Who Qualifies as a Non-Resident for Tax Purposes in Australia?

Knowing your tax residency status matters. It affects what you pay and where you pay it. The Australian Taxation Office (ATO) sorts people into residents and non-residents. Non-residents only pay tax on income earned in Australia.

They do not pay tax on overseas earnings. In some cases, such as when selling Australian property, non-residents may also be affected by foreign resident capital gains withholding. See Bates Cosgrave’s guide on changes to foreign CGT withholding for more detail.

This guide explains how the ATO makes the call. It also shows what evidence you need. You will learn which rules apply and how to meet them.

What Is a Tax Non-Resident?

A tax non-resident is someone the ATO finds to live mainly overseas. You might still hold an Australian passport or visa. That fact alone does not make you a tax resident. The ATO looks at your living situation and habits.

If you qualify as a non-resident, you will:

Pay tax only on Australian income.
Lose the tax-free threshold in Australia.
Avoid Australian tax on most foreign income.

The Four Main Tests

The ATO uses four tests. You pass one and you may be a non-resident. Each test checks a different part of your life.

1. The Resides Test

This looks at where you really live. The ATO asks:

Do you live overseas most of the year?
Do you keep a home here?
Do you have close ties here, like family?

If you do not live here and you have stronger ties abroad, you may be a non-resident.

2. The Domicile Test

Your domicile is your permanent home. It may differ from where you sleep now. If your permanent home stays in Australia, the ATO might still call you a resident.
For example, you work overseas but plan to return to your house in Sydney. You keep your family here. You may fail this test. You stay a resident.

3. The 183-Day Test

This test counts days. The financial year runs from 1 July to 30 June. If you spend 183 days or more in Australia, you may be a resident.
But if you truly live abroad and your stay here is only a visit, you might still pass as a non-resident. You need proof that your real home is overseas.

4. The Superannuation Test

This applies only to government workers overseas. If you belong to an Australian government super fund, you stay a resident.

Other Factors the ATO Considers

After the four tests, the ATO looks at extra clues. These include:

Family ties: Are your spouse and kids in Australia?
Property links: Do you own or rent here?
Work or business: Do you earn income from an Australian job?
Intention: Do you plan to stay overseas for good?
Daily habits: Do you still use Medicare or a local bank account?

Proving Your Status

If you claim non-resident status, the ATO may ask for proof. You will need:

Evidence of your overseas address and visa.
Travel records showing days in and out of Australia.
Details of your family’s location.
Records of foreign income and taxes paid abroad.
Documents showing you closed Australian accounts or sold property.

Keep clear records. This helps you avoid disputes and penalties.

Taxable Income for Non-Residents

Non-residents only pay tax on Australian-sourced income. They do not pay tax on most foreign income. Here is how it breaks down:

Australian-Sourced Income (Taxed)

Salary from an Australian job.
Business profits from an Australian operation.
Rent from an Australian property.
Capital gains on Australian real estate or certain shares.

In particular, foreign residents selling Australian property may be subject to withholding tax rules. For more detail, see Bates Cosgrave’s overview of changes to foreign CGT withholding.

Foreign-Sourced Income (Not Taxed)

Salary earned overseas.
Business profits from abroad.
Rent from overseas property.

Some exceptions apply. For instance, capital gains rules on certain assets may still affect you.

Steps to Qualify as a Non-Resident

Limit time here – Stay fewer than 183 days in Australia each year.
Live overseas – Make your new home abroad. Rent or buy property there.
Cut ties here – Sell or lease your Australian home. Close local bank accounts. Quit Australian jobs.
Keep records – Save travel logs, lease contracts, employment letters, and foreign tax documents.
Seek advice – Talk to a tax professional if you’re not sure.

Why This Matters

Your tax residency status changes what you owe and what you report. Residents pay tax on worldwide income. They get a tax-free threshold. Non-residents pay only on Australian income. They pay from the first dollar.

A wrong status can cause overpayments, fines, and extra paperwork. It pays to check your status before tax season. For those dealing with property transactions, you can also explore Bates Cosgrave’s overview of foreign CGT withholding changes to understand how residency rules may impact capital gains tax.