Australian tax residency: months in India and the four ATO tests

No number of days in India ends Australian tax residency on its own. Four months away or a full year, the law sets no point at which time abroad turns a resident into a foreign resident. Its main test has no number in it.

The same rules govern retirees who winter with family in India and people who go back for months to care for parents or work remotely. They sit in a 1936 Act and are explained in Australian Taxation Office guidance updated in June and July 2026.

The resides test asks where a person lives

Section 6 of the Income Tax Assessment Act 1936 defines a resident as a person who resides in Australia, then adds groups who count even if they do not. The ATO calls the resides test the primary test. A person who fails it is still a resident if they meet one of three statutory tests.

The resides test can weigh six factors, among them time spent in Australia, intention, family and work ties, assets and social life. “No single factor is likely to be decisive, and many will be interrelated,” the ATO says. Where the bills are paid and where the children go to school both indicate where a person resides. Keeping a house is not the same as living in it.

The 183-day test, one of the three, counts days in Australia during the income year, continuous or not. More than half the year here makes a person a resident, unless their usual place of abode is outside Australia and they have no intention of taking up residence here. Failing it does not, by itself, make anyone a foreign resident.

Two rented-out properties, two different answers

Domicile, a person’s permanent home by law, can come from birth, by choice or by operation of law. Under the domicile test, a person domiciled in Australia is a resident unless the ATO is satisfied that their permanent place of abode is outside Australia. Case law, the ATO says, has established that “permanent does not have the meaning of everlasting or forever”. Courts, tribunals and the ATO weigh the length of the stay overseas, any home set up abroad, any residence kept here, and family and financial ties.

In one ATO worked example, Emily, who is single, takes a one-year contract teaching English in Japan and rents out her Australian property, planning to travel in Asia before returning to work here. The ATO accepts that she is residing in Japan, yet she remains a resident under the domicile test, because her permanent place of abode is still Australia.

In another, Bronwyn takes a three-year job overseas, with an option of three more, and her husband and three children go too. They rent out the family house, intending to return one day, and rent a home abroad. She is a foreign resident. Holding on to the house, although relevant, is not persuasive enough against the other factors, and by renting it out she has arguably abandoned it for the duration of her stay.

In the ATO’s table of common situations, someone who leaves temporarily and sets up no permanent home elsewhere is generally a resident; someone who leaves permanently is generally treated as a foreign resident from departure. A 2013 legal decision, the ATO says, shows that a person who “fails to cut their connection with Australia” will be treated as a resident.

What residency changes on a tax return

An Australian resident, the ATO says, must declare all income earned in Australia and overseas, even if taxed abroad, and may be entitled to a foreign income tax offset. For a temporary resident, most foreign income is not taxed here. A foreign resident pays no Medicare levy. In the 2026-27 income year, a part-year resident’s tax-free threshold is at least A$13,464, against the full A$18,200.

A two-step tie-breaker for residents of both countries

India applies its own residence rules, including the resident but not ordinarily resident status covered in this magazine’s earlier piece on RNOR. For a dual resident, where a tax treaty exists, the ATO says a tie-breaker test would usually decide which country has the right to tax.

The 1991 agreement between Australia and India breaks the tie in two steps. The person is treated as resident only of the country where a permanent home is available to them. If one is available in both, or in neither, the tie goes to the country with which their “personal and economic relations are closer”, with citizenship and habitual abode as factors.

A day count for Australian tax residency is still only a proposal

In the 2021-22 Budget the former government announced it would replace the residency rules with a framework based on a Board of Taxation model, and Treasury consulted on it from 21 July to 22 September 2023. Its paper set out a bright line as the primary test: 183 days or more physically present in Australia in an income year.

Below that, secondary tests would use a 45-day threshold. Under one, a long-term resident would cease to be a resident after fewer than 45 days in Australia in the current income year and in each of the two before it.

The paper said the framework was “not yet law”, and Treasury’s consultation page still says so, with no outcome reported. The ATO’s guidance, updated in June 2026, sets out the four current tests, and the Act’s definition, as compiled on 1 October 2026, still begins with a person who resides in Australia.

Writing about Australians sent to work abroad, the 2023 paper said whether a departing person has settled permanently elsewhere and abandoned their Australian residence is “often far from clear”. Under the current tests, a long stay in India is weighed with the rest of a person’s life: the bills, the family, the house. No rule turns it into a number of days.