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Leaving Australia

Non-Resident Versus “Foreign Resident”

Section 995-1 of the Income Tax Assessment Act (1997) defines a “foreign resident” as ‘a person who is not a resident of Australia for the purposes of the Income Tax Assessment Act 1936’.

The Australian income tax legislation was updated in 1997 and some of the sections of the 1936 act are still used. In some tax commentaries you will see the term “non-resident” used to mean ‘anyone who is not a resident’ in terms of the 1936 act. However, the Tax Office now uses the term “foreign resident” because the term is specifically defined in the 1997 act.

If you want to be technically correct, the term you should use is “foreign resident”.

How Do I Become A “Foreign Resident” For Tax Purposes?

If you are going overseas to work for an extended period of time, one of the key issues you need to consider is how much tax you will pay and to which revenue authority the tax will be paid.Taxation of individuals is typically determined based on the concept of ‘residence’ which often rests of the particular facts and circumstances of the individual.

Whether you are resident of Australia or resident of an overseas country depends on your personal circumstances. It is therefore essential that you understand how the Tax Law applies to your personal circumstances and seek professional tax advice if you are not sure.

The Australian Tax Office has a simple questionnaire on its web site which can assist you in determining whether you are resident for tax purposes or not. Click here to use it.

However, the outcome of that questionnaire will not be binding on the Tax Office – it is only meant as a guide.

If you want to be sure about how the Tax Office will view your tax residency status, you can request a Private Binding Ruling (PBR). However, given the technical nature of the tax law, you should consider engaging a tax professional to prepare the PBR request on your behalf.