Tax Residency Law - Expat Tax Traps - Waterhouse Lawyers

Expat Tax traps: Australian tax resident: Ordinary concepts test


Tax Residency

Expat Tax traps: Australian tax resident: Ordinary concepts test

Tax Residency Law:  Are you a Tax Resident of Australia?

Whether you are a tax resident of Australia is a tricky question to navigate come tax time. Tax Residency Law can be tricky in the sense that if the Australian Taxation Office (ATO) asks whether you are a tax resident of Australia, what do you say?

For many it may come as a shock to know that this question is not a straightforward question, particularly if you are an Australian expatriate.

Tax Residency Law Tests

Many Australians living overseas think that if they do not spend more than 183 days in Australia they are not a resident of Australia.  Wrong… this is only one of the four residency tests that you must not satisfy.

The four tests are:

  • Residency – Ordinary Residency Test
  • Residency – The Domicile Test or Permanent Place of Abode
  • 183 day test
  • The Superannuation fund test

If you have been in Australia for more than 183 days, then unless there are exceptional circumstances, such as Covid, you are a resident of Australia.

Tax Residency Law – Ordinary Residency Test

This article focuses on the ordinary residency test.

The primary test for deciding your residency status is whether you “reside” in the ordinary sense of the word.  This is a complex test.  If you satisfy this test then you are a resident of Australia.

The relevant factors are:

  1. The intended and actual length of your stay in an overseas country;
  2. Whether you intended to stay in the overseas country only temporarily and then move on to another country or return to Australia at some definite point in time;
  3. Whether you have established a home outside Australia;
  4. Whether you have a home in Australia or whether you have abandoned it your overseas absence;
  5. The duration and continuity of your presence in the overseas country; and
  6. Your continuity of association with Australia
  7. The durability of association you have with a particular place in Australia, for example, maintaining bank accounts or a rental property.

As a broad rule of thumb, a period of two years or longer will be considered a substantial period for the purposes of a taxpayer’s stay in another country.  But, it all depends on the circumstances.

Intention is critical, and having evidence of this intention such as a visa in the foreign country.


Australian tax residency law test is anything but ordinary

If you are unsure about your residency status for Australian taxation purposes, contact us so we can assist in determining whether you are an Australian tax resident.




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