Tax Implications of Permanently Leaving Australia: What You Need to Know Before You Move

Packing up your life and moving overseas for good is exciting, but before you book that one-way ticket, it pays to understand what happens to your tax affairs. But one thing to be clear about: leaving Australia permanently doesn’t make your tax obligations disappear just because you’re in a new country.

In fact, the day you cease Australian tax residency can trigger capital gains events, change how your investments are taxed, and reshape your relationship with the ATO for years to come.

This guide walks through everything you need to consider, from residency tests to superannuation, property, shares, and business interests, so that you can plan your departure with confidence rather than surprises.

Prefer watching over reading? Head to our Clear Tax Accountants YouTube channel for a quick video explaining the key tax considerations before leaving Australia permanently: Leaving Australia Permanently? The ATO Can Tax You Before You Even Sell.

What Happens Tax-Wise When You Permanently Leave Australia?

When you stop being an Australian tax resident, your tax obligations shift fundamentally.

As a resident, you’re taxed on your worldwide income. As a non-resident, you’re generally only taxed on Australian-sourced income, things like rental income from an Australian property, Australian-based employment income, or income from an Australian business.

Sounds simple, but the transition itself is a taxable event. Ceasing residency can trigger a deemed disposal of certain assets (more on that below), you lose access to the tax-free threshold, and several government agencies need to be notified. Treating your move as “just” an address change is one of the most common, and costly, mistakes people make.

Determining Your Australian Tax Residency Status

Your visa, citizenship or intention alone doesn’t determine your tax residency. The ATO applies a set of residency tests (outlined in ruling TR 2023/1) and looks at the facts of your situation. Broadly, you may still be considered an Australian tax resident if you meet any one of these:

• The residents test – based on ordinary concepts: your physical presence, family, and social and economic ties to Australia.
• The domicile test: your legal home is in Australia, and you haven’t established a permanent home elsewhere.
• The 183-day test: you’ve been in Australia for 183 days or more in the income year.
• The superannuation test: you (or your family) are a member of certain Commonwealth super schemes.

A general rule of thumb used by advisers is that a genuine, ongoing move overseas for around two years or more, with a home and life established abroad, will usually support a change to non-resident status, but this isn’t guaranteed, and each case turns on its own facts.

Getting this wrong is significant: it can mean paying tax on the same income in two countries.

Example: Sarah leaves Adelaide for a permanent job in New Zealand. She ends her lease, moves her family, and has no plans to return to Australia. In this case, she’s likely to become a non-resident for Australian tax purposes from the day she leaves.

Her New Zealand salary is generally no longer taxed in Australia, but she may still need to pay Australian tax on income that comes from Australia, such as investment income.

What to Do Before Leaving Australia

Before you go, it’s worth working through a pre-departure checklist so nothing falls through the cracks:

• Confirm your likely residency status and the date it will change.
• Review all Australian assets (property, shares, super, business interests) and their tax treatment as a non-resident.
• Get up-to-date market valuations of assets that may be subject to a deemed disposal.
• Decide whether to sell any assets before or after departure.
• Arrange for your mail, banking and tax agent details to be updated.
• Consider prepaying or restructuring loans linked to Australian investments.
• Speak to a cross-border tax adviser about double tax treaty positions in your destination country.

Final Australian Tax Return Considerations

You’ll generally need to lodge a tax return covering the period up to your departure date, declaring your worldwide income for the part of the year you were still a resident.

If your income and circumstances change partway through the year, your return will need to reflect a “part-year” resident calculation, and any residency-triggered capital gains (see below) need to be included in that year’s return.

Declaring Foreign Residency (Where Applicable)

Once you’ve ceased residency, you’ll declare yourself as a foreign resident on future tax returns (if you’re still required to lodge one) and on other ATO interactions, such as TFN declarations for any Australian income you continue to earn.

This affects the rate of tax withheld from Australian income and removes access to certain offsets available only to residents.

Capital Gains Tax Implications When Leaving

This is the part of the Australian exit tax that catches the most people off guard. When you cease Australian tax residency, CGT event I1 is triggered. The ATO treats you as having disposed of most of your worldwide assets, other than “taxable Australian property” like Australian real estate, at their market value on the day you leave.

You then have a choice:

• Accept the deemed disposal – declare the gain (or loss) in your departure-year tax return. If you’ve held the asset for 12 months or more, the 50% CGT discount generally still applies.
• Elect to defer – choose to disregard CGT event I1 for those assets. They then remain connected to the Australian tax system and are taxed when you eventually sell them, even while you’re a non-resident.

The right choice depends heavily on where you’re moving, whether that country has a more or less favourable capital gains regime, and how the relevant double tax agreement applies.

Example: David owns international shares that have gone up in value. If he sells them before leaving Australia, normal CGT rules apply. If he waits until after becoming a non-resident, he may still be taxed because the shares can be treated as sold when he leaves, unless he chooses to defer the tax.

The timing of the sale and whether he chooses to defer can have a real impact, so it’s worth getting advice before leaving Australia.

Australian Investment Properties After Departure

Australian real estate is treated differently: it’s “taxable Australian property” and remains within the Australian CGT net regardless of where you live. It isn’t caught by the CGT event I1 deemed disposal; instead, CGT is calculated when you actually sell it.

However, becoming a non-resident changes the numbers substantially:

• You lose the 50% CGT discount on gains made while you were a non-resident. How much depends on your purchase date and ownership period; get it calculated, don’t assume it.
• If you’re a foreign resident when you sell your former home, you generally lose the main residence CGT exemption, including for the years you lived in it as your home. The main exception is the life events test, which applies if you’ve been a foreign resident for six continuous years or less and, during that period, you, your spouse, or your child under 18 was diagnosed with a terminal illness, passed away, or the sale happened because of a formal relationship breakdown agreement.
• Foreign resident capital gains withholding (FRCGW) applies at settlement on Australian property sales, currently 15% of the sale price, with no minimum property value threshold, unless the seller provides a valid clearance certificate or an ATO variation.
• Rental income earned while overseas remains taxable in Australia at non-resident rates, which start at 30% with no tax-free threshold.

Example: Family moving to Canada, keeping an Australian rental property: The Nguyen family relocates permanently to Toronto but decides to keep their Melbourne investment property and rent it out.

Once they become non-residents, the rental income is taxed on the first dollar at non-resident rates, and they’ll need to factor in FRCGW for any future sale.

If the property was once their home, they should get advice from a property tax accountant before selling it as a non-resident, since the main residence exemption may no longer apply.

Australian Shares, ETFs and Managed Funds

Listed Australian shares, ETFs and managed fund units are generally not taxable Australian property, so they are typically caught by the CGT event I1 deemed disposal discussed above (unless you make the deferral election).

Franking credits also work differently for non-residents; unfranked dividends and the unfranked portion of dividends are generally subject to non-resident withholding tax rather than being included in an Australian tax return.

Businesses and Trusts

If you own or control an Australian company, trust, or business, moving overseas can affect more than just your personal tax. If the business is managed from overseas, its tax residency could change, creating unexpected tax issues.

Example: Mark moves to Singapore but continues to run his Australian consulting company as its sole director. Since he’s making key business decisions from overseas, the company’s tax residency could be affected or even create dual-residency issues under tax treaty rules.

That’s why it’s worth getting advice from a business tax accountant before you leave. Simple steps, such as changing governance arrangements or appointing an Australian-based director, are usually much easier to implement before your departure.

Superannuation Considerations

Superannuation isn’t caught by the CGT event I1 deemed disposal. However:

• You cannot access your super until you reach preservation age (currently 60) and meet a condition of release, regardless of where you live.
• The temporary resident early-access scheme (Departing Australia Superannuation Payment, or DASP) applies only to certain temporary visa holders, not to Australian citizens or permanent residents leaving permanently.
• Ongoing contributions, insurance inside your fund, and fund fees are worth reviewing, since some funds adjust cover or fees for members who become non-residents.

Foreign Income After Departure

Once you’re a non-resident, foreign-sourced income (such as salary, foreign investment income, or foreign business income) is generally outside the Australian tax net. You’ll instead be taxed on that income according to the rules of your new country of residence.

Double Tax Agreements (DTAs)

Australia has DTAs with many countries, including the UK, US, Canada, New Zealand and most of Europe and Asia. These treaties determine which country has taxing rights over specific types of income, and often include a “tie-breaker” test if both countries could otherwise claim you as a resident.

If you retain Australian-sourced income after leaving, checking the relevant DTA is essential to avoid double taxation and to claim any foreign tax offset you’re entitled to.

Updating the ATO and Other Government Agencies

Before or shortly after you leave, update your details with:

• The ATO – residency status, address, and contact details.
• Medicare – your entitlement generally ends once you’re not an Australian resident.
• Services Australia / Centrelink – for any pensions or benefits you receive.
• Your super fund(s) – contact details and residency status.
• Your bank and financial institutions – some may require updated documentation once you’re overseas.

Common Mistakes Made Before Relocating

• Assuming a visa change or “living overseas” automatically makes you a non-resident.
• Forgetting the CGT event I1 deemed disposal applies to worldwide assets, not just Australian ones.
• Selling an Australian property without accounting for the loss of the main residence exemption.
• Not arranging a clearance certificate before an Australian property sale, resulting in unexpected withholding.
• Leaving super fund and bank details out of date, causing correspondence to go missing.
• Not checking the relevant DTA before assuming that income will be taxed only once.

A Practical Departure Tax Checklist

Before leaving Australia, you should consider this checklist, which includes: residency confirmation, asset reviews, valuations, property and share considerations, superannuation, business structuring and agency notifications — everything on this list, in one place, so you can work through it step by step before you leave.

Final Thoughts

If you’re planning to leave Australia permanently, don’t leave your tax planning until the last minute. The rules vary depending on what you own and where you’re moving, so getting advice before you go can make a real difference.

If you’re planning your departure, get in touch with the team at Clear Tax; we help Australians moving overseas plan their exit cleanly, avoid common pitfalls, and stay compliant on both sides of the border.

FAQs

Do I need to lodge a final Australian tax return?

Yes, you’ll typically need to lodge a return covering income up to your departure date, including any residency-triggered capital gains.

Do I automatically become a non-resident when I leave?

No. Residency depends on the ATO’s tests and your overall circumstances, not simply leaving the country.

What happens to my Australian investment property?

It stays subject to Australian CGT and rental income tax as a non-resident, but you lose the CGT discount and may lose the main residence exemption.

Will I pay Capital Gains Tax when I leave Australia?

CGT event I1 can deem a disposal of most non-property assets on your departure date, unless you elect to defer it.

Can I keep my Australian bank account?

Generally yes, though some banks require updated ID and residency details, and interest may be subject to non-resident withholding tax.

Should I notify the ATO before moving overseas?

Yes, updating your residency status and contact details helps avoid compliance issues and ensures correspondence reaches you.