Tax residency disputes with the ATO

You are an Australian resident for tax purposes if you meet any one of four tests: you reside in Australia, your domicile is in Australia (unless your permanent place of abode is overseas), you are here for more than half the income year (unless your usual home is overseas and you don't intend to live here), or you belong to certain Commonwealth super schemes. Tax residency generally decides whether Australia taxes your worldwide income, so it is a common ATO dispute, particularly for expats.

We act in residency reviews, audits and objections as part of our work on ATO audits, reviews and objections. We check your facts against each residency test and any treaty tie-breaker, year by year, and work alongside your accountant.

Why does tax residency matter?

Residents are taxed on income from all sources. Foreign residents are generally taxed only on Australian-sourced income (Income Tax Assessment Act 1997 (ITAA 1997) ss 6-5, 6-10).

	Australian resident	Foreign resident
Income taxed	Worldwide income, with a foreign income tax offset for foreign tax paid (Div 770)	Australian-sourced income, plus some other amounts (s 6-5(3))
Tax-free threshold	Yes, pro-rated for a part year of residency	No
Selling your home	Main residence exemption generally available	Generally not available if you are a foreign resident when the CGT event happens (usually when you sign the contract), unless you have been a foreign resident for 6 years or less and a life event applies, such as terminal illness, death or relationship breakdown (s 118-110(3)–(5))

When you stop being a resident, CGT event I1 generally happens to your assets other than Australian real property and assets of a business you carry on through an Australian permanent establishment. Individuals can instead choose to disregard those gains and losses, and the assets are then treated as taxable Australian property until you dispose of them or become a resident again (ss 104-160, 104-165). Temporary residents have different rules (s 768-915). On becoming a resident, assets other than taxable Australian property generally take a market value cost base (s 855-45).

Are you an Australian resident for tax purposes? The four tests

The tax residency tests are in the Income Tax Assessment Act 1936 (ITAA 1936) s 6(1). Meeting any one is enough, so check all four. The ATO's view is in Taxation Ruling TR 2023/1 (7 June 2023), which says residency is a question of fact and no single factor is decisive (paras 4, 10).

1. The resides test

You are a resident if you reside in Australia in the ordinary sense: your presence here is usual and settled rather than temporary and casual. The ATO looks at (TR 2023/1 para 20):

• how long you are physically here, and why
• how you live here
• family, business and employment ties
• where your assets are
• your social and living arrangements

Absence alone doesn't end residency: the question is whether you keep a continuity of association with Australia (para 25). Nor does saying you will never return (para 35).

2. The domicile test

If your domicile is Australia, you are a resident unless the Commissioner is satisfied your permanent place of abode is outside Australia. You keep your domicile until you acquire a new one, which requires lawful presence in another country and an intention to make your home indefinitely there (Domicile Act 1982 s 10; TR 2023/1 paras 58–59). A working visa usually isn't enough (para 61).

In Harding v Commissioner of Taxation [2019] FCAFC 29, the Full Federal Court held that a permanent place of abode can be a town or country, not a particular house. Mr Harding's was in Bahrain, where he had settled, even though he was living in an apartment there temporarily ([6], [26], [40]). The ATO now asks whether you have definitely abandoned residence in Australia and started living permanently overseas (TR 2023/1 paras 63, 66).

• The 2-year rule of thumb. If you intend to stay overseas for less than 2 years, you are unlikely to have a permanent place of abode overseas (para 77).
• Moving between countries. If you never settle in one country, you generally remain a resident (para 68).

3. The 183-day test

If you are in Australia for more than half the income year, you are a resident unless the Commissioner is satisfied your usual place of abode is overseas and you don't intend to take up residence here. For this "183-day rule", the ATO counts 183 days (184 in a leap year), treats part days as whole days and uses the income year from 1 July (TR 2023/1 paras 83, 86–87). A long holiday generally won't make you a resident.

4. The Commonwealth superannuation fund test

Active members of the PSS or CSS Commonwealth super schemes, and their spouses and children under 16, are residents wherever they live. It mainly affects government officials posted overseas (TR 2023/1 paras 96–97).

Have the "bright line" residency rules become law?

No. Simpler day-count tests have been proposed, but they have not been legislated. As at November 2026, the four tests above remain the law, and TR 2023/1 says there are no bright-line rules (para 4).

When do expats stop being Australian residents?

• Working overseas, coming home to family. If you return at intervals to an established family and social life here, you will often still be a resident, even if you spend more time overseas (TR 2023/1 para 49).
• Moving your life overseas. If you and your family relocate for some years, set up a home and routine overseas and return only for short visits, you may not be (para 50).
• Keeping the house. A home let at arm's length matters less. A home kept available that you return to matters more (para 80).

For example, suppose an engineer takes a 3-year contract in Singapore while her family stays in their Brisbane home and she flies back every few weeks. She is likely to remain a resident under Australian law, subject to the treaty tie-breaker. If the family moves with her and the house is let, the answer may differ.

Paying tax overseas doesn't generally make your salary exempt here. The foreign employment income exemption requires at least 91 days of continuous foreign service and covers only limited work, such as delivering Australian official development assistance (ITAA 1936 s 23AG(1), (1AA)). Otherwise, foreign tax paid is usually dealt with through the foreign income tax offset.

What if you are a resident of two countries?

You can be a tax resident of two countries at once (TR 2023/1 para 108). A tax treaty with the other country usually has tie-breaker rules that treat you as resident of only one for the treaty's purposes. They look at factors such as where you have a permanent home, a habitual abode and closer personal and economic relations, but the wording and order vary between treaties.

In Commissioner of Taxation v Pike [2020] FCAFC 158, Mr Pike worked in Thailand while his partner and sons lived in Australia. He was a resident under Australian law, but for the years he was also a Thai resident, the Australia–Thailand treaty's tie-breaker treated him as resident solely of Thailand, because his personal and economic relations, taken together, were closer there ([1], [17], [20]–[22], [39]–[41]).

You remain an Australian resident for Australian tax purposes, but the treaty limits how Australia taxes you where the two are inconsistent (TR 2023/1 para 108; International Tax Agreements Act 1953 s 4). Expect to need a certificate of residence from the other country.

How is a company's residency decided?

A company incorporated in Australia is a resident. A foreign company is also a resident if it carries on business here and either its central management and control is in Australia or Australian residents control its voting power (ITAA 1936 s 6(1)).

Central management and control is exercised where high-level decisions are actually made, not where they are merely recorded or formalised (TR 2018/5 para 30). In Bywater Investments Ltd v Commissioner of Taxation [2016] HCA 45, the High Court upheld findings that the central management and control of several foreign-incorporated companies was exercised in Australia. The ATO's view, drawing on Bywater, is that directors who play no real role, or who rubber-stamp decisions already made by others, don't exercise central management and control (TR 2018/5 paras 23, 27).

How do expat tax residency audits start?

• Returning expats with foreign income or assets, and returns lodged as a foreign resident or not lodged at all.
• Departures where family, a home or a business stayed here.
• Offshore accounts. Under the Common Reporting Standard, financial institutions report accounts held by foreign residents to their local tax authority, which exchanges that information with the account holder's country (for Australia, Taxation Administration Act 1953 (TAA) Sch 1 Subdiv 396-C).
• Property sales while overseas, especially main residence claims.
• Records that don't fit, such as employment, visa or travel data. See how ATO data matching works.

What evidence matters in a residency dispute?

Residency is decided on the whole picture, including the years either side, and the ATO may rely on what you did over what you say (TR 2023/1 paras 16, 60). Useful evidence includes:

• Home Affairs international movement records and a day count for each income year
• leases and title documents here and overseas, and whether your Australian home was rented out
• where your spouse and children lived, and school enrolments
• employment contracts, secondment letters and any return clause
• visas, foreign tax returns and certificates of residence
• assets, accounts, memberships and professional registrations in each country (para 82)
• statements made at the time, such as passenger cards, visa applications and emails (para 36)

If you don't comply with an ATO offshore information notice, the overseas information or documents it asked for generally can't be used as evidence in a later review or appeal without the Commissioner's consent (TAA Sch 1 ss 353-25, 353-30). The notice must allow at least 90 days after it is given, and you can apply in the approved form for more time before that period ends (s 353-25(3)). Treat it as the deadline for building your case.

How far back can the ATO go?

For most individuals, the ATO can generally amend within 2 years after the day it gives notice of the assessment, 4 years for some others, and at any time if the Commissioner is of the opinion there has been fraud or evasion (ITAA 1936 s 170(1)). If the ATO has started examining your affairs, the period can also be extended by your written consent or a Federal Court order (s 170(7)). If you didn't lodge for a year, there is no assessment for those limits to protect, and the ATO can make a default assessment (s 167). See how far back the ATO can audit for who gets 4 years.

What interest and penalties can apply?

Amended assessments bring shortfall interest charge (TAA Sch 1 s 280-100), and general interest charge on anything left unpaid. Neither charge is deductible for income years starting on or after 1 July 2025 (ITAA 1997 s 26-5(1A)).

There may also be a base penalty of 25% to 75% of the shortfall, depending on whether it resulted from a failure to take reasonable care, recklessness or intentional disregard (or a position that was not reasonably arguable), which can be increased or reduced (TAA Sch 1 ss 284-90, 284-220, 284-225). Because two tests turn on the Commissioner's satisfaction, TR 2023/1 says you should self-assess by taking a reasonable view of how the Commissioner would regard those matters, and links this to the reasonably arguable position rule for penalties (paras 109–110 and footnote 70; s 284-15(2)).

If past returns were wrong, a voluntary disclosure to the ATO made before the ATO tells you it is examining your affairs generally reduces the base penalty by 80% (s 284-225).

How do you dispute an ATO residency decision?

1. During the audit. Answer with evidence organised by test and income year. A position paper is often your main opportunity to change the result before assessments issue. See responding to a position paper.
2. Objection. You can object to an amended assessment, stating your grounds fully and in detail (TAA s 14ZU). For most individuals, the deadline is the later of 2 years after notice of the assessment being amended (4 years for some taxpayers) and 60 days after the notice of amended assessment is served (s 14ZW(1B), (1BA)). The objection is limited to the matters the amendment changed (s 14ZV). If you miss the deadline, you can lodge the objection with a written request for the ATO to accept it late, explaining the delay (s 14ZW(2)–(3)). See how ATO objections work.
3. Tribunal or court. If the objection is disallowed, you can apply to the Administrative Review Tribunal or appeal to the Federal Court, generally within 60 days after you are served with the objection decision (ss 14ZZ, 14ZZC, 14ZZN). You must prove the assessment is excessive or otherwise incorrect and what it should have been, and you are generally limited to your objection grounds (ss 14ZZK, 14ZZO). For the domicile test, the forum can matter: the joint judgment in Harding notes that the tribunal can decide for itself, on the evidence, whether it is satisfied a permanent place of abode is overseas, while a court's role on that question is to decide whether the Commissioner erred in law ([17]–[18]). Harding was decided when the tribunal was the AAT, which the ART replaced on 14 October 2024.

If you are planning a move, a private ruling on your residency generally binds the ATO if it applies to you and you rely on it (TAA Sch 1 ss 357-60, 359-5).

Next step

Send us the ATO letter or position paper, your departure and return dates, where you and your family lived in each income year, the returns lodged for those years, and a short note on your work and any Australian home you kept. If the ATO has given you an offshore information notice, tell us the date it was given. In a first call we'll tell you which tests are in play, how the evidence looks and what the deadlines are.