Whether you are a resident of Australia or non-resident of Australia for tax purposes has significant consequences for you.
Primarily, if you are a resident of Australia for tax purposes you will be liable for tax in Australia on income you derive from all sources – including of course from overseas (eg, an overseas bank account, rental property, an interest in a foreign business etc).
On the other hand, if you are a non-resident of Australia for tax purposes, you will only be liable for tax on income that is sourced in Australia (including capital gains on certain property such as real estate in Australia).
And while there may be difficulty in determining the source of income in some cases, if you are a resident for tax purposes, the principle of liability for tax in Australia on income from all sources remains clear.
Resident of Australia for tax purposes
So, what does it mean to be a resident of Australia for tax purposes?
Well, broadly, it means you “reside” in Australia (as commonly understood), unless the Commissioner is satisfied that your permanent place of abode is outside Australia.
However, a recent decision of the Federal Court has shed some light on this matter – especially the often-misunderstood presumption that “connections with Australia” is all that counts.
