Powered by MOMENTUM MEDIA
subscribe to our newsletter sign up

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.

What’s the difference between Australian and foreign tax residents?

gloria liang difference between australian and foreign tax residents

Whether someone is an Australian or foreign resident for tax purposes can make a substantial difference to the amount of tax they are liable to pay. How are different resident types classified and what’s the difference? 

The standards used by the Australian Taxation Office to determine tax residency are not the same as those used by the Department of Immigration and Border Protection, therefore, it’s important to understand the difference between Australian citizen and permanent resident.

Someone could be an Australian resident for tax purposes even if they are not an Australian citizen or permanent resident.

Australian tax residents will be taxed on worldwide income while non-tax residents will only be taxed on Australian-sourced income and Australia taxable property.

Advertisement
Advertisement

Foreign tax resident

A foreign resident (or ‘non-resident’) is usually someone who lives outside Australia during the year or spends fewer than 183 days in that tax year in Australia.

These residents:

  • Are only taxed on Australian-sourced income and Australian taxable property;
  • Have a tax rate of 47 per cent (including the temporary budget repair levy of 2 per cent); and
  • Pay no capital gains tax (CGT) on the disposal of shares in an Australian company unless the company owns Australian taxable property.

Australian tax resident

An individual will be an Australian tax resident if they reside in Australia or in Australia for over 183 days in the year of income.

Even though Australian tax residents will be taxed on worldwide income and the individual top marginal tax rate is relatively higher, there are still benefits of being tax residents, including:

  • Access to the 50 per cent CGT discount if the CGT asset is held for greater than 12 months;
  • Their main residence will be exempt from CGT upon sale (this would generally not apply to non-residents); and
  • There is no foreign stamp duty surcharge.

Temporary resident

Those who hold a temporary visa and do not have a permanent resident visa are considered to be temporary residents of Australia for tax purposes.

Temporary residents are exempt from Australian tax on certain foreign source income and capital gains as well as interest withholding tax and have certain concessions in relation to employee share schemes.

People on working holidays will be subject to a tax rate of 19 per cent from 1 January 2017 under current government proposal.

In certain circumstances, an individual may be exempt from paying the Medicare levy if they are a temporary resident and they are not from a country where Australia has a Reciprocal Health Care Agreement.

Australia has such agreements with New Zealand, the United Kingdom, the Republic of Ireland, Sweden, the Netherlands, Finland, Italy, Belgium, Malta, Slovenia and Norway.

Gloria Liang, senior tax consultant, HLB Mann Judd Melbourne

What’s the difference between Australian and foreign tax residents?
gloria liang difference between australian and foreign tax residents
nestegg logo
subscribe to our newsletter sign up
FROM THE WEB
Recommended by Spike Native Network
Cynic - Do you think this wasn't considered when Mr Morrison took 4 months to set the election date? It is out of our control to deliver this year. Ha!....
Anonymous - Bulldust. This sounds like leftist badmouthing the government as the ASTO has already said that even if the legislation is passed after 1 July 2019 it.......
Anonymous - Happy days are here again for all the aspirational battlers and retirees who will not be ripped off by Labor's Tax grab.....
MelbMan - We dodged a real bullet with Saturday nights Federal election result. ....