How an Italian person who live in Australia will pay taxes? She is living in Australia for a year and working for a startup.

This situation creates a "dual residency" risk where the taxpayer may be liable for taxes in both Australia and Italy. Because the stay is exactly "one year," she sits on the borderline of tax residency in both nations.

Below is the tax framework for an Italian citizen working in Australia for one year.

1. Introduction

For a one-year assignment, this taxpayer will almost certainly be an Australian resident for tax purposes (or a Working Holiday Maker) while potentially remaining an Italian tax resident if she does not formally break ties with Italy.

The Australia-Italy Double Taxation Agreement (DTA) is the legal mechanism that prevents her from paying full tax twice. Generally, Australia gets the first right to tax the income earned from her job there, and Italy grants a credit for that tax paid.

2. Core Explanation

A. Australian Tax Status

Her tax obligations in Australia depend entirely on her visa type. There are two common scenarios:

Scenario 1: Working Holiday Visa (Subclass 417 or 462) If she is on a "Working Holiday" visa, she is taxed as a Working Holiday Maker (WHM) regardless of how long she stays.

• Tax Rate: 15% on every dollar earned up to $45,000.
• Tax-Free Threshold: **0**. She does not get the first ~18k tax-free.
• Action: She must give her employer her Tax File Number (TFN) declaration indicating she is a WHM.

Scenario 2: Standard Work Visa (e.g., TSS 482) or Student Visa If she is on a standard work visa and stays for more than 6 months, she typically qualifies as an Australian Resident for Tax Purposes.

• Tax Rate: 0% on the first $18,200 (Tax-free threshold).
• Tax Rate: 16% (for 2024-25) or 19% (historical standard) on income between 18,201 and 45,000.
• Medicare Levy: She is likely exempt from the 2% Medicare Levy if she is not entitled to Australian public health care (Italy has a reciprocal health agreement, so she may be entitled to Medicare, in which case she pays the levy; if not entitled, she must apply for an exemption certificate).

Superannuation (Retirement)

• Her employer must pay "Superannuation" (currently 11.5%+) on top of her wages.
• Refund: When she leaves Australia permanently, she can claim this money back as a Departing Australia Superannuation Payment (DASP). The tax on this withdrawal is 35% (or 65% if she was a Working Holiday Maker).

B. Italian Tax Status (AIRE & Fiscal Domicile)

Italy taxes its residents on worldwide income. To stop being an Italian tax resident, she must generally meet two conditions:

1. AIRE Registration: She must register with the Anagrafe degli Italiani Residenti all'Estero (Registry of Italians Residing Abroad).
2. 183-Day Rule: She must reside outside Italy for more than 183 days in the calendar year.

• If she registers with AIRE: She generally ceases to be an Italian tax resident. She pays tax only to Australia on her Australian income. She would only file in Italy if she has other Italian income (like renting out a house in Milan).
• If she does NOT register with AIRE: She remains an Italian tax resident. She must declare her Australian income to the Italian Agenzia delle Entrate.

C. Applying the Treaty (Double Taxation)

If she remains an Italian tax resident (common for 1-year stays where people forget to register with AIRE), she relies on the Australia-Italy Double Tax Agreement.

• Article 15 (Dependent Personal Services): Australia has the right to tax the salary because the work is physically performed in Australia.
• Foreign Tax Credit: When she files her Italian tax return (Modello Redditi), she includes her Australian income to calculate her Italian tax liability. She then subtracts the tax she already paid to Australia (the "Foreign Tax Credit") from her Italian bill.
• Note: Since Australian tax rates are often lower than Italian rates, she might owe the "difference" to Italy.

3. Summary of Obligations

4. Audit and Practitioner Considerations

If reviewing this client's situation, a tax professional should verify:

1. AIRE Registration Date: If she registers with AIRE after July 2nd of the year, she remains an Italian tax resident for that entire calendar year (since she wasn't abroad for the greater part of the tax period).
2. Fiscal Domicile: Even if registered with AIRE, if she keeps her spouse/children/main bank accounts in Italy, the Agenzia delle Entrate may argue her "center of vital interests" remained in Italy.
3. Australian Residency Start Date: Australia's tax year runs July 1 – June 30. Italy's is Jan 1 – Dec 31. This misalignment often requires prorating income across two different Italian tax returns.
4. Visa Subclass: Using the "Resident" tax rates on a "Working Holiday" visa is a common audit trap. The ATO data-matches visa subclass to tax returns automatically.

5. Suggested Next Steps

1. Check Visa Type: Confirm if it is subclass 417/462 (Working Holiday) or 482 (Skills Shortage). This dictates the Australian tax rate.
2. Apply for TFN: Do this immediately upon arrival via the ATO website.
3. Consult on AIRE: She should speak with an Italian Commercialista to decide if registering with AIRE is beneficial or mandatory for her specific 12-month window.
4. Track Dates: Keep flight tickets and boarding passes to prove the exact day count for the 183-day tests in both countries.