Months in India each year? How the ATO decides your Australian tax residency

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. It asks where a person lives, and its main test has no number in it.

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

The first test asks where you live

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 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 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.

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 with an Australian domicile is a resident unless the ATO is satisfied that their permanent place of abode is outside Australia. In that phrase, the ATO says, case law 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.

Two of the ATO’s worked examples show how those factors cut. Emily, who is single, takes a one-year contract teaching English in Japan and rents out her Australian property, planning to travel in Asia and then come back to work. 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.

Bronwyn takes a three-year job abroad, 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 overseas. She is a foreign resident. Holding on to the house, although relevant, was not persuasive enough, and by renting it out she arguably abandoned it for the duration of her stay.

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

When India counts you as resident too

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 a 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, it is the country with which their “personal and economic relations are closer”, with citizenship and habitual abode as factors.

The answer matters. The ATO says an Australian resident 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 day count for Australian tax residency, 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 the Board’s principle that, unlike the existing rules, there should be clear thresholds for becoming and ceasing to be a resident.

The primary test would be a bright line: 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. No rule turns it into a number of days.