Temporary resident tax benefits in Australia
The Australian tax law provides that ‘Temporary Resident’ individuals only pay tax on Australian sourced income and certain foreign income that is derived as a result of remuneration as an employee or connected with employment. In addition, capital gains on foreign and Australian assets other than those connected with Australian real property should not be subject to Australian tax. This means that foreign rental and other investment income including capital gains on disposal of foreign investments and crypto currencies may not be taxable in Australia.
Further, most individuals on temporary employment visas do not get Medicare health support, so may be exempt from paying the Medicare levy, saving a further 2% on when lodging a tax return.
Temporary residents for tax purposes are defined as individuals who:
- Hold a temporary visa under the Migration Act;
- Are not an Australian resident under the Social Security Act; and
- Their spouse is not an Australian resident under the Social Security Act
The Migration Act, Social Security Act and Income Tax Acts are all complex legislation, so an individual’s tax residency should be determined each year based on the facts. The tax law allows individuals to ‘self-assess’ their tax residency status each year and determine whether to exclude foreign income from their tax return. Care should be taken, because if the Australian Taxation Office (ATO) later audits and determines you are not a temporary resident, then you could be subject to penalties.
