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AJML Accountants Update – February 2021

Residency for tax purpose – Part 19

Failure to cut connection with Australia

legal decision in 2013 shows that a person who fails to cut their connection with Australia will be treated as an Australian resident.

Working holiday makers

If you come to Australia for a working holiday under visa subclass 417 or 462, you have fixed tax rates regardless of your residency status.

Dual residents

You are considered as a dual resident if you are a resident of Australia for domestic income tax law purposes, and a resident of another country for the purpose of that other country’s tax laws. Where Australia has a double tax treaty with a foreign country, a treaty tie breaker test would usually determine which country has the right to tax Australian and foreign sourced income.

Coming to Australia

You may come to Australia to reside permanently, study or holiday.

If you earn money here, you will pay tax and need to lodge an Australian tax return. To work in Australia, you need a work visa and a tax file number.

Studying in Australia

If you’re enrolled to study in Australia in a course that lasts for six months or more, you may be regarded as an Australian resident for tax purposes. This means:

  • you pay tax on your earnings at the same rate as other residents
  • you’re entitled to the benefits of the Australian tax system, such as:
    • the tax-free threshold (or part of it, if you’re here for only part of the financial year)
    • tax offsets
    • generally lower tax rates than a foreign resident.

Generally Australian residents must declare all income they’ve earned, both in Australia and internationally, on their Australian tax return. However, as an overseas student you probably have a temporary visa, which means that you may be a temporary resident.

If you’re a temporary resident, most of your foreign income is not taxed in Australia and you don’t declare it on your Australian tax return. You only declare income you derive in Australia, plus any income you earn from employment or services performed overseas while you are a temporary resident of Australia.

Moving to Australia permanently

If you migrate to Australia and intend to reside here permanently, you are an Australian resident for tax purposes.

Before you start working in Australia, or soon after, you may need to get a tax file number (TFN). The main tax you will pay is income tax. This is charged on income you receive, such as salary and wages, investment income and business income. At the end of the income year (30 June), most people must lodge an annual tax return.

You can get a registered tax agent to advise you on tax and prepare and lodge your tax return for you.

These agents are the only people allowed to charge a fee to prepare and lodge your tax return. They must be registered with the Tax Practitioners Board and follow strict regulations.