Whether you're considered a resident or non-resident of Australia for tax purposes has significant implications. If you're a resident, you'll be taxed in Australia on all your income, including income from overseas sources like foreign bank accounts, rental properties, or business interests. However, if you're a non-resident, you'll only be taxed on income that comes from Australia, including capital gains on certain Australian properties like real estate.
Being a resident for tax purposes in Australia generally means you live in Australia unless it's clear that your permanent home is somewhere else. Recently, a Federal Court case clarified that just having connections to Australia isn't enough to make you a tax resident. The key question is where you consider your home to be for the time being, even if it's not forever. Residency is determined on a year-by-year basis, meaning your status can change from one year to the next depending on your circumstances.
This case is particularly relevant for people who work overseas on contracts but still have family or other ties to Australia. It suggests that your residency status should be reviewed annually, rather than assuming you're locked into being a resident or non-resident once your circumstances change. It's also important to know when your residency status might actually change.
If you're in a situation where you're working overseas or moving abroad but still have ties to Australia, it's important to discuss your residency status with a tax professional to understand the tax implications.
