Australia is one of the highest-taxed countries in the world. With a top marginal tax rate of 45%, tax can be one of the most significant expenses that professional athletes taxed in Australia incur.

With this in mind, understanding whether you’re considered an Australian resident for tax purposes is a vital first step to determining your tax obligations. Your residency status will affect your assessable income and the tax rate that’s applied when you lodge your tax return.

The Australian Taxation Office (ATO) uses a different residency test to other government departments. Their approach means that you can be classified as an Australian resident for tax purposes even if you’re not an Australian citizen or permanent resident.

Am I an Australian resident for tax purposes?

As the law currently stands, the ATO usually considers you an Australian resident for tax purposes if you:

  • have always lived in Australia
  • have come to Australia and live here permanently
  • have been in Australia continuously for six months or more, and for most of that time, you’ve had the same job and lived at the same address
  • have been in Australia for more than six months of the financial year, unless your usual home is overseas and you don’t intend to live in Australia
  • go overseas temporarily but don’t set up a permanent home in another country

If you’re deemed to be an Australian resident for tax purposes, you must declare all income you’ve earned both in Australia and internationally in your Australian tax return – even if you’ve already paid tax on this income overseas. If you have paid income tax in another country, you may be entitled to an Australian foreign income tax offset. 

What if I’m a foreign resident?

While athletes considered Australian residents for tax purposes are taxed on their worldwide income, foreign residents and temporary Australian residents are generally only taxed on the income they earned in Australia.

How can I minimise my tax as a professional athlete?

If you earn your income as a professional athlete, you should seek tax advice from an advisor who specialises in your field. The ATO has created specific tax rules that apply to professional sportspeople recognising that they’re often paid differently to the norm. Working with an advisor who specialises in advising sportspeople will allow you to take advantage of these concessions – such as income averaging – to minimise your tax and maximise your income.

As a professional athlete, you’re a driven high achiever who knows that thorough preparation is key to success. Taking a strategic approach to your tax affairs can save you a significant tax bill in the future.

At Archer Sports Advisory, we understand the many tax rules that apply to professional athletes. We support some of Australia’s biggest cricket, soccer, AFL, netball and basketball stars with tailored advice to help them establish, grow and protect their wealth.

* Archer Sports Advisory is aware of the proposed legislative changes to residency and how this may impact tax advice for our clients. We’re monitoring the situation closely and will provide an update once the legislation is released.

Whilst every effort has been made to provide valuable, useful information in this guide, Archer Sports and any related associated entities accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances.  This is intended as general information only.

About the Author: Tim Pullman

My experience providing accounting, taxation, and business services to a diverse range of clients enables me to deliver technical advice distinctive to their needs. My passion for sport drives my focus on individuals from a sports background, while I also support a broad spectrum of organisations, including SME and family businesses with their business, taxation and strategy requirements. Please connect with me on LinkedIn.

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