Due to the ongoing COVID-19 pandemic, the Hong Kong Special Administrative Region Government has imposed a ban on flights arriving from a number of countries, including Australia, until 20 April 2022.

As a consequence, many Australian expatriates who have since arrived in Australia for a temporary visit, generally for the Christmas holidays, have been unable to return to Hong Kong where they would ordinarily live and work. Understandably, those affected Australian expatriates are now concerned as to whether their foreign resident status for Australian tax purposes has been affected.

 The purpose of this article is to outline the Australian tax residency rules, in a general sense, in the context of an unintended, prolonged stay in Australia by an Australian expatriate.

The overarching theme of this article is to give comfort that, as long as an Australian expatriate maintains a home in a foreign country, and can continue to evidence their intention for it to remain so, it would be unlikely that foreign resident tax status will be affected.

Who is an Australian tax resident?

Under current laws, an Australian tax resident is generally determined by the following three tests:

·       the resides test,

·       the domicile test, and

·       the 183 day test.

All three tests must be considered in determining an Australian expatriate’s tax residency status.

The Resides Test

For an Australian expatriate who has been caught in Australia for an extended length of time, under the resides test, you may remain a foreign tax resident of Australia on the basis you can evidence that, generally speaking, an overseas country is your “home” and you intend for it to remain so.

Notwithstanding your physical presence in Australia, relevant factors include your family and business ties, maintenance and location of assets as well as your social and living arrangements in that country. Overall, the more factors pointing to the overseas country, and not to Australia, the better your case that you do not satisfy the resides test.

The guidance does exist that the Australian Taxation Office accepts that the resides test may not be satisfied by an Australian expatriate if a protracted stay in Australia was intended to be only temporary but was extended due to border closures or overseas travel restrictions.

The Domicile Test

Under the domicile test, you are a tax resident of Australia if your domicile is in Australia unless, generally speaking, your home is outside Australia.

For an Australian expatriate, your domicile will be Australia by virtue of your Australian citizenship. Accordingly, and to put simply, in order not to pass the domicile test, an Australian expatriate must once again substantiate that their home is outside Australia.

The 183 Day Test

 There are two conditions to the 183 day test that must be borne in mind by Australian expatriates.

 The first condition is commonly known; you will be a tax resident if you are in Australia for at least 183 days in an income year. However, the second condition receives much less attention; even if you are in Australia for at least 183 days in an income year, you will not be a tax resident if your home is outside Australia and you do not intend to take up residence in Australia.

As was also the case with the domicile test, the second condition of the 183 day test significantly curtails its application to Australian expatriates.

Accordingly, the practical effect of these residency tests for Australian expatriates, who have been in Australia for an unintended yet extended length of time, is an emphasis on maintaining your home in a foreign country, in both a broad and specific sense, and the importance of substantiating your intention for your home to be in that foreign country going forward.

Please note, the term “home” has been used broadly in this article to encompass tax parlance such as “usual place of abode”, “permanent place of abode” and other similar terminologies. Although each of Australia’s tax residency tests do apply their own particular nuances, such nuances are all within the generally understood meaning of the term “home”, in a broad country or regional sense as well a specific sense to each individual’s personal living arrangements, to an extent that is appropriate for this article.

If you’d like some assistance with your taxation, reach out to Dean Crossingham,

Head of Accounting at Stanford Brown.

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