10 factors to help show you are non-resident for Australian tax purposes

When it comes to lodging Australian expat tax returns, it’s important to prove that you truly are a non-resident for Australian tax purposes.

First and foremost, if you are taxed as an Australian resident, you will be required to pay tax on your worldwide income from all sources at high Australian tax rates. Non-residents however, are only taxed on income earned and sourced specifically in Australia.

As an Australian expat, most of your income is likely to be from overseas. Thus, declaring yourself as a non-resident will ensure that you get the full benefit of the lower tax regime in your country of residence. Having said that, it’s always worth checking your circumstances with us first, because, recent budget announcements have meant that whether it is better to structure your affairs as a resident or a non-resident is not so clear-cut nowadays!

If you are working overseas, paying tax as an Australian Resident often means you will pay tax on your overseas income without wreaking any of the benefits that come with it, such as access to lower overseas tax rates, and no practical access to Australia’s medicare system.

As the ATO carries out in-depth analyses and audits of Australian expats, (particularly audits relating to an expat’s residence status), it’s vital that you prove you really are a non-resident for Australian tax purposes when lodging your tax returns.

Here’s ten things that you can do…

1. Submit evidence of your permanent living situation

Long-term rental agreements, mortgages and issues of correspondence to the same address will all act as evidence of having a permanent residence overseas.

2. Electoral Registry

Remove or update your details on the Australian electoral roll to show that you are no longer considered an Australian permanent resident.

3. Take ATO residency tests

The primary test that the Australian Tax Office provides is the ‘Resides Test’. If you don’t satisfy the resides test, the ATO will expect you to take one of three other tests to prove your residency status:

  • ‘The Domicile Test’,
  • ‘The 183 Day Test’, and
  • ‘The Commonwealth Superannuation Test’

You only need to pass one of these four tests to be considered as a resident of Australia. If you don’t satisfy any of these tests, then you may be considered a non-resident for Australian tax purposes.

4. Sell or lease out your Australian property

Selling or leasing out your property so that it is not available for your use, assists to provide evidence that you are not considering returning to Australia soon. Bear in mind that there may be Capital Gains Tax issues to consider in both cases, whether you choose to sell or lease out your property, so it’s wise to check in with us first.

5. Evidence of overseas finances

Open an overseas bank account and an overseas credit card (if applicable) and live day to day from those accounts instead of via your Australian bank accounts.

6. Buy a one-way ticket

A one-way ticket out of Australia shows to the Australian Taxation Office that you are not considering returning anytime soon.

7. Provide ATO with foreign address

This could be a long-term rental property or real estate.

8. Foreign drivers license

Obtain a driver’s license in your country of residency.

9. Acquire overseas investment assets

Whilst we cannot provide you with any specific investment advice, it may be a good idea to begin building up a portfolio of overseas investments, to support that you’ve largely cut ties with Australia.

10. Health insurance

Obtain health insurance in your country of residence and don’t make claims on Medicare.

Got any questions about residency status for Australian tax purposes? Contact us today.

Shane Macfarlane
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Shane Macfarlane

CEO & Founder at Expat Tax Services
Shane's an Australian Chartered Accountant and Australian expat tax specialist who's also an expat himself (based in Asia).Shane's passionate about tax and legitimate tax minimisation, particularly as it relates to Australian expats who are often subject to high rates of tax back home in Australia.Beyond tax and accounting, Shane's an entrepreneur, having devised, created and founded a successful accounting startup, Fifo Workpapers (acquired by accounting software giant, Intuit inc. in 2013)

In short Shane's a tax and software techno-geek, who recognised that Australian expats were unable to obtain the specialist advice and quality service, that they needed from their accountants. Accordingly, Shane founded Expat Tax Services to provide Australian expats with access to specialist, quality advice at fair and reasonable prices (no hourly rates, fees quoted upfront with unlimited support included) . . . receive the support and advice you need without having to take second-mortgage to pay your accountant's bill! Speak to Shane & the team today.
Shane Macfarlane
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