If I retire overseas, do I pay tax in Australia? Tax residency explained

Why citizenship doesn’t decide it

It depends on whether you are still an Australian resident for tax. Your citizenship doesn’t settle that, and neither does the address in your passport.

The ATO says it does not use the same rules as the Department of Home Affairs, so you can be a citizen and a foreign resident for tax, or the other way round. We can set out the rules, but only a registered tax agent, or the ATO, can tell you how they apply to you.

What are the four residency tests?

The ATO uses four tests. Meet the first and you are a resident, full stop. Fail it, and you are still a resident if you meet any one of the other three.

Test	What it asks
Resides	Do you live in Australia, in the ordinary meaning of the word? This is the main test.
Domicile	Is your permanent home by law in Australia? If it is, you are a resident unless the ATO is satisfied your permanent place of abode is overseas.
183-day	Are you in Australia for more than half the income year? If so you are a resident, unless your usual place of abode is overseas and you do not plan to live here.
Commonwealth super	Are you a Commonwealth government employee at an overseas post, in a Commonwealth super scheme? This one rarely applies to retirees.

What does the ATO look at under the resides test?

Pretty much your whole life. The ATO lists these factors:

• Physical presence: how much time you spend in Australia.
• Intention and purpose: why you left, and whether you plan to come back.
• Family: where your partner and family live.
• Business or employment ties.
• Where your assets are, and how you keep them.
• Social and living arrangements: where you have a home, belong to clubs, and live day to day.

Does spending 6 months a year overseas make me a foreign resident?

The ATO does not give a rule for this. If you split the year, as in part of the year overseas or two bases, it’s the whole picture that counts. The ATO’s examples do lean one way, though. Keeping your home, your ties and your plans to return points towards staying a resident, while renting out the home and setting up a life overseas points away from it.

Here are the two examples. In one, a woman takes a one-year job overseas and rents out her property here, and is still a resident under the domicile test. In the other, a woman moves overseas with her family for 3 years or more, sets up a home there and rents out the family home, and is a foreign resident.

Ties matter. The ATO points to a 2013 legal decision: a person who fails to cut their connection with Australia will be treated as an Australian resident. You can’t just tick a box to become a foreign resident, and what you do with your home is part of the test: see keep, rent or sell the family home.

What changes if I become a foreign resident?

Several things, and some are hard to undo. The table has the ATO’s general rules, and our guide to foreign resident tax rates has the full rate table.

	Australian resident	Foreign resident
Tax-free threshold	A$18,200	None
Rate on the first dollar of taxable income (2025-26)	Nil up to A$18,200	30%
Medicare levy	Generally 2%	None
Income from overseas	Goes in your Australian tax return	Not needed in your return from the date you stop being a resident
Australian interest and dividends	Taxed in your return	Withholding tax, as a final tax
Main residence exemption when you sell your home	Can apply	None for sales after 30 June 2020, apart from narrow life events

In the year your status changes, the ATO says you are taxed at resident rates for that year, with a part-year tax-free threshold for the months you were a resident.

Will the country I move to tax me too?

It might. Smartraveller notes that super income and lump sums may get tax concessions in Australia that the country you retire in won’t give. It also says that applying for residency overseas may affect your Australian tax residency.

Every country has its own tax rules, so you’d want a tax adviser over there as well as a registered tax agent here.

An example, not real people

Here are two retired couples who both leave each winter, and which way the ATO’s factors lean for each. Their actual residency would be for the ATO or a tax agent to decide.

ATO factor	Kath and Bill	Ann and Phil
Time away	4 months each winter	2-year lease in Portugal, home once a year
Home in Australia	Kept, empty while they are away	Rented out on a 2-year lease
Visa overseas	Visitor stays	Portuguese residence visa
Family and clubs	Children and grandchildren nearby; still in the bowls club	Children here; club memberships ended
Plans	Come home each spring	Decide after 2 years

Most of Kath and Bill’s factors point towards Australia, while Ann and Phil’s point both ways. Either couple would need a registered tax agent to look at the full facts. A trial year before a longer lease is one way to test the move first.

What should I ask a registered tax agent?

1. Based on my plans, which residency tests do I meet, and why?
2. If I become a foreign resident, from what date, and what changes in that year?
3. How will rent, interest and dividends from Australia be taxed?
4. What happens to capital gains tax on my home if I sell while I am overseas?
5. Does the country I am moving to have a tax agreement with Australia, and how does it apply to me?
6. What records should I keep of my time in and out of Australia?

What this means for you depends on

• How long you are away each year, and whether you come back.
• Whether you keep a home in Australia, and whether you rent it out.
• Where your partner, children and grandchildren live.
• Whether you take up residence in another country.
• Where your money and assets are held.
• Your plans and reasons, which the ATO weighs alongside the facts.