Individual Tax Residency in Australia – Understanding Residency Tests
By Dania Foo
Determining whether you are a resident of Australia for tax purposes (a “tax resident”) is not always straightforward. Many people mistakenly believe tax residency is based on citizenship or permanent residency status. In fact, Australian tax residency is determined by a series of statutory and common law tests applied by the Australian Taxation Office (ATO).
How is tax residency determined?
Under Australian tax law, there are four tests to determine whether an individual is a resident:
- The resides test (or “ordinary concepts test”)
- The domicile test
- The 183-day test
- The Commonwealth Superannuation Fund test
You will be treated as an Australian tax resident if you satisfy any of these tests.
The Resides Test
The resides test is the primary test of tax residency. There is no statutory definition of “resides”, so it takes its ordinary meaning. The Macquarie Dictionary defines “reside” as “to dwell permanently or for a considerable time; have one’s abode for a time.”
When applying this test, the courts and the ATO look at whether you have maintained a “continuity of association” with Australia. This is assessed by examining various factors such as:
- periods of physical presence in Australia
- your intention or purpose of being in Australia
- behaviour while in Australia
- family, business and employment ties
- the maintenance and location of assets
- social and living arrangements
- whether you maintain a place of abode in Australia
Importantly, being physically absent from Australia does not automatically mean you are a non-resident. If you continue to have strong connections with Australia, you may still satisfy the resides test.
The Domicile Test
A person may also be a resident under the domicile test. Every person has a domicile of origin (usually their father’s domicile at birth), which may change to a domicile of dependence (before the age of 16) or a domicile of choice.
To establish a domicile of choice, a person must lawfully reside in another country and intend to make it their home indefinitely.
If you have an Australian domicile and you are living outside Australia with the intention of returning to Australia on a clearly foreseen and reasonably anticipated contingency, then you will retain your Australian domicile even if you stay overseas for a substantial period.
However, an Australian-domiciled person is not a resident if the ATO is satisfied that their permanent place of abode is outside Australia, as demonstrated by:
- their abandonment of residence in Australia; and
- the establishment of a place of abode overseas that is permanent, in the sense that it is not temporary or transitory.
When deciding whether your permanent place of abode is outside of Australia, the ATO considers:
- the length of your overseas stay;
- the nature of your overseas accommodation; and
- the durability of your associations – that is, the connections you maintain both in Australia and abroad.
This is often the most contentious residency test, as many Australians working or living overseas struggle to prove they have sufficiently severed ties with Australia.
The 183-Day Test
If you do not satisfy the first two tests, you may still be a resident under the 183-day test. This applies if you are physically present in Australia for 183 days or more during an income year, unless you can satisfy the ATO that:
- your usual place of abode is outside Australia, and
- you have no intention of taking up residence in Australia.
The Commonwealth Superannuation Fund Test
The final test is only relevant for certain government employees. You (and your spouse and children under 16) will be considered an Australian resident if you are an Australian government employee working overseas and you are an active member of either:
- the Public Sector Superannuation Scheme (PSS), or
- the Commonwealth Superannuation Scheme (CSS).
Why Residency Status Matters
Your residency status has significant tax implications.
Whilst Australian tax residents are entitled to certain tax advantages – such as (in general) a lower rate of tax, access to the main residence exemption and the ability to halve capital gains from assets held longer than 12 months – Australian tax residents must also declare and pay tax on worldwide income and capital gains, even if it has already been taxed overseas.
Non-residents only pay Australian tax on income derived from Australian sources as well as capital gains on taxable Australian property.
Seek Expert Advice
Determining your Australian tax residency can be complex, and getting it wrong can result in serious consequences. A recent case, Kirtlan and Commissioner of Taxation (Taxation) [2025] ARTA 539, highlights this. Mr Kirtlan relied on advice that he was a non-resident and did not declare his overseas income, leading to an allegation of tax evasion from the Commissioner. While the Tribunal ultimately found his conduct was not fraudulent – recognising he relied on professional advice and had no intention to omit income without a credible explanation – the case underscores the risks of incorrect assumptions about residency.
Whether you are an expat, investor, or Australian working overseas, your residency status will affect how your income and capital gains are taxed.
If you are unsure about your position, it is essential to get professional advice before lodging your return. Feel free to contact Dania Foo or Antony Barrier to discuss your circumstances and ensure you meet your obligations while minimising your tax exposure.
