Australian Expat Tax: Leaving or Returning to Australia

Australian expat tax: what changes when you leave or return?

Leaving Australia does not, by itself, end Australian tax residence. The result depends on the statutory residence tests, the facts maintained after departure and, where two countries treat a person as resident, any applicable tax treaty.

The tax consequences can arise before the first overseas salary is paid. Residence, departure capital gains tax, the Australian home, employee equity, superannuation, foreign companies and trusts should be reviewed as one departure or return transaction.

How is Australian tax residence determined?

The current Australian law applies four residence tests to individuals. The proposed replacement framework discussed in earlier years has not displaced these existing tests.

• The resides test asks whether the person resides in Australia according to ordinary concepts, assessed from the whole pattern of life and connections.

• The domicile test can treat a person with an Australian domicile as resident unless the person has a permanent place of abode outside Australia.

• The 183-day test can apply to a person present in Australia for more than half the income year, subject to its statutory exception.

• The Commonwealth superannuation test applies to specified Commonwealth scheme members and certain spouses and children.

No single factor is decisive. Citizenship, an Australian passport, an overseas visa, days abroad, ownership of an Australian home and statements of intention must be considered with the actual living arrangements.

For dual residents, a treaty tie-breaker may examine a permanent home, centre of vital interests, habitual abode and nationality, depending on the treaty.

What happens if you remain an Australian resident?

An Australian resident is generally assessed on worldwide ordinary and statutory income. This can include overseas salary, bonuses, shares and options, investment and rental income, business profits, foreign pensions and trust distributions.

Foreign tax paid may support a foreign income tax offset, but the offset does not necessarily equal all foreign tax and is subject to timing, character and limitation rules. Foreign employment income is not generally exempt merely because the services are performed overseas.

What happens if you become a foreign resident?

A foreign resident is generally assessed on Australian-source income and capital gains from taxable Australian property. Australian duties, rent, business income connected with an Australian permanent establishment and gains on Australian real property may remain taxable.

Ceasing residence can trigger CGT event I1. Broadly, the individual is taken to dispose of CGT assets that are not taxable Australian property at market value when residence ends.

An individual may choose to disregard those gains and losses, but affected assets are then treated as taxable Australian property until disposal or until Australian residence resumes. The election can defer, rather than eliminate, Australian tax exposure.

What happens to an Australian home?

The continuing main-residence rule and six-year absence rule should not be applied without considering the foreign-resident restriction. If a person is a foreign resident when the disposal CGT event occurs, the exemption is generally unavailable unless a statutory life-events exception applies.

Rental deductions, interest tracing, depreciation, land tax, foreign-resident withholding and record keeping also need separate review. A pre-departure market valuation is often commercially useful.

What should be reviewed before departure?

1. Determine the most supportable residence outcome and likely change date.

2. Review employment, accommodation, family movements, return patterns and authority to work.

3. Model CGT event I1 and compare paying departure tax with making the section 104-165 choice.

4. Review property, shares, options, trusts, private companies, cryptocurrency and employee equity.

5. Assess superannuation, foreign pension, payroll, treaty, withholding and foreign-tax-credit mechanics.

What should be reviewed when returning to Australia?

The return date can change the taxation of foreign investments, companies, trusts, pensions and employee equity. A person becoming resident may obtain a market-value cost base for certain non-Australian assets, but taxable Australian property and temporary-resident rules require separate treatment.

Before returning, obtain valuations and preserve acquisition, contribution and distribution records. Foreign companies, trusts and retirement plans should be reviewed before high-level decisions or withdrawals occur from Australia.

Frequently asked questions

Does spending fewer than 183 days in Australia make me a non-resident?

No. The 183-day test is only one of four tests. The resides and domicile tests can still produce Australian residence.

Does an overseas employment contract prove non-residence?

No. It is relevant evidence, but the overseas home, family location, return pattern, Australian accommodation and actual conduct must be considered.

Can I keep the six-year main-residence exemption while overseas?

Potentially while resident, but a person who is a foreign resident when selling will generally be denied the exemption unless a statutory life-events exception applies.

Before acting

A departure or return review can integrate residence, CGT, property, employment, superannuation, companies, trusts and treaty consequences before the transaction date.

Book an Expat Tax Review

This article provides general information only and does not constitute tax or legal advice. Residence and treaty outcomes are fact-sensitive and should be documented against the law applying at the relevant time.

Current at 27 July 2026.