Tax residency tests — am I an Australian tax resident, and how much does the answer cost?
Two people do the same job on the same $60,000 salary. One may pay about $8,000 more tax than the other — for FY2025-26, roughly $18,000 against roughly $9,990 — because of a single word on their tax return: resident.
Tax residency has nothing directly to do with your passport, your PR application, or the visa in your pocket. It is a question of fact and behaviour, answered by four legal tests. Get it wrong in one direction and you may overpay by thousands; get it wrong in the other and the ATO — which matches immigration movement records against tax returns — may come asking. Here is what actually decides it, and what the answer is worth.
1. The four tests — your visa is not one of them
Under the law (and the ATO’s current view in ruling TR 2023/1), you are an Australian tax resident if you pass any one of four tests:
- The resides test. Do you live here in the ordinary sense of the word? Where you sleep, work, keep your things, and build your routine — this is the primary test, and for most people the only one that matters.
- The domicile test. If your domicile (broadly, your permanent legal home) is Australia, you stay a resident unless the ATO is satisfied your permanent place of abode is overseas.
- The 183-day test. Physically here more than half the income year? You may be a resident, unless your usual place of abode is outside Australia and you don’t intend to take up residence.
- The Commonwealth superannuation test. Only for members of certain Commonwealth government super schemes (PSS/CSS) posted overseas — most people can ignore it.
Notice what is missing: citizenship and visa class. A student on a temporary visa can be a tax resident from the week they arrive; an Australian citizen working abroad can be a non-resident.
2. What the answer costs: the $8,000 gap on a $60,000 salary
Residents get the $18,200 tax-free threshold and a 16% opening rate. Foreign residents get no threshold at all — tax starts at 30% from the very first dollar (they don’t pay the 2% Medicare levy, which softens but nowhere near closes the gap).
On a $60,000 salary, FY2025-26:
| Resident | Foreign resident | |
|---|---|---|
| Tax-free threshold | $18,200 | none |
| Income tax | $8,788 | $18,000 |
| Medicare levy (2%) | $1,200 | — |
| Total | ≈ $9,988 | $18,000 |
That is about $8,000 more tax for the same job (before offsets — a small low-income tax offset may trim the resident figure slightly further). The gap isn’t a loophole in either direction; it’s simply what the label is worth. Which is why it pays to get the label right, with evidence.
3. The 183-day myth
The most repeated line in migrant group chats — “stay under 183 days and you’re not a resident” — is wrong in both directions.
The day count is one factor in one of four tests, and that test mainly catches people arriving in Australia, not people leaving. What the ATO actually weighs is behaviour: where your family lives, where your home and belongings are, your job, your assets, and what you intend. You can be a resident after 100 days if you’ve clearly set up life here — and still a resident after 200 days overseas if your home base stayed in Australia. Count days, but don’t let days do your thinking.
4. On a temporary visa? The exemption almost nobody tells you about
If you hold a temporary visa (student, 482, working holiday) and neither you nor your spouse is an Australian citizen or permanent resident, you may be a temporary resident for tax — even while being a tax resident under the tests above. The concession is generous:
- Your overseas investment income — rent from an apartment back home, dividends, interest — is generally not taxed in Australia.
- Most foreign capital gains are disregarded entirely.
Two exceptions to respect: income from work you do overseas while a temporary resident is still assessable, and employee-share-scheme income keeps its own rules. The status ends the day you (or your spouse) become a PR or citizen — from that day, worldwide income is on the table, and your foreign assets enter the CGT net (see section 6).
5. Leaving Australia: residency doesn’t end at the departure gate
Moving overseas does not automatically make you a non-resident. Under the domicile test, an Australian-domiciled person stays a resident until they can show a permanent place of abode outside Australia — a settled, durable home in one place, not hotel-hopping, and usually not a short secondment with a return ticket.
Keep the family home available, leave your partner and kids here, tell the bank you’ll be back in a year — and the ATO may keep taxing your worldwide income the whole time you’re away. Expats are routinely caught by this years after they thought they’d left the system. If you’re leaving long-term, the move needs to look long-term in the facts: home established overseas, ties here wound back, and the paper trail kept.
6. Changing residency is a CGT event — in both directions
Residency changes move your assets in and out of Australia’s CGT net, and the law handles it with deemed transactions:
- Becoming a resident (other than a temporary resident): your foreign assets are treated as acquired at their market value on that day — a free cost-base uplift, but also the start of Australian CGT exposure on them.
- Ceasing residency: CGT event I1 deems you to have sold your non-Australian-property assets at market value on departure day — a tax bill with no cash proceeds. You may instead choose to defer, keeping those assets in the Australian net until you actually sell (or return).
- The main residence trap: since 1 July 2020, if you sell the family home while a foreign resident, you may lose the main residence exemption entirely — not even a partial exemption for the years you lived in it, unless a narrow “life events” test applies within six years. Sequencing the sale before ceasing residency may change the outcome dramatically.
One more thing to model if you’re weighing up a move: from 1 July 2027 the 50% CGT discount is replaced by indexation plus a 30% minimum rate for individuals — and the indexation option may not be available to foreign or temporary residents.
Where to from here
A “bright line” statutory residency framework (a 183-day primary test plus a 45-day factor test) has been proposed since the 2021-22 Budget but has not been legislated — the four tests above remain the law, so don’t plan around rules that may never arrive.
Residency questions are decided on facts and evidence: travel records, leases, employment contracts, where your family and assets sit. If you’re arriving, leaving, or your visa status is changing this year, work the tests through before you lodge — the label may be worth thousands.
General information only, current for FY2025-26 — thresholds and rates may change, and residency outcomes turn on individual facts. Get advice from a registered tax agent on your own situation.
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