It seems like a pretty straightforward question, but the answer can have an enormous impact on your tax return, so it is important to get it right! From a tax perspective, a more accurate way to phrase the question is, ‘what is your residency status?’
Residency status relates to whether or not, for a particular financial year, you are a resident of Australia or a non-resident; and it’s not as simple as knowing where you were born or where you were living for the year in question. There are four main considerations in determining your residency status. They are:
- Would you be considered a resident by the ordinary definition? This question refers to standard definitions of a resident. Considerations include: Do you spend most of your time in Australia? Do you have a permanent residence in Australia? Have you established your family in Australia, even if you actually work outside of the country for a lot on the year? This is the primary test of residency. If the answer to this question is yes, you are likely to be considered a resident by the ATO and no further tests are required.
- Is your home in Australia? Even if you spend a large portion of your time overseas, you may be considered an Australian resident if you maintain a home in Australia. So if you work overseas for long periods, but your family remains in Australia and you regularly return to Australia and you don’t intend to live and work permanently overseas, then you would probably be considered as an Australian resident.
- Did you spend more than half the year in Australia? This is commonly the consideration for overseas visitors. While it seems straightforward, it also accounts for whether you appear to be settled in Australia (mainly living in one location and establishing community ties – likely resident) or appear to be a tourist/traveller (travelling and working in various locations most of the time – likely a non-resident).
- Are you a member of a Commonwealth superannuation scheme? Relates to government employees and whether they are receiving superannuation payments. Basically, if you work for the Australian Public Service, even overseas, you will most likely be considered an Australian resident.
If you answered yes to any of these questions, you are likely to be considered an Australian resident; however, as you can see from the number of times ‘likely’ and ‘probably’ appear above, there is a fair amount of grey in these tests, so it is worth discussing with your accountant and checking with the ATO if necessary. Next week, we will discuss why it is so important to ascertain whether or not you are an Australian resident.
By Jennifer Lowe