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Resident or non-resident?

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  • an extract from the 'Residency' chapter of the annual Tax Summary book
  • the tests explained, and definitions of temporary resident from above book
  • a summary of the advantages and disadvantages of residency status.

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Resident tax rates

One of the very first questions you are asked on your tax return is: 'Are you an Australian resident?' It may seem an unusual or unnecessary question, but the Tax Office wants to get this one cleared up early, as it makes a big difference to everything else that follows.

The tax law definition of 'resident' is a bit long and cumbersome to repeat here, but the Tax Office views residency in an entirely different way to other Australian governmental agencies, which deal with things like immigration, visas and citizenship. Whether you're defined as a resident or non-resident has no impact on your passport or even your status as a permanent resident, and vice versa. You can find out more about residence for tax purposes here.

The Tax Office is really only interested in your earnings, and uses the term 'resident for tax purposes' to decide how much you should be taxed for a financial year. The tax law contains a series of tests to take to determine your status. But if you 'reside' in Australia under the usual meaning of the word, you don't need to look at any of the prescribed tests.

The reason the Tax Office gives such weight to residency is that a person's status as a resident or not can make quite a difference for tax purposes, as the law treats residents and non-residents differently.

Australian residents are generally taxed on all of their income, from here and from overseas, and non-residents are taxed only on income sourced in Australia. The marginal tax rates are different for income below $37,000, and the effective tax rates are much higher for non-residents.

Resident tax rates

Here are the 2011-12 and 2012-13 tax rates applied to residents for tax purposes, and to non-residents. Note: These rates do not include the Medicare levy.

General individual income tax rates for residents

2011-12 tax threshold from July 1, 2011

Taxable income

Rate (%)

Calculate as

$0 - $6,000

0

Nil tax payable

$6,001 - $37,000

15

15c for each $1 over $6,000

$37,001 - $80,000

30

$4,650 plus 30c for each $1 over $37,000

$80,001 - $180,000

37

$17,550 plus 37c for each $1 over $80,000

$180,001 and above

45

$54,550 plus 45c for each $1 over $180,000

2012-13 tax threshold from July 1, 2012

$0 - $18,200

0

Nil tax payable

$18,201 - $37,000

19

15c for each $1 over $18,200

$37,001 - $80,000

32.5

$4,650 plus 32.5c for each $1 over $37,000

$80,001 - $180,000

37

$17,550 plus 37c for each $1 over $80,000

$180,001 and above

45

$54,550 plus 45c for each $1 over $180,000

2011-12 and 2012-13 resident minors' tax rate on eligible income*

Taxable income

Rate (%)

Up to $416

Nil

$417 to $1,307

66% for the part over $416

$1,308 and over

45% on the entire amount

From 1 July 2011, the ability of minors to access the LITO on their 'unearned income' is removed. The 'unearned income' of minors who are orphans or disabled, as well as compensation payments and inheritances received by minors will not be affected by this measure.

General individual income tax rates for non-residents

2011-12 tax threshold from 1 July 2011

Taxable income

Rate (%)

Calculate as

$0 - $37,000

29

29c for each $1

$37,001 - $80,000

30

$10,730 plus 30c for each $1 over $37,000

$80,001 - $180,000

37

$23,630 plus 37c for each $1 over $80,000

$180,001 and above

45

$60,630 plus 45c for each $1 over $180,000

2012-13 tax threshold from 1 July 2012

$0 - $80,000

32.5

32.5c for each $1

$80,001 - $180,000

37

$26,000 plus 37c for each $1 over $80,000

$180,001 and above

45

$63,000 plus 45c for each $1 over $180,000

2011-12 and 2012-13 non-resident minors' tax rate on eligible income

Taxable income ($)

Rate (%)

Up to $416

29% on the entire amount

$417 to $732

$120.64 plus 66% on the part over $416

$733 and over

45% on the entire amount


The main difference is that non-residents are not eligible for the tax-free threshold, but the cents-in-the-dollar amounts vary by a considerable amount as well for income below $37,000.

If you think you need to determine your residency status, the Tax Office has put together an online interactive tool that will help you determine your status.

It has also outlined a number of possible scenarios to help taxpayers determine whether or not they would be considered resident or non-resident. The Tax Office has also applied its own tests to some of the scenarios to see how these tests can work. Click here to see these residency/non-residency scenarios.

Last reviewed 26/07/12

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