Resident or non Resident – Tax purposes

Residence & Source of Income


Before we calculate or acknowledge assessable income of the taxpayer, we need to understand two key concepts of taxation

  • Residence
  • Source of Income


These concepts are significant because Australian resident are taxed on income from All sources, whereas non-residents are only taxed on income from Australian based sources.



Residents & Non residents for tax purposes


  1. Residents
  • Eligible for tax free threshold & tax offset
  • Pay Medicare levy once their taxable income across threshold amount. They can be Medicare levy surcharge if they don’t have private health insurance
  • Residents are taxed on net capital gain. They can also claim the CGT discount once they held the asset for more than 12 months.
  • Need to lodge an income tax return or pay any tax in advance under PAYG withholding or PAYG installment


  1. Non residents
  • Not eligible for tax free threshold & tax offset. They pay income tax at special rates.
  • They are not able to claim Medicare benefits. Therefore, they don’t pay the Medicare levy on taxable income.
  • Non residents are ineligible for CGT discount after 8th May 2012
  • PAYG withholding may apply to Australian sourced income. Non-residents are not required to lodge a tax return if withholding tax has been deducted from Australian source income.


If the resident moves overseas on a permanent basis, then he will only be able to claim a portion of tax-free threshold.


Test to be a determine taxpayer is resident or non-resident


If the resident does not satisfy any of the below four tests, then a taxpayer will be classified as non resident.


  • Resides Test: Factors apply are Intention or purpose of presence, family or business ties in Australia, Maintenance and location of assets, social & living arrangement and physical presence in Australia
  • Domicile Test: If the taxpayer is domiciled in Australia then the taxpayer is an Australian resident for tax purposes. Domicile can be by origin, by choice or by operation of law.
  • 183 day Test: This test applies to a taxpayer who is coming to Australia not leaving. If the person present for more than half of the income tax year, then taxpayer is resident.
  • Taxpayer is a resident if the person is a member of a commonwealth Government superannuation scheme.


If you have any question about assessable income or require assistance in your bookkeeping requirements, then please do not hesitate to call us on (03)93107871 or visit us on


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