Tax residency issues for Australian expatriates

Australia is a perennial destination of choice for business, investment and lifestyle migrants. The globalisation of the Australian economy has seen increasing numbers of Australians taking up opportunities to work overseas. Whilst some will leave permanently, most will leave with an intention to return after an indefinite period of time.

Moving to Australia (either as a returning expatriate or a new migrant) has various tax implications that can present both traps and opportunities. Accordingly, Australian expatriates who are considering returning to Australia permanently should seek professional advice. Generally, these issues are equally applicable to new migrants to Australia. This article outlines some of the key issues that should be taken into consideration.

Australian tax residency has potentially significant consequences because Australian residents are taxed on their worldwide income. In contrast, non-residents are generally taxed in Australia on income from Australian sources only.

Timing of resumption of Australian residency

Many people are familiar with the ‘183 day test’ to determine whether you are an Australian resident for tax purposes. However, this is only one of four alternative tests to determine Australian residency.

For example, if your spouse and dependents return to Australia ahead of you, it may indicate an intention of residing in Australia permanently or indefinitely, which may bring forward the timing of your Australian tax residency. Other relevant factors include business and employment ties, the maintenance and location of assets, and social and living arrangements.

Professional advice and guidance should be sought to ensure that you do not risk becoming an Australian resident at an earlier point in time than expected.  If you need assistance in this area, please don’t hesitate to contact one of our advisors by clicking the link below.

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