Why residency comes first
Australian tax residency is not determined solely by citizenship, visa status, the location of your bank account or the country paying your salary. The ATO identifies several statutory tests, including the resides test, domicile test, 183-day test and Commonwealth superannuation test. A person who is an Australian resident for tax purposes generally needs to declare worldwide income, while a foreign resident is generally taxed on Australian-source income.
Residency should be reviewed whenever you move countries, establish a permanent home, bring family members with you, change employment location or substantially alter your pattern of living. Keep a contemporaneous travel calendar and evidence showing where you lived, worked, maintained a home, kept personal belongings and established social or economic connections.
Worldwide income and foreign tax
An Australian resident may need to report foreign salary, business income, investment income, pensions, annuities and capital gains on overseas assets. Foreign tax paid may support a foreign income tax offset, subject to the applicable rules. Do not assume that payment into an overseas account removes the income from the Australian return.
For example, an Australian resident who works remotely from Sydney for a foreign employer may still need to include the foreign salary in the Australian return. A person who becomes a foreign resident may have a different Australian filing position, but Australian-source income can remain taxable.
CGT when residency changes
Changing residency can affect the assets included in Australia’s capital gains tax net. The ATO explains that becoming or ceasing to be an Australian resident may change how assets are taxed. Before departure, prepare an asset register showing acquisition dates, cost bases, market values, ownership percentages and whether each asset is Australian real property or another asset class.
Action checklist
- Apply the residency tests using the full facts, not a day-count alone.
- Separate Australian-source and foreign-source income.
- Preserve foreign tax payment certificates for possible offset claims.
- Review CGT consequences before transferring or selling assets.
- Obtain advice where treaty residence or dual-residence issues arise.
Residency is a factual conclusion that can change during the year. Treat an international move as a tax-planning event and review the position before lodging the relevant return.