Australian tax residency: the tests for individuals and companies
Tax residency is determined under the Income Tax Assessment Act 1936. Individuals have four alternative tests; companies have separate corporate residency tests. Here's the framework.
Why residency matters
Australian tax residency status has significant implications for how an individual or company is taxed. Generally, an Australian tax resident is subject to tax on their worldwide income, meaning income earned both within and outside of Australia. Conversely, a non-resident is typically taxed only on income sourced from Australia.
The distinction between residency and non-residency directly affects the applicable tax rates and offsets. Residents and non-residents are often taxed at different rates, and the offsets available to them may also vary. Furthermore, tax treaties between Australia and other countries can modify these domestic tax outcomes, providing relief from tax in certain circumstances.
Understanding residency status is therefore crucial for accurate tax obligations.
Individual residency — four tests
An individual is considered a resident of Australia for income tax purposes if they satisfy any one of the four tests outlined in section 6(1) of the Income Tax Assessment Act 1936. These tests provide different approaches to determining residency based on various factors.
The first test considers the ordinary concept of residency, taking into account a person’s physical presence in Australia, their family and business ties, and their lifestyle. The second test focuses on domicile, where a person is deemed to be domiciled in Australia unless the Commissioner is satisfied that they have a permanent place of abode outside of Australia.
The third test is a quantitative measure, requiring a person to be present in Australia for more than half of the income year. However, this test is not applied if the person’s usual place of abode is overseas and they have no intention of taking up Australian residence. The final test applies specifically to members of certain Commonwealth superannuation schemes and their spouses and children.
Company residency
A company is considered an Australian resident for tax purposes if it meets at least one of the tests outlined in the s 6(1) definition. These tests determine whether a company is subject to Australian tax laws.
The first test is the incorporation test, which is satisfied if the company is incorporated in Australia. The second test involves assessing central management and control; a company satisfies this test if it carries on business in Australia and its central management and control is also located in Australia. The ATO Taxation Ruling TR 2018/5 provides further explanation regarding the application of this test.
The third test focuses on shareholder control. A company satisfies this test if it carries on business in Australia and its voting power is controlled by shareholders who are Australian residents.
Reform on the agenda
The Australian government announced a reform of the corporate tax residency framework in the 2020 Federal Budget. This reform proposes a move towards a Significant Economic Connection test to determine residency.
As of 2026, the proposed reform remains under consultation and has not been formally legislated. This means the existing tests for corporate tax residency – incorporation, central management and control, and the controlling-shareholder tests – continue to be the operative framework.
The current status of the reform means that taxpayers should continue to assess residency based on the existing tests until legislation is enacted.
Frequently asked
How many tests does Australia have for individual tax residency?
Four alternative tests under the s 6(1) Income Tax Assessment Act 1936 definition — resides test, domicile test, 183-day test, and superannuation test. Satisfying any one makes you a resident.
Is corporate residency reform live?
Reform to move towards a Significant Economic Connection test was announced in the 2020 Federal Budget. As at 2026 it has been the subject of consultation but is not yet legislated. The existing incorporation, central management and control, and controlling-shareholder tests continue to apply.