 |
 |
 |
 |
 |
 |
 |
 |
 |
RESIDENCE STATUS FOR
INDIVIDUALS ENTERING AUSTRALIA
FY 2024
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.
Foreign income exemption for temporary residents:
You are a temporary resident if:
1. You hold a temporary visa granted under the Migration Act 1958.
2. You are not an Australian resident within the meaning ofthe Social Security Act 1991.
3. Your spouse is not an Australian resident within the meaning of the Social Security
Act 1991.
If after 6 April 2006, you have been an Australian resident for tax purposes but not a temporary resident, you will not be entitled to the temporary resident exemptions from that time, even if you later held a temporary visa.
If you are an Australian resident for tax purposes and meet the requirements to be a tempory resident, the temporary resident rule mean:
1. Most of your foreign income will not be tax in Australia except income earned from employment performed overseas while you are a tempory resident. You may be entitled to claim a foreign income tax offset.
2. If a capital gains tax event occurs on or after 12 December 2006, a temporary resident is not liable to capital gains tax unless the asset is "taxable Australian property".
3. If a capital gains tax event occurred between 1 July 2006 and 12 December 2006, a temporary resident was not liable for capital gains tax unless the asset had a "necessary connection with Australia". Special rules apply for employee Share Schemes.
Working Holiday Makers on 417 or 462 visas:
These rates apply to working holiday maker income regardless of residency for tax purposes.
15c from $0 to $37,000 then 32.5c from $37,000 to $90,000 then 37c from $90,000 to $180,000 then 47c > $180,000.
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 $45,000 19c for each $1 > $18,200
$45,001 to $120,000 $5,092 + 32.5c for each $1 > $45,000
$120,001 to $180,000 $29,467 + 37c for each $1 > $120,000
$180,000 and over $51,667 + 45c for each $1 > $180,000
Plus 2% Medicare Levy
Foreign residents
0 to $120,000 32.5c for each $1
$120,001 to $180,000 $39,000 + 37c for each $1 > $120,000
$180,000 and over $61,200 + 45c 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.
Nationality
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
Eligibility:
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
NON RESIDENT CAPITAL GAINS TAX AFTER 8 MAY 2012
DISCOUNT PERCENTAGE
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 accrued 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
Foreign Residents and Main Residence Exemption
Foreign residents will no longer be entitled to claim the main residence exemption when they sell property in Australia.
If you are a foreign resident when a CGT event happens to your residential property in Australia you will no longer be able to claim a main residence exemption when you use the exemption as a reason to vary your foreign resident capital gains withholding rate or when you lodge your income tax return as a non resident.
This will apply from 1 July 2019 and the property was held prior to 9 May 2017.
DEPARTING AUSTRALIA SUPERANNUATION PAYMENT
TEMPORY RESIDENT VISA
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 permanent resident of Australia or a citizen of Australia or New Zealand
TAX RATES
i) Taxable Component - 35%
ii) Tax-free Component - 0%
iii) Untaxed Element - 45%
iv) Working Holiday Makers - 65%
Disclaimer
We have clients from the following locations:
Brisbane, Gold Coast, Sydney, Newcastle, Cairns, Canberra,
Melbourne, Adelaide, Perth, Darwin.
Other:
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.
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.
Liability limited by a scheme approved under Professional Standards legislation