Moving overseas for work, family or an extended retirement can be exciting. However, staying outside Australia for a long period may change your Australian tax residency—and the consequences can be significant.
Leaving Australia does not automatically make you a non-resident
Tax residency is not determined simply by your passport, citizenship or how many days you spend overseas. The Australian Taxation Office considers your overall circumstances, including:
- how long you intend to remain overseas;
- whether you establish a permanent home overseas;
- whether your family moves with you;
- whether you retain a home in Australia;
- your employment, business and financial connections; and
- whether your behaviour supports your stated intentions.
Someone working overseas on a short assignment may remain an Australian tax resident. Another person who relocates indefinitely and establishes a permanent home overseas may become a foreign resident for tax purposes.
Your income tax position changes
Australian tax residents are generally taxed on their worldwide income. This includes overseas salaries, rent, interest, dividends and investment gains.
Foreign residents are generally taxed in Australia only on Australian-sourced income, such as rent from an Australian property, Australian employment income and certain investment income. Foreign residents also generally lose access to the Australian tax-free threshold and are not usually entitled to the 50% capital gains tax discount for gains accumulating while they are non-residents.
You may also need to lodge tax returns in your new country. Australia has tax treaties with many countries to help determine which country may tax particular income and to reduce double taxation.
Think carefully before selling your home
One of the biggest traps involves the family home.
Foreign residents generally cannot claim the main residence capital gains tax exemption when selling an Australian home, unless they qualify under a limited “life events” exception. This can apply in circumstances involving terminal illness, death or certain relationship breakdowns.
Consequently, selling while you are a foreign resident may produce a very different tax outcome from selling before departure or after becoming an Australian resident again. Timing should be considered well before signing a contract.
When Australian property is sold, foreign-resident capital gains withholding may also apply. Since 1 January 2025, the withholding rate has been 15% of the property’s sale price, with no minimum property-value threshold. This is a withholding payment—not necessarily the final amount of tax—and the seller may claim a credit when lodging their tax return.
Other issues to review before departing
Consider whether leaving Australia triggers a deemed disposal of shares or other investments that are not taxable Australian property. You may need to choose between paying capital gains tax at departure or deferring it until the investment is eventually sold.
Tell your banks, share registries and investment platforms if your tax residency changes. Different withholding arrangements may apply to interest and dividends.
You should also review your superannuation contributions, private health insurance, Medicare position, HELP debt obligations, estate planning and the tax rules of your destination country.
The most important message is simple: seek advice before leaving, not after. A residency review and pre-departure tax plan can prevent an overseas adventure from producing an unexpected Australian tax bill.