How does the ATO decide whether someone is an Australian tax resident in 2026?

The ATO applies Australia's existing residency tests, including the ordinary concepts test, domicile test, 183-day test and Commonwealth superannuation test. No single factor, such as citizenship or days overseas, decides every case. The ATO considers intention, family, accommodation, assets, work and social connections.

Do Australian citizens pay tax in Australia while living overseas?

Citizenship does not determine Australian tax residency. A citizen who becomes a foreign resident generally pays Australian tax only on Australian-sourced income and taxable Australian property gains. A person who remains an Australian resident is generally assessed on worldwide income, with foreign income tax offsets potentially available.

What happens to Australian shares when an Australian tax resident moves overseas?

When an individual ceases Australian tax residency, CGT event I1 can deem many non-taxable-Australian-property assets, including shares, to be disposed of at market value. The taxpayer may elect to disregard the gain or loss, but the assets are then generally treated as taxable Australian property until disposal or residency resumes. Professional advice is essential.

Can a foreign resident claim the main residence CGT exemption on an Australian home?

Usually not. Foreign residents are generally denied the main residence exemption when a CGT event occurs, even for the period they lived in the home, unless a limited life-events exception applies and other conditions are met. The former six-year absence rule does not override the foreign-resident restriction.

Do foreign residents pay the Medicare levy in Australia?

A person who is a foreign resident for Australian tax purposes is generally not liable for the Medicare levy for the foreign-resident period. Part-year residents may need a Medicare Entitlement Statement or other evidence. Medicare levy surcharge and private health rules should be checked separately.

What tax rate applies to Australian rental income earned by a foreign resident?

Foreign residents lodge an Australian return for net rental income and pay foreign-resident rates, with no tax-free threshold. For 2025-26, the rate was 30% from the first dollar up to $135,000, then 37% to $190,000 and 45% above that. State land tax and foreign-owner surcharges may also apply.

Australian Tax Residency When Moving Overseas: The Complete 2026 Guide

Moving overseas does not automatically end Australian tax residency. Nor does keeping an Australian passport, bank account or investment property automatically preserve it. Residency is determined from the law and the full pattern of a person’s life.

The result can change how salary, foreign investments, Australian rent, capital gains, Medicare levy and tax offsets are treated. An incorrect assumption may remain hidden for years, then surface when the Australian Taxation Office reviews a property sale or data received under international information-sharing arrangements.

This 2026 guide explains the current Australian framework, the records to keep and the major tax decisions to make before departure.

Tax Residency Is Not Immigration Residency

Tax residency is separate from citizenship, permanent residency and visa status. An Australian citizen can be a foreign resident for tax. A temporary visa holder can be an Australian resident for tax.

Australian tax residents are generally taxed on worldwide income. Foreign residents are generally taxed only on Australian-sourced income and gains from taxable Australian property. Temporary residents can receive concessions for some foreign income and capital gains.

Status	General Australian tax scope	Tax-free threshold	Medicare levy
Australian resident	Worldwide income	Usually available	Usually applies
Foreign resident	Australian-sourced income and taxable Australian property	Not available	Generally exempt
Temporary resident	Modified rules, including concessions for much foreign income	Resident treatment may apply	Depends on Medicare entitlement

Treaty rules can change the outcome where both Australia and another country regard the person as resident.

Australia’s Four Individual Residency Tests

An individual is an Australian resident if they satisfy any applicable test. The facts need to be considered together.

1. The resides test

This asks whether the person resides in Australia according to ordinary meaning. Relevant factors include:

physical presence;
intention and purpose;
family and business ties;
maintenance and location of assets;
social and living arrangements; and
the regularity and duration of visits.

A person who accepts a two-year overseas posting but leaves a spouse and children in the Australian family home, returns frequently and maintains Australian routines may have a stronger case for continuing residency than someone who moves the household indefinitely and establishes a settled life abroad.

No minimum number of days automatically determines this test.

2. The domicile test

A person domiciled in Australia is generally resident unless the Commissioner is satisfied their permanent place of abode is outside Australia.

“Permanent” does not mean everlasting. The analysis looks at whether the overseas living arrangement has an enduring quality and whether the person has abandoned residence in Australia for the relevant period.

Evidence can include a long-term overseas lease, relocation of family, disposal or long-term rental of the Australian home, overseas employment, local registrations, schooling and community ties.

A series of hotels and short leases across countries can make it harder to establish a permanent place of abode outside Australia.

3. The 183-day test

Someone present in Australia for 183 days or more during an income year may be resident unless their usual place of abode is outside Australia and they do not intend to take up residence here.

This test often matters for arrivals, not only departures. It is not a rule that permits an Australian domiciliary to remain resident-free merely by spending fewer than 183 days here.

Count part-days carefully and retain travel records.

4. The Commonwealth superannuation test

This specialised test applies to certain Australian Government employees who are members of specified older Commonwealth superannuation schemes, as well as their spouses and children under 16. It does not make every Australian with a super account a resident.

A Practical Residency Example

Jordan leaves Melbourne on 1 October 2026 for an open-ended role in Singapore. Jordan’s spouse and child move too. They lease their Australian home to unrelated tenants for three years, sign a two-year Singapore lease, enrol the child in school, obtain local health cover and move most personal belongings.

These facts support foreign residency from departure, although no fact is decisive.

Now change the facts: Jordan’s family remains in Melbourne, Jordan uses employer-provided accommodation, returns every six weeks, keeps the home available and expects to come back after 12 months. Continued Australian residency becomes more plausible.

The tax difference can be significant. Assume Jordan earns the AUD equivalent of $180,000 overseas and receives $20,000 of net Australian rent:

Treatment	Australian assessable scope
Australian resident	$180,000 foreign salary plus $20,000 rent, subject to offsets and treaty rules
Foreign resident	Generally $20,000 Australian rent; overseas salary generally outside Australian assessment

The other country may also tax the salary. A tax treaty and foreign income tax offset rules are necessary to manage double taxation.

Part-Year Residency and Australian Tax Rates

A person who changes status during an income year may be a part-year resident. Resident rates apply while resident, while foreign-resident rules apply to the foreign-resident period.

The tax-free threshold is adjusted for a part-year resident. The ATO formula provides a base amount plus a proportion related to the months of Australian residency. Income must be attributed to the correct periods.

For 2025-26, foreign-resident individual rates were:

Taxable income	Tax rate
$0-$135,000	30% from the first dollar
$135,001-$190,000	$40,500 plus 37% over $135,000
Above $190,000	$60,850 plus 45% over $190,000

Rates can change. Confirm the table for the year being lodged. Foreign residents generally do not pay the Medicare levy, but documentary requirements can apply.

Worldwide Income and Foreign Tax Credits

An Australian resident must generally declare foreign:

salary and consulting income;
interest;
dividends;
rent;
pensions and annuities;
capital gains;
trust distributions; and
some gains attributed from foreign entities.

Convert amounts to Australian dollars using an acceptable exchange rate. The ATO publishes rates, although another reasonable, consistently applied source may sometimes be accepted.

If foreign tax was paid, a foreign income tax offset may reduce Australian tax on the same income. The offset is not always dollar-for-dollar. An offset limit applies, and unused amounts generally cannot be carried forward.

Keep foreign assessments, payslips, withholding certificates, bank statements and exchange-rate calculations for at least the applicable Australian record-retention period.

CGT Event I1 When Residency Ends

One of the biggest departure traps is CGT event I1. When an individual stops being an Australian resident, Australia can deem them to dispose of CGT assets that are not taxable Australian property at market value.

Potentially affected assets include:

Australian and overseas shares;
exchange-traded funds;
cryptocurrency;
units in managed funds;
foreign property; and
some contractual rights.

Taxable Australian property, such as Australian real property, is generally excluded because Australia retains taxing rights when it is later sold.

Pay departure tax now or elect to defer

The taxpayer can generally choose to disregard the I1 gain or loss. If the choice is made, affected assets are treated as taxable Australian property until disposal or the person again becomes resident.

Consider shares bought for $150,000 and worth $230,000 at departure:

Choice	Immediate result	Later consequence
Recognise CGT event I1	$80,000 capital gain before losses and discount	Australia generally resets involvement for that asset
Disregard I1	No immediate gain	Australia may tax the eventual disposal while non-resident

The best option depends on unrealised gains and losses, the CGT discount, expected sale date, destination-country tax, treaty rules and cash flow. Obtain market valuations at departure even if no immediate sale occurs.

The CGT Discount Can Shrink

Foreign residents generally cannot access the 50% CGT discount for gains accruing after 8 May 2012. Apportionment rules can preserve discount treatment for an earlier resident period, subject to the legislation and valuations.

Someone holding an asset across resident and foreign-resident periods may need a market value at 8 May 2012, departure or another relevant date. Missing evidence years later can make the calculation expensive and uncertain.

The treatment of assets covered by an I1 election is technical. Do not assume the same apportionment applies to every asset.

Keeping an Australian Home

Australian real estate remains within Australia’s CGT net. Rental income must be declared, and deductions may include interest, agent fees, council rates, insurance, repairs and capital works, subject to normal rules.

Foreign residents and the main residence exemption

Foreign residents are generally denied the main residence CGT exemption when the CGT event occurs. A narrow life-events exception can apply where the foreign-residency period does not exceed six years and a specified event occurs, such as terminal illness, death or certain relationship breakdowns.

This can produce a harsh outcome. A former home owned for 15 years may lose the entire main residence exemption if sold while the owner is a foreign resident and no exception applies. Selling before departure, while resident, or after genuinely resuming residency can produce different outcomes, but commercial and anti-avoidance considerations matter.

The familiar six-year absence rule does not by itself rescue a sale made while foreign resident.

Foreign resident capital gains withholding

Purchasers of Australian real property may be required to withhold a percentage of the sale price and remit it to the ATO unless the vendor provides a valid clearance certificate or variation.

Australian resident vendors should obtain a clearance certificate before settlement. Foreign residents can apply for a variation where expected tax is lower than the withholding amount. The withheld amount is a credit, not necessarily the final tax.

State taxes continue

Land tax is imposed by states and territories, not the ATO. Absentee-owner or foreign-owner surcharges may apply, and definitions differ. A person can be an Australian citizen yet an absentee owner under a state regime.

Check the rules where the property is located, including notification deadlines. Surcharges can add thousands or tens of thousands of dollars annually.

Australian Shares, Dividends and Interest

Australian companies generally withhold tax from unfranked dividends paid to foreign residents. Treaty rates may reduce withholding. Fully franked dividends are generally not subject to further Australian tax for a foreign resident, but franking credits are usually not refundable.

Australian interest paid to a foreign resident is generally subject to final withholding tax, commonly 10% subject to treaties and exceptions. Notify banks and registries of foreign residency so correct withholding occurs.

Ordinary Australian shares are often not taxable Australian property for a foreign resident unless the person and associates hold a sufficient interest in a land-rich entity or another rule applies. CGT event I1 choices can alter that result.

Superannuation When Moving Overseas

Australian citizens and permanent residents generally cannot withdraw super merely because they move overseas. Savings remain preserved until a condition of release is met.

Temporary residents who permanently depart and whose visa has ceased may be eligible for a Departing Australia Superannuation Payment. DASP withholding rates can be substantial and a higher rate applies to working holiday maker components.

Before departure:

update contact and tax details;
review insurance inside super;
check whether overseas work affects contributions;
consolidate only after checking insurance and tax;
keep access to myGov and identity documents; and
nominate or review beneficiaries.

Australian super can be treated differently by the destination country. Some countries tax growth or withdrawals that Australia treats concessionally. Cross-border advice is essential before contributing or rolling over.

Trusts and Companies Need Separate Analysis

An individual’s move does not automatically move an Australian company or trust. Company residency can depend on incorporation and central management and control. Trust residency rules consider trustees and central management and control, with different provisions for capital gains tax.

A director running an Australian company entirely from overseas can also create a taxable presence in the destination country. Conversely, managing a foreign company from Australia can create Australian residency issues.

Discretionary trust distributions to foreign residents can attract trustee tax at high rates and special rules for foreign-source income and capital gains. State foreign-person land tax and duty surcharges may look through trust deeds and beneficiary classes.

Review structures before departure, not after a distribution or property acquisition.

Tax Treaties and Dual Residency

A person can be resident under the domestic law of two countries. Australia’s tax treaties often contain tie-breaker rules examining a permanent home, centre of vital interests, habitual abode and nationality. The exact treaty wording matters.

Do not copy advice written for the United Kingdom, United States or Singapore to another destination. Each treaty and local tax system differs. The United States, for example, taxes citizens and green-card holders on a broad worldwide basis even while abroad.

Departure Checklist

Before leaving Australia

Prepare a dated statement of intentions and retain employment contracts, visas, accommodation records and removal invoices. Obtain market values for investments potentially affected by CGT event I1. Model whether to sell the family home or investments before or after residency changes.

Review companies, trusts, SMSFs and private-company loans. An SMSF must satisfy residency rules to remain complying, and prolonged overseas control can put tax concessions at risk.

Immediately after moving

Update banks, brokers, share registries, property managers and the ATO. Arrange withholding and keep evidence of the overseas home, family relocation and local connections.

Record every return visit to Australia, including arrival and departure dates and purpose. Reassess residency if the assignment, family arrangements or intended return date changes.

At tax time

Use the correct residency dates, declare required worldwide income for the resident period, claim foreign tax offsets with evidence, and lodge Australian rent and gains for the foreign-resident period.

Explain unusual positions in the return where appropriate and retain a written professional opinion for complex facts. For significant uncertainty, a private ruling may provide greater confidence.

Mistakes That Create Expensive Problems

The first is relying on the 183-day myth. The second is selling an Australian former home while foreign resident without modelling the main residence restriction. The third is overlooking the deemed disposal of shares and crypto on departure.

Other common errors include failing to notify banks, claiming refundable franking credits while foreign resident, ignoring state absentee-owner taxes, and allowing an SMSF’s strategic control to move overseas.

Finally, do not assume paying tax overseas removes the Australian obligation. Treaties and offsets manage double tax, but returns may still be required in both countries.

The Bottom Line

Australian tax residency is a facts-and-circumstances question with potentially large consequences. The best time to analyse it is before flights, contracts and asset sales lock in the facts.

Prepare a residency timeline, value investments, model CGT choices, review the family home and confirm how the destination country will tax Australian assets. Revisit the conclusion when circumstances change.

Find an Australian accountant or tax agent through WealthWorks, and consult a financial adviser where departure decisions interact with investments, superannuation and insurance.