply for a Medicare levy exemption?

This must be done through a Medicare levy exemption form through Services Australia and can be found here. This Medicare Entitlement Statement informs the ATO the period during a financial year that you weren’t eligible for Medicare. You must claim this your Australian income tax return.

 

Resources

Australian Tax for Aussies Abroad

Australian Tax for Aussies Abroad

Australian Tax for Aussies Abroad Understanding your Australian taxes as an Australian Resident living in Australia is not ordinarily a simple affair. When we throw a whole new tax system and the integration between the two – we have a recipe for confusion. We are...

Foreign Resident Capital Gains Withholding

Foreign Resident Capital Gains Withholding

Foreign Resident Capital Gains Withholding If you are selling your property valued at more than $750k AUD and/or are a foreign resident for tax purposes - it's essential to prepare a clearance certificate under the foreign resident capital gains withholding rules....