Leaving Australia does not automatically make you a non-resident for tax purposes. Australian tax residency depends on four statutory tests and on the facts of your move: where you live, how long you plan to stay away, and what ties you keep. Many people who move overseas for a year or two remain Australian residents, and some who expect to keep residency lose it.
The stakes are real. Once you become a foreign resident, Australia taxes only your Australian-source income, but you lose the tax-free threshold, you may face a deemed sale of some assets under capital gains tax (CGT) event I1, and you can lose the main residence exemption on your home.
This guide explains how the tests work for people leaving Australia and what changes on the day you cease to be a resident, as of October 2026.
Key takeaways
- Australia uses four tests: the resides test, the domicile test, the 183-day test and the Commonwealth superannuation test. Meeting any one makes you a resident.
- For most people leaving, the domicile test is the hard one. You stay resident unless your permanent place of abode is outside Australia.
- When you stop being a resident, CGT event I1 treats most assets other than Australian real property as sold at market value, unless you choose to defer.
- Foreign residents generally cannot claim the main residence exemption when they sell their Australian home, apart from narrow "life events" cases.
- Foreign residents pay 30% from the first dollar of Australian taxable income up to $135,000, with no Medicare levy.
The four residency tests
The legal definition of "resident" sits in section 6 of the Income Tax Assessment Act 1936. The Australian Taxation Office (ATO) explains how it applies in Taxation Ruling TR 2023/1 and on its tax residency pages.
| Test | What it asks | Relevance when leaving |
|---|---|---|
| Resides test | Do you reside in Australia in the ordinary sense of the word? | Looks at physical presence, intention, family, assets and social ties |
| Domicile test | Is your domicile in Australia? If so, you are resident unless your permanent place of abode is outside Australia | The main test for Australians who move overseas |
| 183-day test | Were you in Australia for more than half the income year? | Rarely decisive for leavers, but can apply in the year you leave or if you return often |
| Commonwealth superannuation test | Are you a member of certain Commonwealth public sector super schemes? | Applies to some government employees posted overseas |
You are a resident if you meet any one test. The resides test is the primary test, but for Australian-born people who move abroad the domicile test usually decides the outcome. Domicile is a legal concept that generally stays in Australia unless you acquire a domicile of choice elsewhere, which means intending to make another country your home indefinitely.
How the tests apply when you leave
The resides test
The ATO looks at the whole picture, including:
- how long you are away and whether you plan to return;
- where your spouse, children and other close family live;
- whether you keep a home in Australia, and whether it is rented out;
- where your assets, bank accounts and business interests are;
- social and community ties, such as clubs, memberships and a Medicare card.
A person posted overseas for 18 months who keeps the family home empty, leaves their children in Australian schools and returns often will usually still reside in Australia. A person who sells up, moves the whole family and signs a long lease abroad is in a different position.
The domicile test and "permanent place of abode"
If your domicile is Australian, you remain a resident unless the Commissioner is satisfied your permanent place of abode is outside Australia. In Harding v Commissioner of Taxation (2019), the Full Federal Court held that this refers to a country rather than a particular house, so you do not need a fixed home abroad from day one. You do need to have settled in another country in a lasting way. Frequent moves between short rentals and countries can make that harder to show.
The 183-day test
If you are in Australia for more than half the income year, you are a resident unless your usual place of abode is outside Australia and you do not intend to take up residence. For leavers, this test mostly matters in the year of departure or when long return visits add up. Our explainer on the 183-day rule covers why day counts are only part of the picture, and a tool such as the day counter can help keep records.
Reform proposals
In the 2021-22 Budget, the government announced a plan to replace these tests with a simpler model built around a 183-day "bright line" and a set of secondary factors. As of the July 2026 compilation of the 1936 Act, that change has not been legislated, and the four tests above still apply.
What changes when you become a foreign resident
Income tax
Foreign residents are taxed only on Australian-source income, such as rent from Australian property, Australian employment income and certain capital gains. Foreign income is outside the Australian net. The foreign resident rates, as listed in PwC's Australia tax summary, are:
| Taxable income (foreign resident, 2025-26 and 2026-27) | Rate |
|---|---|
| $0 to $135,000 | 30% |
| $135,001 to $190,000 | 37% |
| Above $190,000 | 45% |
There is no tax-free threshold and no Medicare levy for foreign residents. In the year you leave, the tax-free threshold is reduced in proportion to the months you were resident.
Australian banks and companies withhold tax on investment income paid to foreign residents: generally 10% on interest and 30% on unfranked dividends, with lower rates under many tax treaties. Fully franked dividends carry no withholding. Banks and brokers need to know about the change of status to apply the correct rate.
CGT event I1: the deemed sale
Under section 104-160 of the Income Tax Assessment Act 1997, CGT event I1 happens when you stop being an Australian resident. You are treated as having disposed of each CGT asset you own for its market value, except "taxable Australian property", which mainly means Australian real estate and certain interests in land-rich entities. Assets acquired before 20 September 1985 are exempt.
In practice, I1 catches assets such as shares in listed companies, managed funds, foreign property and crypto. Individuals can choose to disregard the deemed sale. The choice must cover all affected assets, and they are then treated as taxable Australian property until you sell them or become a resident again. Deferring keeps them in the Australian tax net, and gains that accrue while you are a foreign resident generally do not get the 50% CGT discount.
Which option produces less tax depends on the value of the assets, your other income, the tax rules in your new country and how long you expect to stay away. People often model both before lodging the return for the year they leave. Our guide to crypto taxes when you move abroad looks at the same issue for digital assets, and our list of countries with exit taxes compares Australia with other systems.
Your home and the main residence exemption
Since rules passed in 2019, a person who is a foreign resident at the time they sell their Australian home generally cannot claim the main residence exemption, even for the years they lived in it. The only exception is the "life events" test. It applies if you have been a foreign resident for six years or less and the sale follows a terminal medical condition of you, your spouse or a minor child, the death of your spouse or a minor child, or a divorce or separation.
This interacts with the well-known "six-year absence rule", which can let you treat a former home as your main residence for up to six years while it is rented out. That rule does not help if you are a foreign resident on the day the contract is signed.
Separately, since 1 January 2025 buyers of Australian real estate must withhold 15% of the price unless the seller provides an ATO clearance certificate. Australian residents can get a certificate; foreign residents generally cannot, and the withheld amount is credited against their tax.
Superannuation, HELP and other loose ends
- Super generally stays in your fund until you meet a condition of release, such as reaching preservation age and retiring. The departing Australia superannuation payment is only for temporary visa holders, not citizens or permanent residents.
- HELP and other study loans still have to be repaid. Overseas debtors must report their worldwide income to the ATO each year.
- Medicare eligibility generally ends when you no longer live in Australia.
- Double residence is possible. If another country also treats you as resident, the tie-breaker rules in a tax treaty may decide which country has the main taxing right. See our guide to tax treaty tie-breaker rules.
Some Australians who move abroad look at a formal residence in a low-tax jurisdiction as their next step. One option some nomads look at is Honduras tax residency through Próspera, which uses a flat lump-sum tax of $5,000 per year. Holding a residence or certificate elsewhere does not by itself end Australian residency; that depends on Australia's own tests and the facts above.
A practical checklist for leavers
- Review the four tests against your plans, including where family will live and what you keep in Australia.
- Gather market values for all assets on your departure date, in case CGT event I1 applies.
- Compare, with professional advice where needed, the effect of accepting the deemed sale or choosing to defer.
- Consider the timing of any sale of your Australian home before or after departure.
- Update your residency status with banks, brokers, your super fund and the ATO.
- Keep records of travel dates, leases and ties abroad. Our guide on how to track days for tax residency covers the basics.
Frequently asked questions
How long do I have to be overseas to stop being an Australian tax resident?
There is no fixed period. The ATO looks at your intentions and ties as well as time away. Older ATO guidance treated an absence of about two years as significant, but the current ruling, TR 2023/1, says no single period decides the question.
Can I keep a house in Australia and be a non-resident?
Yes, owning property is only one factor. But keeping a home available for your use, rather than renting it out, points toward continued residence, and selling it as a foreign resident usually means losing the main residence exemption.
Do I pay tax in Australia on foreign income after I leave?
Not if you are a foreign resident for tax purposes. Foreign residents are taxed only on Australian-source income. If you remain a resident, worldwide income stays taxable, with credits for foreign tax paid.
What is CGT event I1?
It is the deemed sale of most assets, other than Australian real estate, at market value when you stop being an Australian resident. You can choose to defer it for all assets, which keeps them in the Australian tax net until you sell.
Do I need to tell the ATO I am leaving?
Your residency status is reported in your tax return for the year you leave. Banks, brokers and your super fund also need updated details, and you may need to lodge returns in later years to report Australian income or a CGT event.
Important: This article is general information, not tax, legal or financial advice. Rules change often and depend on your personal circumstances. Speak with a qualified professional in each relevant country before you act.