Australians - are you an Australian resident for tax purposes?

If no, how do you get around the being in one place for two years or more requirement?

You can’t escape the Australian Tax department. We’re under a worldwide tax system so unless you decide to stop being Australian or happen to be super wealthy, you’re going to have to declare all your income to the ATO regardless of residency.

Actually you can if you plan to be at one address overseas for 2 years or more. My sister works for a multinational company in Hong Kong and she’s still an Australian citizen but not a resident for tax purposes.

I’m just wondering if anyone has tested the 2 years thing. I’m assuming you would need a visa as proof that you have the right to live and work somewhere else.

Actually you can’t if you’re a digital nomad.

The 2+ year scenario doesn’t apply to digital nomads as it requires the person to declare themselves a permanent resident of their host country under (in most cases) a sponsored (non-holiday) working visa. Bouncing from country to country and acknowledging an 183+ day immigration residency doesn’t count as tax residency falls under a different definition.

Those who use the 2+ year scenario declare themselves to the ATO as “permanently” away from Australia. Once they return they fall under a “whoops, changed my mind” deal which may result in an audit, require proof of international income and possibly result in the payment of back taxes (minus the medicare levy and other similar fees) depending on how bad of a day the person at the ATO is having.

In most cases where the person has a normal non-nomadic job, can prove occupational AND taxation residency, does not have any Australian shares, property or income from Australian interest, they won’t usually have to pay Australian tax.

As digital nomads can not fall into this scenario, their options are to either declare the double-taxable personal income or set up a business or similar in another country and funnel earnings though that.

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I was away for 2.5 years in various places and still declared/did my income tax in Aus. I just find it easier to stay as a tax resident at home and then for all foreign earnings (whether I’m away or home) I just work out the exchange rate for that month and add it as Australian earnings. I guess if I ended up earning more of a different currency than Australian $ as my primary income, I’d look at changing my tax residency. Is there any particular reason you want to change your ‘tax residency’ to a different place?

I was just wondering about it. Up until recently, I had investment property in Australia so it was not worth looking at other options but I no longer have that.

Do you do the exchange yourself? I thought the ATO had official exchange rates.

Ok fair enough.

Yes, I use this website to see rates: (don’t bother with daily, monthly is legally fine).

And then I input them into a spreadsheet of income and expenses that automatically does the exchange and then gives me final figures in $AUD.

This is 100% not true. Perhaps you’re thinking of the US system?

Australians pay tax to the ATO if you are an Australian tax resident on worldwide income. Ie, as long as you are an Australian tax resident, you will pay tax on any of your income, derived from anywhere.

However, if you STOP being an Australian tax resident, you no longer have to submit a return with the ATO.

However, stopping being an Australian tax resident is hard. You can’t just simply leave Australia and think you aren’t a tax resident. You need to tell the ATO you have left and you need to be able to prove you aren’t a tax resident, i.e.:

  • you’ve established residence somewhere else, perhaps by taking a longterm lease
  • you dont have property in Aus, ie house, car
  • you show no signs that you plan to return to Australia

There is a series of tests that you need to pass to prove you aren’t a tax resident anymore.

In most cases, digital nomads won’t be able to pass the test unfortunately.

You dont need a visa, residency etc. You can prove you’re no longer a resident using things like investment in the new country, longterm lease, kids in school, - evidence you’ve set up life somewhere else. Unfortunately this doesn’t work well for digital nomads :frowning: but it is possible (i’ve done so).