Tax residency when you move to Australia: how the ATO decides your status

The four residency tests

The ATO uses four tests to determine whether you are an Australian tax resident. You only need to satisfy one of them to be treated as a resident for tax purposes (ATO).

The resides test is the primary test. It asks whether you "reside" in Australia based on the ordinary meaning of the word. The ATO considers factors including your physical presence in Australia, your intentions and purposes for being in the country, your family and business or employment ties, the maintenance and location of your assets, and your social and living arrangements. For most new migrants arriving with the intention to live and work in Australia, this test is satisfied from the date of arrival. If you arrive with a permanent visa, a job, and a rental lease, you clearly reside in Australia from day one.

The domicile test applies to people who have their domicile — their permanent home — in Australia. If you were born in Australia and return after a period overseas, your domicile may revert to Australia. For new migrants arriving for the first time, the domicile test is usually less relevant than the resides test — but for returning Australians, it can be decisive.

The 183-day test is a statutory test that deems you to be an Australian tax resident if you have been in Australia for more than half the financial year (183 days or more), unless you can establish that your usual place of abode is outside Australia and you have no intention of taking up residence. For new migrants who intend to stay, this test provides a backstop — even if the resides test is arguable, spending 183 days in Australia in a financial year almost certainly makes you a resident.

The Commonwealth superannuation test applies to Australian Government employees who are members of certain superannuation schemes. This is a narrow test relevant mainly to public servants posted overseas and is not applicable to most new migrants.

When your residency starts

For most new migrants, tax residency begins on the date of arrival in Australia. This is the date you step off the plane with the intention to live here — not the date your visa was granted, not the date you started looking for a house, and not the date you started working.

The date matters because your worldwide income becomes assessable from your residency start date. Income earned before that date is generally not taxable in Australia (unless it was Australian-sourced). Income earned after that date — including overseas income — is potentially assessable.

If you arrive partway through the Australian financial year (which runs 1 July to 30 June), you are a part-year resident. You are taxed as a resident from your arrival date to 30 June, and as a non-resident for the earlier part of the year. This affects your tax-free threshold — you receive a pro-rata share of the AUD 18,200 tax-free threshold based on the number of months you were a resident.

What tax residency means for your worldwide income

As an Australian tax resident, you are taxed on your worldwide income — income from all sources, anywhere in the world, from the date you become a resident. This includes employment income earned in Australia, employment or business income earned overseas (if any), interest on bank accounts anywhere in the world, dividends from shares in companies anywhere in the world, rental income from property anywhere in the world, and capital gains on assets disposed of after your residency start date.

For new migrants with ongoing financial ties to their home country — a rental property, a bank account earning interest, shares paying dividends — this worldwide income obligation means those overseas earnings must be declared on your Australian tax return from your residency start date.

Australia has Double Taxation Agreements (DTAs) with many countries. If tax is paid on overseas income in the source country, the DTA typically provides a foreign income tax offset (FITO) in Australia, preventing the same income from being taxed twice. The offset is generally limited to the lesser of the foreign tax paid or the Australian tax that would apply to that income.

The temporary resident exemption

A significant exception exists for temporary residents. If you hold a temporary visa (such as a subclass 482 or 485) and you are not an Australian citizen, and your spouse (if any) is also not an Australian citizen or permanent resident, you are classified as a temporary resident for tax purposes (ATO).

Temporary residents are only taxed on Australian-sourced income and employment income earned overseas while working for an Australian employer. They are generally exempt from tax on foreign income from investments, shares, and property, capital gains on foreign assets, and interest and dividends from overseas accounts and investments.

This exemption is significant. A temporary resident on a 482 visa with a rental property in their home country does not need to declare the rental income on their Australian tax return, and does not pay Australian capital gains tax if they sell the property during their temporary residency.

The exemption ends when you become a permanent resident or Australian citizen, at which point worldwide income obligations apply in full.

Pre-arrival wealth is not taxed

A common misconception among new migrants is that bringing money into Australia triggers a tax obligation. It does not. The ATO does not tax you on money you accumulated before becoming an Australian tax resident simply because you transfer it to an Australian bank account.

Savings from employment before your arrival, proceeds from selling property overseas before your arrival, gifts or inheritances received before your arrival, and the principal of any funds you transfer to Australia from pre-arrival sources are all not taxable.

What is taxable is the income those funds generate after your arrival. If you transfer AUD 200,000 in pre-arrival savings to an Australian bank account and it earns interest, the interest (not the principal) is assessable income. If you bring proceeds from an overseas property sale but keep the funds in an overseas bank earning interest, that interest is assessable from your residency start date (unless you qualify for the temporary resident exemption).

Keeping clear records of the source and timing of funds transferred to Australia is strongly recommended. If the ATO queries a large deposit in your bank account, being able to demonstrate that the funds represent pre-arrival savings rather than undeclared income avoids problems.

Common situations for new migrants

A permanent resident arriving with savings transfers AUD 100,000 from their overseas bank to their new Australian bank account. The AUD 100,000 is not taxable. Any interest earned on the Australian account from the date of deposit is assessable income.

A skilled worker on a 482 visa has a rental property in India earning INR 30,000 per month. As a temporary resident, this rental income is exempt from Australian tax. If the worker later transitions to permanent residency, the rental income becomes assessable from the date permanent residency is granted.

A couple arrives in Australia and one partner continues to work remotely for their UK employer for the first three months while the other partner job searches. The UK employment income earned while the partner is an Australian tax resident is assessable in Australia. A FITO may be available for any UK tax paid on the same income.

A new permanent resident sells their family home in China six months after arriving in Australia. The capital gain on the sale is assessable in Australia because the sale occurred after the person became an Australian tax resident. However, the cost base of the property for Australian CGT purposes is its market value on the date the person became a resident — not the original purchase price — which reduces the taxable gain to the appreciation since arrival.

Steps to take on arrival

Apply for a Tax File Number within 28 days. You can apply online through the ATO website using your passport and visa details. Without a TFN, your employer withholds tax at the highest marginal rate (45% plus the 2% Medicare levy) and your bank withholds tax on interest at the highest rate.

Inform your employer of your TFN and complete a Tax File Number Declaration form so the correct amount of tax is withheld from your pay.

Note your arrival date. This becomes your residency start date for tax purposes and determines when worldwide income obligations begin.

If you have overseas income-producing assets, begin keeping records of the income they generate from your arrival date onwards. If you are a temporary resident and believe the foreign income exemption applies, verify your eligibility with the ATO or a registered tax agent.

Lodge a tax return at the end of your first financial year in Australia. If you arrived partway through the year, you are a part-year resident and may need to apportion the tax-free threshold.

For anything beyond straightforward employment income, consulting a registered tax agent who is familiar with international tax issues is strongly recommended. The interaction between Australian tax law, your home country's tax rules, and any applicable DTA can be complex, and getting it wrong can result in penalties or double taxation that could have been avoided.

Am I an Australian tax resident if I hold a temporary visa?

Most likely, yes. Tax residency is not determined by visa type — it is determined by the four ATO tests. Most temporary visa holders who live and work in Australia satisfy the resides test and/or the 183-day test. The key distinction is between tax residency (which determines whether you are taxed on worldwide income) and the temporary resident exemption (which limits the scope of your worldwide income obligation if you qualify).

What if I am a tax resident of both Australia and another country?

This is common for new migrants. Many countries consider you a tax resident based on citizenship, domicile, or other criteria that may not cease when you move to Australia. DTAs between Australia and many countries include "tie-breaker" rules that determine which country has primary taxing rights, and FITOs prevent double taxation on the same income.

Do I need to declare overseas bank accounts to the ATO?

You do not need to separately declare the existence of overseas bank accounts, but you must declare any assessable income (such as interest) they generate on your tax return. The ATO receives information from foreign tax authorities through the Common Reporting Standard (CRS) and exchange-of-information agreements, so overseas accounts are not invisible to the Australian tax system.

Can I choose to be a non-resident for tax purposes?

Not if you satisfy one of the four tests. Tax residency is a determination based on facts and circumstances — it is not elective. If you live and work in Australia, you are almost certainly a tax resident regardless of your preference.

When should I see a tax agent?

If your only income is employment income from an Australian employer, you may be able to handle your own tax return. If you have overseas income, overseas assets, capital gains, or a complex dual-residency situation, seeing a registered tax agent before the end of your first financial year is strongly recommended.