Well, the answer will primarily depend on whether the person ceases to be a “resident of Australia” for tax purposes at the time they leave Australia.
And this can be one of the most difficult issues in tax law to determine. Not only will it depend on the precise facts and the intention of the taxpayer, but it can also involve what often seems to be a “judgement-call” at the relevant time. This is especially the case as a taxpayer’s residency status is worked out on an income year basis, and this can change from one income year to another.
But putting aside all the issues involved in actually determining whether a person ceases to be a resident of Australia for tax purposes part-way through an income year, let us assume this is the case.
So, what are some of the general tax consequences associated with such part-year residency?
For a start, the person’s tax threshold for the relevant income year will be adjusted downwards (pro-rated) to reflect the fact that the person ceased to be a resident for tax purposes part-way through the income year. As a result, this pro-rated threshold will apply to the person’s assessable income:
- from all sources both within and outside Australia for the period they are a resident of Australia, and
- from sources within Australia while they are a foreign resident.
Importantly this, in effect, means that the resident tax rates do not change on the basis of a person’s part-year residency – but only the relevant tax free threshold.