Australian resident for tax purposes: the four tests

Australian tax residency is decided by four tests, and the most common mistake made about it is arithmetic: the belief that a day count settles the question. It does not, and it never has. A day count is one of the four routes into residency, and it is the least used of them.

The distinction matters because Australian residents are assessed on worldwide income while foreign residents are assessed on Australian-source income at a different rate scale, with no tax-free threshold. The gap between the two positions is wide enough that people plan around it, and the planning frequently rests on a rule that Australia has proposed but never enacted.

The four tests, as the law currently stands

The definition of resident in s. 6(1) of the Income Tax Assessment Act 1936 sets out four tests. They are alternatives: satisfying any one of them makes you a resident for the income year, which runs from 1 July to 30 June. The ATO’s current view on all four is in TR 2023/1, which replaced the earlier rulings on ordinary residence and permanent place of abode.

1. The resides test

The primary test, and the one that decides most cases. It asks whether you reside in Australia according to the ordinary meaning of the word — a question of fact, weighed on the whole of your circumstances. TR 2023/1 sets out the factors: the period of your physical presence, your intention or purpose in being here or away, your family and business or employment ties, the maintenance and location of your assets, and your social and living arrangements.

No factor is decisive and none is a threshold. Presence matters as evidence of how you live, not as a count to be reached. If you satisfy the resides test, the other three are irrelevant.

2. The domicile test

If your domicile is in Australia, you are a resident unless the Commissioner is satisfied that your permanent place of abode is outside Australia. Domicile is a general-law concept modified by the Domicile Act 1982: a domicile of origin persists until a domicile of choice is acquired, which requires both presence in a new jurisdiction and the intention to make it your home indefinitely.

The onus here runs the other way from the resides test. The Australian-domiciled person leaving for an overseas posting is a resident by default, and must displace that default. Harding v Commissioner of Taxation, decided in the Full Federal Court in 2019, is the case that matters: a place of abode means a town or a country, not a particular dwelling, so living in a series of serviced apartments in one foreign city does not defeat a permanent place of abode abroad.

3. The day-count test

Formally the 183-day test. You are a resident if you were present in Australia for more than half of the income year — 183 days or more in an ordinary income year, and 184 or more in an income year containing 29 February, continuously or intermittently — unless the Commissioner is satisfied both that your usual place of abode is outside Australia and that you do not intend to take up residence here.

Two features are routinely misread. The test is one-directional: reaching the threshold can make you a resident, but falling below it proves nothing, because the other three tests remain live. And the exception attached to it is conjunctive and discretionary — you need a usual place of abode abroad and no intention to take up residence, and the Commissioner must be satisfied of both.

This is the test that most resembles the Substantial Presence Test or the Indian residential status rules, and the resemblance is misleading. In those systems the day count is the spine of the analysis. In Australia it is a supplementary provision that catches people the other tests miss.

4. The superannuation test

A member of the Commonwealth Superannuation Scheme or the Public Sector Superannuation Scheme is a resident, as is their spouse and any child under 16. It applies to a defined and shrinking group of Commonwealth employees posted overseas, and it is absolute: no day count, no facts, no discretion.

The proposed reform, and its status

This needs to be stated carefully, because a great deal of published commentary states it wrongly.

In 2019 the Board of Taxation recommended replacing the four tests with a modernised framework. In the 2021-22 Federal Budget the government announced it would adopt that model. The proposal has a clear shape:

• a primary bright-line test: physical presence in Australia for 183 days or more in an income year makes you a resident, full stop;
• secondary tests for everyone else, combining a 45-day presence threshold with objective factors — a right to reside permanently, Australian accommodation, Australian family, and Australian economic interests — of which two must be met to commence residency;
• a ceasing residency rule for outbound individuals, including an overseas employment rule turning on spending 45 days or fewer in Australia in each of three consecutive income years.

As at 30 August 2026, none of this is law. No bill implementing the Board of Taxation model has been enacted. Treasury consulted further on the design in 2023, and successive budgets have neither legislated it nor formally abandoned it. The measure sits where announced-but-unenacted measures sit: real enough to plan for, not real enough to rely on.

The practical consequence is that the four tests above govern every income year up to and including the current one, and that anyone reading a bright-line day threshold as current Australian law is reading a proposal. Given the age of the announcement, verify the position with Treasury or the ATO before acting on it — the status described here is dated deliberately for that reason.

Ceasing to be a resident

Residency can begin or end partway through an income year; Australia has no formal split-year statute, but the ATO accepts part-year residency and pro-rates the tax-free threshold accordingly.

Ceasing residency has its own charge. CGT event I1 treats you as disposing of assets that are not taxable Australian property at market value on the day you cease to be a resident. You may elect under s. 104-165 to disregard that gain instead, which keeps those assets in the Australian net until you actually sell them. The choice between paying now at Australian resident rates and deferring into an uncertain future is a real one, and it is made once.

Separately, holders of a temporary visa who are not Australian residents for social security purposes may qualify as temporary residents, exempt from Australian tax on most foreign income and on foreign capital gains. That status turns on the visa, not on days.

What Residay tracks for this

Australian residency is a facts test with a day-count limb, and a day ledger serves both halves differently.

Residay counts Australian presence against the statutory threshold across the 1 July to 30 June income year rather than the calendar year, because using the wrong year is the commonest arithmetic error in this jurisdiction. It records each day’s location contemporaneously, which is what the resides and domicile tests actually run on — the pattern of a life, evidenced rather than recalled. It runs the Australian count alongside the United States, United Kingdom and Indian counts on one ledger, which is the position most people asking this question are actually in. And it keeps the record on your device, exportable for an adviser.

Planning notes

• Do not plan against a day threshold alone. The resides and domicile tests can make you a resident on a handful of days, and neither has a number in it.
• Work in income years, not calendar years. A trip that straddles 30 June splits across two assessments.
• If you are Australian-domiciled and going abroad, address the permanent place of abode question directly and early: a lease, a settled town, a stated indefinite intention. The onus is on you.
• Treat the proposed bright-line model as a forecast, not a rule, and re-check its status before each income year rather than assuming it passed.
• Decide the CGT event I1 election deliberately in the year you leave. It is not revisited.