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30 June 2017

The difference residency makes:


Australian residents:

Are generally taxed on their worldwide income from all sources.

This includes overseas investments such as renting overseas properties, selling overseas assets, income from interests in foreign entities.

You must include in your tax return foreign rental property, foreign capital gains, distributions from foreign trusts & companies and other relevant tax schedules.

If you have paid tax on this income in another country, you can claim a foreign income offset in Australia.


Foreign residents:

Are generally taxed only on their Australian-sourced income, e.g. money they earn working or investing in Australia.

This includes Australian investments such as interest (10%), unfranked dividends (15% or 30%) and royalties (15% or 30%), tax is generally withheld in Australia at the time of payment. This rate will depend on whether Australia has a tax treaty with the foreign resident's country.

But if you receive income from Australian properties or capital gains from selling Australian assets (publicly listed shares and trusts are usually excluded), you must complete a rental property or capital gains tax schedule and lodge an Australian income tax return.


Tax Rates

Australian residents

Australian residents tax-free threshold may be less than $18,200 in a financial year if you enter Australia permanently during the year.

Formula = $13,464 + ($4,736 x months)/12

Taxable Income         Tax on this income

0 to $18,200                Nil

$18,201 to $37,000     19c for each $1 > $18,200

$37,001 to $80,000     $3,572 + 32.5c for each $1 > $37,000

$80,001 to $180,000   $17,547 + 37c for each $1 > $80,000

$180,000 and over      $54,547 + 47c for each $1 > $180,000

Plus 2% Medicare Levy


Foreign residents

0 to $80,000                 32.5c for each $1

$80,001 to $180,000   $26,000 + 37c for each $1 > $80,000

$180,000 and over      $63,000 + 47c for each $1 > $180,000

No Medicare Levy


Residency Tests

The primary test of tax residency is called the 'resides test'. If you reside in Australia, you are considered an Australian resident for tax purposes and do not need to apply any other residency tests.


The resides test:


Intention - Sometimes your stated intentions will be in contrast to your intentions as shown through your behaviour or actions.

e.g. You may wish to stay in Australia but your visa forbids you from applying for a permanent resident's visa while in Australia.


Maintenance and location of assets - The place where you organise your affairs (bank accounts, house deeds, wills, insurance policies and other securities) is an indicator of where you reside.

The location of your assets may be overseas e.g. your home or investments.

Alternatively you may have bought a home in Australia and relocated your family and personal belongings here.


Social and living arrangements - Consideration will be given to the ordinary course of your life and may include playing social sport, being a member of a local community club, enrolling your children at the local school.


Physical presence in Australia - You need to display behaviour consistent with residing here. e.g. If you stay here more than 6 months. Generally this a combination of time spent and behaviour.




Dual Resident - Tax treaties between two countries may determine which country you may be a resident of.


If you do not satisfy the resides test, you will still be considered an Australian resident if you satisfy one of three statutory tests:


Statutory tests

The domicile test:

You are an Australian resident if your domicile (the place that is your permanent home) is in Australia, unless the ATO is satisfied that your permanent place of abode is outside Australia.

The 183 days test:

If you are actually present in Australia for more than half the income year, whether continuously or with breaks, you may be said to have a constructive residence in Australia, unless it can be established that your usual place of abode is outside Australia and you have no intention of taking up residence here.

The Superannuation test:

This is to ensure that Commonwealth government employees working at Australian posts overseas are treated as Australian residents.


ATO Work out your tax residency Tool

Google: ATO Are you a resident? tool.  Then complete.

This tool can help you work out your residency status, however this result is not binding on the ATO.

This tool asks you questions about your personal circumstances including migration, returning to live, length of stay, staying continuously in a particular place, main purpose of stay (permanent employment, holidaying, full time education, visiting relatives, etc.), location (renting, relatives, friends, etc.), do you have a spouse or dependant children? (where are they?), where do you hold your assets? (overseas or here), are you a member of any clubs or community groups?,

If you are coming to Australia on a working holiday you will probably be taxed as a foreign resident.

If you are coming to Australia to study a course that is more than 6 months long, or you are moving to Australia permanently, you will probably be taxed as an Australian resident.


Medicare Levy Exemption Certificate


You do not hold an Australian permanent resident visa and have not applied for one.

You do not reside in a country that has a reciprocal health care agreement:

These countries have agreements with Australia:

UK, Northern Ireland, Italy, Malta, Sweden, the Netherlands, Finland, Belgium or Slovenia

You are an Australian citizen residing overseas for 5 years or more

You are a New Zealand citizen that has been residing in Australia for less than 6 months.

Download the Medicare levy exemption certificate application


ATO Examples of Foreign Residents

Example 1:

Juliette states that she intends to stay in Australia for at least the next 10 years. Unfortunately, her visitor's visa only permits her to stay in Australia for a period of six months. The visa also forbids her to apply for a permanent resident's visa while in Australia. Juliette is considered to be a foreign resident.

Example 2:

Janine is a British national who has longed to spend twelve months 'down under'. After saving for years, she takes 12 months leave from her work and departs for Australia on her 24th birthday. Although she travels with considerable savings, her intention is to spend at least part of her time working. She obtained a working holiday visa enabling her to work for no more than six months with one employer.

Through a contact in Australia, she is assured of work in Perth for the first three months. After that period, she decides to travel to the east cities via Adelaide. She spends a month in Adelaide where she works for two weeks and continues her journey to Melbourne. Once there, she meets some friends from back home. After working for a further three months, she decides to spend the balance of her time in Melbourne and uses her savings for living expenses. To keep costs down, she leases a house with two other friends. At the end of her 12 months in Australia, she returns to the UK and resumes living in her house there, which she had been renting out while in Australia.

Janine is a foreign resident because her main purpose for being here is to have a holiday and she is merely supplementing her savings by working. Her usual place of abode was outside of Australia and she did not intend taking up residence in Australia


Proposed Changes:

From 1 July 2016 the tax residency rules will changed to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here.




If the asset is owned for > 12 months.

From 8 May 2012 foreign or tempory resident individuals must meet certain eligility to apply the CGT discount.

For CGT events occurring after 8 May 2012, the application of a CGT discount percentage will depend on:

i)  whether the CGT asset was held before or after 8 may 2012 and

ii) the residency status of the individual who has the capital gain.


This change will affect individuals who are:

i) a foreign or temporary resident;

ii) an Australian resident with a period of foreign residency after that date;

iii) had a discount capital gain from a CGT event that occurred after 8 May 2012.


Foreign or Temporary Residents

If you were a foreign or temporary resident on 8 May 2012, you may choose to get a market value for the CGT asset as at

8 May 2012 and use a market value calculation.

This will apportion the CGT discount to take into account the capital gain you have that was accurued before 8 May 2012.

Use the ATO calculator


Australian Residents

If you are an Australian resident you must calculate the CGT discount you can apply to the capital gain if you have:

i) a capital gain from a CGT event after 8 May 2012 and

ii) a period of foreign or temporary residency.

Use the ATO calculator




i) You may access your superannuation if your tempory resident visa has expired or has been cancelled and you have left Australia

ii) You are not able to claim a DASP if you are a permanentresident of Australia or a citizen of Australia or New Zealand


i)   Taxable Component  - 38%

ii)  Tax-free Component -  0%

iii) Untaxed Element - 47%

iv) Working Holiday Makers - 65%


The information provided in the above documents is not intended to be, nor should it be construed as tax advice. Any specific recommendation for a client can only be done after their individual circumstances have been determined by David Douglas Accountants.

We have clients from the following locations:

Brisbane, Gold Coast, Sydney, Newcastle, Cairns, Canberra, Melbourne, Adelaide, Perth, Darwin.


Brisbane, Albion, New Farm, Teneriffe, Newstead, Windsor, Wilston, Bowen Hills, Wooloowin, Herston, Lutwyche, Hamilton, Eagle Farm, Gordon Park, Fortitude Valley, Clayfield, Ascot, Hendra.

Morayfield, Burpengary, Caboolture, Bellmere, Wamuran, Narangba, North Lakes, Mango Hill, Kallangur, Dakabin, Deception Bay, Bribie Island, Elimbah, Kippa-Ring.

We do tax returns for individuals, trusts, companies, partnerships, contractors, ABNs and sole traders.

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