non-resident tax

How Does An Aussie Expat Qualify As A Non-Resident For Tax Purposes

One of the most debated topics amongst Australian expats is how does an aussie expat qualify as a non-resident for tax? The confusion surrounding this relates to a lot of misinformation on the web, combined with the ever moving goal posts that the ATO sets for those who are based overseas.

There are a number of circumstances in which an Aussie expat may be considered either and no one single factor is decisive in making this determination and usually a lot are interrelated which causes the confusion in the first place. Still with me?

There are a number of tests that can assist in determining whether you qualify as a resident or non-resident for tax purposes

One of the first tests is called the “resides test” and usually this is how most Aussie Expat qualify as a Non-Resident For Tax. However, the resides test is not conclusive in determining whether you’re a resident or a non-resident based on the amount of time you spend in Australia.

The ATO however has indicated that six months is usually a good rule of thumb and it does not have to be continuous as to whether you reside in Australia or outside of Australia. The key indicators are whether your nehaviour matches that of an Australian resident or a non-resident. An Australian may be considered a resaident if their day-to-day behviours matches that of an Australian resident, as opposed to the day-to-day behaviours of a non-resident. Factors that the ATO has taken into account as to whether you are a resident includes your intentions or behviours, family or business ties, maintenances or location of assets and social or living arrangements. If the resides test cannot be met then one of the following tests may be considered to determine your tax residency.

Domicile Test

The first test is the “domicile test”. A person will be classified as a tax resident if their domicile is in Australia, which is fair enough. A domicile is considered by law to be a person’s permanent residence or home. This test of residency is normally applicable for expats, when they do move overseas for a permanent period of time due to work. The ATO will take into account the following considerations when considering whether they have a permanent place of residence overseas:

  • Intended or actual length of time overseas,
  • Existence of a home base overseas,
  • Existence of a family home in Australia, while overseas; and
  • Family and ties in Australia and overseas.

The weight of each factor will vary according to personal circumstances and no single factor will be decisive.

183 day test

The next test is the “183 day test”. Under this test an individual will be classified as an Australian resident if they spend more than 183 days in Australia, in that financial year whether continuously or intermittently. The only time that the ATO will accept that this person is a non-resident, is if they can be satisfied that their usual place of abode is overseas.

Superannuation Test

The last test is the “superannuation test”. This test relates to Commonwealth Government employees and in order to qualify for this test the following conditions must be met:

  • They must be a member of a superannuation scheme set up under the Superannuation Act 1990 and
  • Be classified as a eligible employee under the Superannuation Act 1976.

If this test is met, then they are considered to be a resident for tax purposes and this includes their spouses, whether same sex or de facto. This also applies to their children all below the age of 16.

 

We hope that this information assists you in determining how does a Aussie Expat qualify as a Non-Resident for Tax. If you would like to know more, please click below to contact us.

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