Leaving Australia: ceasing tax residency

How Australian tax residency is determined

There are four residency tests for individuals in section 6(1) of the Income Tax Assessment Act 1936. You are a resident if you satisfy any one of them. The current ATO guidance is TR 2023/1.

Resides test

Whether, in the ordinary sense of the word, you still reside in Australia. Physical presence, intention, family, and where your life is actually lived.

Domicile test

If your domicile is Australian, you remain a resident unless you have established a permanent place of abode outside Australia.

183-day test

Whether you were present in Australia for 183 days or more in the income year, unless the Commissioner is satisfied your usual place of abode is overseas and you do not intend to take up residence here.

Superannuation test

Applies only to members of certain Commonwealth government superannuation schemes and their families. Irrelevant to most people.

The leading case is Harding v FCT [2019] FCAFC 29. The Full Federal Court confirmed that a permanent place of abode outside Australia means a country or town, not a particular dwelling. Moving between apartments, or living in temporary accommodation overseas, does not by itself defeat the claim that you have settled abroad.

Two principles that run through everything

Australia recognises part-year residency

The tax return has a field for the date you ceased to be an Australian resident. You can be a resident for part of the year and a foreign resident for the rest. Nothing has to line up with 30 June.

The date is a question of fact, not notification

Telling your bank, updating your address, suspending health cover, selling a car, renting out the house: these are evidence, not conditions. They do not trigger the change in status. They demonstrate when it happened.

What actually gets weighed

No single factor decides it. The ATO looks at the whole picture: whether your intention on departure was long-term or indefinite as against a planned return; whether you have set up an actual home overseas (lease, purchase, utilities, local registrations); whether family members went with you; whether the Australian home stayed available for your use or was let or sold; whether Australian employment ended; the extent of work, schooling and social ties established overseas; and the continuity and length of your actual presence there.

The widely quoted "two-year rule of thumb" comes from the withdrawn ruling IT 2650. Following TR 2023/1 and Harding it is not a bright line. Treat it as a directional indicator, never as authority.

The 183-day rule: the hidden risk in short return trips

Spend 183 days or more in Australia in a single income year and the 183-day test is satisfied in its own right, whatever your home overseas looks like.

Most people assume that occasional trips back to Australia, to see family, settle an estate or deal with a property, cannot disturb a non-residency that is already established. Usually that is right. But there is a hard line. Once you pass 183 days, arguments about where your home is and where you intend to live do not automatically help you. You are left arguing the Commissioner's discretion: you must satisfy the ATO that your usual place of abode is outside Australia and that you do not intend to take up residence here.

The consequence is that the whole income year becomes a residency year. Worldwide income is assessable, and any deemed disposal you had planned for that year is pushed out.

In practice: days accumulate by income year (1 July to 30 June), not calendar year. If a trip could run long because of visa processing, probate, medical treatment or a queue you cannot control, plan to split it across two income years. Keep a running record of every entry and exit; movement records can be obtained from Home Affairs. And while back in Australia, do not rebuild residential ties: do not revert bank, licence or electoral roll addresses.

Do you need to fly back to Australia to do this?

No. This is one of the most common misconceptions. There is no rule requiring a final personal departure, and no form on which you apply to become a non-resident. Residency is self-assessed and reported in your tax return. All of the following can be done from overseas.

Update banks and brokers to an overseas address and non-resident status

Online or by phone. But it must be done. Otherwise no-TFN withholding applies at 47% on interest and unfranked distributions.
Notify the ATO

There is no dedicated form. It is the cessation date in your tax return, plus an overseas address in myGov.
Suspend private health cover

Suspend rather than cancel: this preserves waiting periods and your Lifetime Health Cover loading position. A separate LHC exemption applies after a year overseas.
Let the property

An agent can handle it end to end, and leases are signed electronically.
Dispose of a car, or keep it

Cars are CGT-exempt (section 118-5). Selling one is weak evidence either way.
Notify your employer

If Australian employment income continues, withholding must change to non-resident rates.

On the "notify within 7 days" rule: this is not a general obligation. The seven-day limit applies only to people with a HELP or HECS debt leaving for 183 days or more, who must lodge an overseas travel notification with the ATO.

Consistency matters more than the date itself

The cessation date in your return, the valuation date for your investments, and the date you told your bank must all be the same.

Inconsistency between them is the easiest thing for a reviewer to find. Where the facts are genuinely borderline, a private ruling from the ATO will fix the position. Full disclosure is required, and the application can be lodged online from overseas.

Renting out Australian property as a non-resident

Income tax is charged on the net rent, not the gross. Foreign residents get no tax-free threshold, but they do get every ordinary rental deduction, and they do not pay the Medicare levy.

Foreign resident tax rates, 2026–27

Taxable income	Tax
$0 – $135,000	30% of every dollar (no $18,200 tax-free threshold)
$135,001 – $190,000	$40,500 + 37% of the excess over $135,000
$190,001 and above	$60,850 + 45% of the excess over $190,000

The usual deductions apply

Mortgage interest, council rates, water, insurance, agent's fees, repairs, body corporate fees and Division 43 capital works at 2.5% a year for buildings constructed after September 1985.

A loss means no tax that year

If the net result is nil or negative, there is no rental income tax, and the loss carries forward indefinitely against future Australian-source income.

No Medicare levy

Foreign residents do not pay the 2% Medicare levy. An Australian return must still be lodged every year.

Depreciation: a former home loses its plant and equipment deductions

Since 1 July 2017, when you move out of your home and rent it out, the existing plant and equipment in it can no longer be depreciated under Division 40.

Dishwasher, air conditioning, carpets, blinds, hot water service: assets you previously used yourself get no deduction. Division 43 capital works at 2.5% is unaffected and continues. Assets purchased new after the property becomes a rental are deductible.

Why it matters: a quantity surveyor's report on a former home will contain Division 43 only, and will be materially smaller than for a standard investment property. Anyone modelling cash flow on the assumption that investment properties generate large depreciation deductions will be well out. Rerun the numbers on this basis, because it directly changes whether the net result is a loss.

Land tax has nothing to do with tax residency

It turns on whether the property is still your principal place of residence. Taking Victoria as the example:

Once it is let, the PPR exemption is lost

The threshold is $50,000 of site value; below that there is no land tax. It is not "rent it out and you pay". It is assessed by calendar year, on the position at 31 December.

Vacant residential land tax

VRLT applies across all of Victoria from 1 January 2025. The property must be occupied or leased for at least six months in the calendar year to be exempt. Long vacancies attract the additional tax.

Good news: the 4% absentee owner surcharge does not apply to citizens or permanent residents

Victoria's Absentee Owner Surcharge has been 4% since the 2024 land tax year, but the SRO is explicit that it does not apply to Australian citizens, Australian permanent residents or Australian residents, regardless of where they actually live.

It was 2% for the 2020 to 2023 years, and a great deal of material online still quotes the old figure. If you hold citizenship or a permanent visa, then even as a long-term foreign resident for tax purposes, the 4% does not touch you.

If you are an absentee owner, you must notify the SRO before 15 January of the following year. Failing to notify attracts penalty tax on top of the surcharge.

Across the border: New South Wales is stricter. Surcharge land tax for foreign owners is 5% from the 2025 land tax year, and a permanent resident who has not lived in Australia for at least 200 days in the 12 months to 31 December is still treated as a foreign person. If you hold property in more than one state, check each separately.

Investment portfolios: CGT event I1 and the deferral choice

The day you cease to be an Australian tax resident, CGT event I1 happens under section 104-160 of the ITAA 1997. This is where the unexpected tax bills come from: you have sold nothing, and you may owe a great deal.

Non-TAP: deemed sold at market value

ASX shares, foreign shares, ETFs, managed funds and crypto are not taxable Australian property. They are treated as disposed of at market value on the cessation date, and the unrealised gain or loss lands in that year's return.

TAP: no event, stays in the net

Australian real property, and indirect interests in it (a holding above 10% where more than 50% of the value is Australian real property), is taxable Australian property. No I1. It stays within the Australian CGT net permanently.

Gains and losses realised before the cessation date are assessed as a resident, with the 50% discount where the asset was held for more than 12 months. Unrealised positions at the cessation date are deemed disposed of and included in that year's assessable income.

The key choice: section 104-165(2)

You can elect not to trigger I1, and instead treat those assets as taxable Australian property until you actually dispose of them, or resume Australian residency.

	Trigger I1	Defer
Cash flow	Tax payable now on unrealised gains, with no proceeds to fund it	Nothing payable now
Long term	Assets leave the Australian net; future disposals are not taxed here	Assets stay in the Australian net permanently
CGT discount	50% discount available as a resident	No discount for the foreign residency period, so future tax may be higher

It is all or nothing

The choice covers every asset caught by I1. You cannot pick and choose which shares to defer and which to crystallise.

The reverse case is often overlooked

If the portfolio is under water overall, triggering I1 can be the better outcome. It crystallises capital losses while you are still a resident, available against current-year gains or carried forward indefinitely.

Document values on the day

Capture market values for every non-TAP asset on the cessation date itself: broker statements, closing-price screenshots, exchange snapshots. Reconstructing them later is difficult, and they are the basis of the whole calculation.

Spouses: two dates, two valuations

Where spouses hold assets jointly, each interest is valued at that person's cessation date. If the two dates differ, a jointly held asset has two valuation dates. Workable, but the records need to be clear.

None of these are on the usual list of questions, and any one of them can exceed everything above combined.

The main residence exemption is lost entirely. Usually the largest number in the whole exercise

Since 1 July 2020, a foreign resident selling Australian residential property loses the main residence exemption completely: for the entire ownership period, back to acquisition, with no apportionment.

The test is your residency status on the date of the CGT event, which for a sale is the contract date. A home you lived in for fifteen years, sold while you are a foreign resident, attracts CGT on the whole gain. The fifteen years of main residence use count for nothing.

Correcting a widely repeated error. "You still get the exemption if you sell within six years of leaving" is wrong. It confuses the six-year absence rule in section 118-145 with the narrow exception to the foreign resident denial. The real exception requires both of the following: you have been a foreign resident for a continuous period of six years or less at the time of the CGT event, and a specified life event occurred during that period, being a terminal medical condition affecting you, your spouse or your child under 18; the death of your spouse or your child under 18; or the CGT event happening because of a family law property settlement. Selling within six years, on its own, gives you nothing. The ordinary six-year absence rule cannot be relied on here; the foreign resident provisions take priority.

There are only two real solutions: sell before ceasing Australian tax residency, or resume Australian tax residency before selling, so that you are a resident on the contract date. Any plan to live overseas long term should have this number calculated before departure.

Foreign resident capital gains withholding: 15% of the price

From 1 January 2025, when a foreign resident sells Australian property, the purchaser must withhold 15% of the sale price, not of the gain, and the previous $750,000 threshold has been removed entirely. On a $1.5 million sale, $225,000 goes straight to the ATO at settlement, and any excess comes back only when the return is assessed. It is not an additional tax, but it is a real cash flow problem, particularly if the proceeds were earmarked for a purchase overseas. A variation can be applied for to reduce the rate, but the process needs to start months ahead.

Withholding on interest and dividends

Item	Foreign resident treatment
Bank interest	10% withholding under most treaties. A final tax; no return required for it
Franked dividends	No further Australian tax, but excess franking credits are no longer refundable
Unfranked dividends	15% under most treaties (the rate varies by treaty)
No overseas address notified	47% no-TFN withholding
HELP / HECS debt	Worldwide income must still be reported annually; an overseas travel notification is due within 7 days of leaving for 183 days or more

The loss of franking credit refunds gets the least attention and often has the largest ongoing effect. For a retirement plan built on fully franked Australian dividends, this is a permanent annual reduction in after-tax income, and it should be modelled before departure.

Self-managed super funds: the biggest trap of all

If you have an SMSF, this section matters more than everything above. The downside is not paying a little more tax. It is losing close to half the fund. APRA-regulated industry and retail funds are not affected: you move overseas and your account continues as normal. The problem is specific to self-managed funds. For how an SMSF is set up and run in the first place, see our SMSF factsheet.

Three tests, all of which must be satisfied

1. Establishment

The fund was established in Australia, or holds an asset in Australia. Low risk: usually satisfied permanently.

2. Central management and control

CM&C is ordinarily in Australia: the strategic decisions (setting and reviewing the investment strategy, reviewing performance, benefit payment strategy) are made here. High risk.

3. Active member

The fund has no active members, or non-resident active members hold no more than 50% of member balances. High risk.

CM&C: a two-year safe harbour, and its limits

There is a safe harbour for temporary absence: CM&C is taken to remain ordinarily in Australia even while trustees are overseas, for up to two years. Two limits on it are consistently missed. It requires the absence to be temporary. If the move is permanent from the outset, the safe harbour may not apply at all; two years is not an unconditional grace period, it is a tolerance for genuinely temporary absence. And it covers CM&C only. It does nothing for the active member test. This is the misconception that does the damage.

The active member test: what actually knocks the fund out

An active member is a member who is contributing, or for whom contributions are being made. If you continue contributing after becoming a non-resident, including employer SG contributions, you are a non-resident active member. If non-resident active members hold more than 50% of member balances, the third test fails immediately, and the two-year safe harbour does not help, because it does not apply to this test at all. For a two-member spouse fund, both members moving overseas and either one continuing to contribute is enough.

The good news is that this is also the easiest thing to fix: stop contributing. No contributions, no active member, test satisfied. Employer contributions can be redirected to an industry or retail fund and revisited later.

What failure costs

The fund becomes non-complying. In the year that happens, an amount equal to the market value of the fund's assets (less certain undeducted contributions) is included in assessable income and taxed at 45%. Income is taxed at 45% in every year it remains non-complying, and the 15% concessional rate and the fund's CGT discount are both lost. That is where "close to half the fund" comes from. It is not a penalty. It is a one-off tax on the whole asset base.

About the "five year" rule: it was never legislated

As at September 2026, the 2021–22 Budget measure to extend the CM&C safe harbour to five years and abolish the active member test has never been introduced into Parliament and has never taken effect.

In the 2021–22 Federal Budget the Government announced it would extend the safe harbour from two years to five, and abolish the active member test, with effect expected from around 1 July 2022. A great deal of material online, including articles by reputable firms written years ago and never revised, still describes the rules as though five years applies and contributions can continue. Plan on that basis and you will discover in year three that the fund failed long ago.

The rules currently in force remain: a two-year CM&C safe harbour, and an active member test that applies. Before making any SMSF arrangement, verify the current legislative status rather than relying on what an article said when it was published.

Four workable approaches

Stop contributing

Cease all contributions before departure and redirect employer contributions to an APRA fund. The first step in almost every case, and the lowest cost.

Enduring power of attorney

Under SIS Act section 17A(3)(b)(ii), the member resigns as trustee or director and an Australian-resident attorney takes the role. The main structural solution where the SMSF is to be kept long term.

Convert to a small APRA fund

Keep the fund but appoint a professional trustee. Suits complex assets where no suitable Australian-resident individual is available.

Wind up the fund

Close it before departure and roll over to an APRA-regulated fund. Suits smaller, simpler funds where ongoing compliance is not worth the cost.

The EPOA route depends on one thing: the delegation has to be real. The Australian-resident trustee must actually make the decisions, not sign off instructions sent from overseas. If the substantive decisions are still being made abroad, CM&C is still not in Australia and the paperwork will not save it. Timing matters too: all of this should be in place before departure. Fixing it afterwards usually means the fund has already spent time non-compliant.

The other side: tax obligations where you are going

Ceasing Australian residency usually means becoming a tax resident somewhere else, often from the moment you arrive.

Under China's individual income tax law, for example, an individual who is domiciled in China by reason of household registration, family or economic interests is a Chinese tax resident taxed on worldwide income. Australian rental income and investment returns would then need to be reported there, with treaty relief and foreign tax credits available to prevent double taxation.

Worth noting: the Australia–China tax treaty dates from 1988. Its tie-breaker provisions for dual-resident individuals are not worded the same way as the modern OECD model. Where a year could produce dual residency, that article needs to be read word by word, not assumed to follow the standard pattern. The same caution applies to Hong Kong, Singapore, the UK and the US: every treaty's tie-breaker is different.

Under the Common Reporting Standard, financial account information is exchanged between both jurisdictions in any event. Planning both ends together, rather than each in isolation, is the only reliable approach.

Checklist

Nothing here is saved or sent. Tick items off as you work through them.

Before departure

Model the main residence exemption impact and decide whether to sell before leaving or hold.
Assess the portfolio's overall unrealised position and calculate the CGT event I1 outcome.
Decide whether to make the section 104-165(2) deferral choice.
If you have an SMSF: stop contributions and put an EPOA, small APRA fund or wind-up in place.
If Australian employment income continues, confirm withholding arrangements with the employer.
Preserve evidence of intention: overseas lease or purchase, employment contract, children's school enrolment.

On the cessation date

Capture market values for every non-TAP asset: broker statements, closing prices, exchange snapshots.

After departure

Update every bank and broker to an overseas address and non-resident status (avoids 47% withholding).
Update your overseas address in myGov.
Lodge an overseas travel notification within 7 days if you have a HELP or HECS debt.
Suspend private health cover (do not cancel).
Confirm with the state revenue office whether your visa status exempts you from absentee owner surcharge.
Keep executed copies of the lease and agent's authority.
Collect evidence of overseas residence: lease or title, utilities, social insurance, employment contract.
Engage an Australian tax agent for ongoing annual lodgements.

Each year

Lodge an Australian return as a foreign resident.
Count days present in Australia for the income year (must stay under 183).
Confirm the property was tenanted for at least six months in the calendar year (VRLT).
If the SMSF is retained: confirm the CM&C arrangement still holds and that nobody has resumed contributing.

When to get advice

The cost of professional advice is well below the risk of getting any of these wrong.

The cessation date is borderline
Departure, overseas settlement and disposal of the Australian home happened at different times.
The portfolio is substantial
The difference between triggering and deferring I1 can run to six figures.
You own Australian property you may sell
The main residence exemption is usually the largest single number.
You have an SMSF
See section 6. The most severe consequence in this factsheet, and the most frequently overlooked.
You may be a tax resident of two countries
The relevant treaty's tie-breaker must be read as drafted.
You hold trusts or companies
Trustees or directors moving overseas can change the entity's own residency, with consequences similar to an SMSF.
A return trip could run long
Once the 183-day test is met, the year's planning is undone.

Where the amounts are significant and the facts are clear, a private ruling from the ATO is the most certain way to lock in both the date and the treatment. It can be applied for online from overseas.

In closing

Ceasing Australian tax residency is not a procedure. It is a set of facts. You cannot make it happen by telling someone, and you cannot simply pick the date you would prefer, but it can be planned. What separates a good outcome from an expensive one is sequence: whether the property is sold before or after, whether the portfolio is triggered or deferred, whether the SMSF was dealt with before departure. The same assets, in a different order, can differ by six figures. And nearly all of those decisions have to be made before you go.

How we help

Kristy Pan & Co. is a CPA public accounting practice in Burwood East, Melbourne, working in both English and Chinese. We model the departure as one exercise: the residency date and its evidence, the main residence exemption on the home, the I1 position and the deferral choice on the portfolio, and the SMSF arrangements, so the sequence is settled before you leave rather than discovered afterwards. If you are planning a long-term move overseas, or you have already left and have not yet dealt with your Australian tax position, talk to us.

Common questions

When do I stop being an Australian tax resident after moving overseas?

On the date the facts show you stopped residing in Australia and established a permanent place of abode overseas. There is no form and no fixed waiting period: it is self-assessed, reported as a cessation date in your tax return, and supported by evidence such as an overseas lease, employment, family moving with you and the Australian home being let or sold.

Do I need to return to Australia to become a non-resident for tax purposes?

No. There is no rule requiring a final personal departure and no application to lodge. Banks, brokers, the ATO, your health insurer and your property agent can all be updated from overseas. The only seven-day deadline is the overseas travel notification for people with a HELP or HECS debt.

How much tax do non-residents pay on Australian rental income?

For 2026–27, 30% from the first dollar of net rental income up to $135,000, then 37% and 45% above that, with no tax-free threshold and no Medicare levy. The rate applies to net rent after interest, rates, insurance, agent's fees and capital works deductions, so a negatively geared property pays no income tax that year.

What happens to my shares and managed funds when I cease Australian tax residency?

CGT event I1 treats shares, ETFs, managed funds and crypto as sold at market value on the day residency ceases, so unrealised gains are taxed even though nothing was sold. You can instead elect under section 104-165(2) to defer, keeping those assets in the Australian CGT net until you actually sell them. The choice is all or nothing.

Can a non-resident claim the main residence exemption when selling an Australian home?

Generally no. Since 1 July 2020 a foreign resident on the contract date loses the exemption for the entire ownership period, with no apportionment for the years they lived there. The only exception requires six years or less of foreign residency and a specified life event such as terminal illness, death of a spouse or child, or a family law settlement. Selling within six years on its own does not help.

Can I keep my SMSF if I move overseas?

Only with care. The fund must keep its central management and control ordinarily in Australia, which the two-year safe harbour covers for temporary absence, and it must pass the active member test, which fails as soon as non-resident members holding more than half the balances keep contributing. Stopping contributions and appointing an Australian-resident attorney as trustee are the usual solutions. The 2021–22 Budget proposal for a five-year safe harbour has never been legislated.

Glossary of terms

TR 2023/1: The ATO's current public ruling on the residency of individuals. It replaced the earlier rulings, including IT 2650 and its "two-year" rule of thumb.
Permanent place of abode: Under the domicile test, a home outside Australia that is permanent rather than temporary. After Harding it means a country or town, not a specific dwelling.
CGT event I1: The event in section 104-160 of the ITAA 1997 that happens when an individual stops being an Australian resident. Assets that are not taxable Australian property are treated as sold at market value on that day.
Taxable Australian property: Australian real property, and indirect interests in it, plus assets of an Australian permanent establishment. Stays within the Australian CGT net regardless of the owner's residency.
Non-TAP: Everything else: listed and unlisted shares, ETFs, managed funds, crypto. Caught by CGT event I1 unless the deferral choice is made.
Deferral choice: The election under section 104-165(2) to disregard CGT event I1 and treat all affected assets as taxable Australian property until they are actually sold or the owner becomes a resident again.
Main residence exemption: The CGT exemption for a home you lived in. Denied entirely to a foreign resident on the contract date, for the whole ownership period, unless the narrow life-event exception applies.
FRCGW: Foreign resident capital gains withholding. From 1 January 2025 the purchaser withholds 15% of the price on any sale of Australian real property by a foreign resident, with no threshold, unless the vendor holds a clearance certificate or a variation.
Franking credit: The company tax already paid on a franked dividend. Residents can have excess credits refunded; foreign residents cannot.
Division 43: Capital works deductions: 2.5% a year on the construction cost of a residential building built after September 1985. Still available on a former home that is let.
VRLT: Vacant residential land tax: a Victorian tax on residential property not occupied or leased for at least six months in a calendar year, state-wide from 1 January 2025.
Absentee owner surcharge: An additional Victorian land tax, 4% since the 2024 year, on land owned by absentee individuals, corporations and trusts. Australian citizens and permanent residents are not absentee individuals wherever they live.
Central management and control: The place where an SMSF's strategic decisions are made. Must ordinarily be in Australia, with a safe harbour of up to two years for temporary absence.
Active member test: An SMSF must have no active members, or non-resident active members must hold no more than half of member balances. An active member is one who contributes or for whom contributions are made.
Non-complying fund: A fund that fails the residency tests or the SIS standards. Its assets are effectively taxed at 45% once, and its income at 45% each year it stays non-complying.
EPOA: Enduring power of attorney. Under SIS Act section 17A(3)(b)(ii) an attorney can act as trustee in place of a member who is overseas, provided the attorney genuinely makes the decisions.
Private ruling: A binding written decision from the ATO on how the law applies to your specific facts. It can be applied for online, including from overseas.
Tie-breaker: The article in a tax treaty that decides which country treats you as resident when both countries' domestic laws do. The wording differs from treaty to treaty.
CRS: The OECD Common Reporting Standard, under which banks report account holders' details to their tax authority for automatic exchange with the account holder's country of residence.