Australian tax residency: What expats need to know

In today’s world, many professionals live in one country, work in another and invest across multiple jurisdictions. One of the biggest mistakes we see is assuming that tax follows your passport, visa status or where you physically spend most of your time.

It doesn’t. Tax follows residency.

For Australian tax purposes, residency is determined by a range of factors, including your personal, family and economic connections to Australia. It is not simply determined by where you work or how much time you spend overseas.

Getting your Australian tax residency wrong can affect how your salary, investments, foreign property and capital gains are taxed and reported.

What is Australian tax residency?

Australian tax residency is separate from your citizenship, visa status or immigration residency. The Australian Taxation Office (ATO) considers four tests when determining whether you are an Australian tax resident: the ordinary concepts test, domicile test, 183-day test and Commonwealth superannuation fund test.

There is no single factor that determines your residency. Your family and personal ties to Australia, assets, employment, living arrangements and the nature of your time overseas can all play a role.

This means you cannot always determine your tax residency simply by counting the number of days you spend in Australia.

Common global mobility pitfalls include:

• Assuming that moving overseas automatically ends Australian tax residency.
• Failing to disclose foreign salary, rental income or investment earnings while remaining an Australian tax resident.
• Paying tax overseas and mistakenly believing there is no Australian reporting obligation.
• Unexpected Capital Gains Tax (CGT) consequences when leaving or returning to Australia.
• Overlooking offshore bank accounts, share portfolios and foreign investments.

For someone moving overseas, the key question is whether your circumstances mean you have stopped being an Australian tax resident.

Can you be a tax resident of two countries?

Yes. You can potentially be a tax resident of Australia and another country under each country’s domestic tax rules. This can create tax obligations in both countries and make it unclear where your income should be taxed.

Australia’s double tax agreements can help in these situations. Your residency under Australian law may differ from your residency under a tax treaty, which can include rules for determining treaty residency and addressing certain instances of double taxation.

The interaction between Australian tax law, another country’s tax rules and the relevant double tax agreement can be complex, particularly if you are moving between Australia and countries such as the UK, South Africa or the UAE.

Case study: The Dubai assignment

A client, Peter*, takes a two-year tax-free role in Dubai and assumes that moving overseas automatically makes him a non-resident of Australia.

It might seem like a reasonable assumption, but his actual tax position could be quite different once all the facts are considered.

In Peter’s case:

• His spouse and children remain in Melbourne.
• He retains ownership of the family home.
• He returns to Australia regularly.
• He intends to return permanently when the assignment ends.

Despite spending most of his time overseas, the Australian Taxation Office (ATO) may still regard Peter as an Australian tax resident because his personal and economic ties remain centred in Australia.

The result

If Peter remains an Australian tax resident, his Dubai assignment could leave him with ongoing Australian tax and reporting obligations. The exact treatment of his Dubai salary will depend on his circumstances and the applicable tax rules.

What looks like a “tax-free” opportunity could become a costly mistake if his residency is not reviewed before he leaves Australia. That is why it is worth reviewing your tax position before accepting an overseas assignment.

What happens to your Australian tax when you move overseas?

If you remain an Australian tax resident after moving overseas, you will generally need to declare your worldwide income, including foreign employment income, rental income and investment earnings.

Paying tax overseas does not necessarily remove your Australian reporting obligations, although foreign tax paid may qualify for a foreign income tax offset.

Leaving Australia can also have CGT implications, depending on the assets you own and whether they remain taxable Australian property. Your residency, income, investments and assets should therefore be reviewed before you leave.

Australian cross-border tax advice can help you understand your obligations and plan your move.

Returning to Australia can also affect your tax position

Returning to Australia and becoming a tax resident again can affect how your worldwide income, investments and foreign assets are taxed.

If you acquired property or investments while overseas, it is worth reviewing their Australian tax treatment before you return. The timing of their acquisition can also affect your CGT position.

Departure and arrival tax planning can help you understand the potential tax implications before they arise.

Where Sable International adds value

At Sable International, we help globally mobile individuals and families navigate cross-border tax complexity before costly mistakes arise.

Our expertise includes:

• Australian tax residency reviews.
• Departure and arrival tax planning.
• Expatriate and foreign employment income advice.
• Foreign tax credit and double tax agreement analysis.
• Cross-border CGT planning.
• Ongoing compliance and reporting for internationally mobile individuals.

Whether you are leaving Australia for an overseas assignment, moving permanently, returning to Australia or managing investments across several countries, our advisers can help you assess your position and understand your Australian tax obligations.

Getting your Australian tax residency right

For global citizens, the greatest tax risk is often not the amount of tax paid. It’s getting residency wrong

Once residency is misunderstood, the tax treatment of salary, investments, foreign property and capital gains can all be affected.

Your passport, visa or the amount of time you spend overseas does not, by itself, determine your Australian tax residency. Your wider personal and economic circumstances matter.

Getting your Australian tax residency position right from the outset can be one of the most valuable tax planning steps for an internationally mobile individual.

Frequently asked questions

Does moving overseas mean I am no longer an Australian tax resident?

No. Moving overseas does not automatically end Australian tax residency. Your individual circumstances need to be considered under the relevant Australian tax residency tests.

What happens to my foreign salary if I am still an Australian tax resident?

If you remain an Australian tax resident, you will generally need to declare your worldwide income in Australia, including foreign employment income. Depending on your circumstances, tax paid overseas may be taken into account through a foreign income tax offset.

Can I be tax resident in Australia and another country?

Yes. You can potentially be a tax resident under the domestic laws of more than one country. Where this happens, the relevant double tax agreement may affect how your residency is treated for treaty purposes and how certain instances of double taxation are addressed.

What should I check before leaving Australia?

Before moving overseas, consider your Australian tax residency, family and personal connections, Australian property and investments, foreign income, potential capital gains tax consequences and any applicable double tax agreement.

*Disclaimer: This example is for illustrative purposes only and does not constitute tax advice.

If you are moving to or from Australia, or already living overseas with Australian financial interests, professional cross-border tax advice can help you understand your position and plan for your Australian tax obligations. Contact Sable International Tax Australia by email at [email protected] or call +61 3 8651 4501.