Does Intending to Leave Australia Permanently End Australian Tax Residency & Change Residency Status For Tax Purposes

Introduction

Australian business owners often assume that stating an intention to leave Australia permanently is enough to cease Australian tax residency. The real tension is that conduct carries more weight than a stated plan to leave because the Australian Taxation Office (ATO) works out your residency status from what you actually do.

This article explains how intention shapes your tax residency when moving overseas, & where a stated plan to leave falls short. It maps the financial consequences that follow when your conduct does not line up with that intention, so you can see what a clean exit requires.

Interactive Tool: Check If Your Move Ends Australian Tax Residency

Why a Plan to Leave Is Not Enough on Its Own

The Foundation of the Resides Test

A decision to leave Australia permanently does not, by itself, end Australian tax residency. Under the ordinary concepts test explained in Taxation Ruling TR 2023/1, the ATO considers whether physical presence in Australia is usual or settled, alongside an intention to treat Australia as home, at least for the time being.

The assessment also considers factors such as:

• family ties;
• business connections;
• assets;
• social arrangements;
• behaviour; and
• duration of presence.

Australian business owners can remain an Australian tax resident while living offshore if these connections show continuity of association with Australia, so obtaining advice on exiting Australian tax residency can help clarify the position. The risk is that moving overseas without changing the underlying pattern of life may not stop Australian tax residency.

The Role of Objective Conduct in Residency Disputes

A stated plan carries less weight when daily conduct points in another direction. Paragraph 36 of TR 2023/1 identifies objectively observable factors as relevant to assessing intention, including:

• behaviour;
• contemporaneous statements;
• passenger cards; and
• visa documents.

However, none of these is decisive alone.

Paragraph 60 of TR 2023/1 states that, where there is a difference between a stated intention & the conduct, the ATO may rely on the conduct. Relevant conduct can include:

• returning to an established family home;
• maintaining Australian business interests;
• retaining assets; and
• preserving familiar routines.

That gap between intention & conduct is where residency disputes begin, leaving the stated departure position harder to defend.

How the ATO Weighs Intention Against Actions

Evaluating the Domicile Test & Permanent Place of Abode

A permanent move is not proved by a departure announcement; it must be reflected in the overseas life that follows. Under the domicile test in Paragraph 55 of TR 2023/1, an Australian-domiciled person remains an Australian resident unless the Commissioner is satisfied that their permanent place of abode is outside Australia.

Rather than simply maintaining accommodation in another country, this requires evidence of both:

1. definitely abandoning Australian residency; and
2. commencing to live permanently overseas.

Intention is relevant. However, Paragraph 35 of TR 2023/1 confirms that subjective intention is not decisive. As a result, Australian business owners can remain residents where their conduct continues to support Australia as home.

TR 2023/1 & Observable Behaviour

As discussed above, Paragraph 60 of TR 2023/1 confirms that where conduct differs from stated intention, the ATO may rely on the conduct. Under the domicile test, observable behaviour after departure—such as long-term accommodation, employment, children enrolled in school, established routines, assets, family connections, & the arrangements surrounding departure—can carry more weight than the stated plan to leave.

This is where a mismatch between intention & conduct makes it harder to support a claimed change in residency status for tax purposes.

Relocating for Business Versus Genuinely Leaving

Distinguishing Between Temporary Moves & Permanent Departures

For Australian business owners, moving overseas to run operations does not by itself establish that Australian tax residency has ended. TR 2023/1 looks at the complete pattern of the following:

• family;
• business;
• accommodation;
• physical presence;
• intention;
• assets;
• social connections; and
• living arrangements.

A temporary overseas assignment may leave Australian tax residency intact where any of the following apply:

• the family remains in Australia;
• the Australian home remains the centre of family life;
• business ties remain active; or
• regular returns continue.

By contrast, a genuine departure claim can be supported by:

• relocating with the family;
• establishing a settled overseas base; and
• returning only occasionally for short stays.

The risk is that working offshore may still leave you residing in Australia where the Australian connections remain stronger.

The Impact of Retaining the Family Home

Keeping an Australian home is not decisive on its own, but its availability for personal use can carry considerable weight.

Under Paragraph 80 of TR 2023/1, retaining a home assumes greater importance where:

• it remains available for personal use;
• you return to it; and
• overseas accommodation reflects a transitory stay.

In Quy v Commissioner of Taxation [2024] AATA 245  (‘Quy‘), the taxpayer relocated to Dubai for work, kept the Perth family home available, & stayed there during Australian visits. The Federal Court appeal succeeded because the Tribunal had confused the intention relevant to residing in Australia with the different intention relevant to the domicile test.

Keeping the family home available for personal use is one of the most reliable ways to undermine a departure claim, regardless of the stated intention to leave, creating a direct risk to the claimed tax residency position.

The Evidence That Makes a Permanent Departure Stick

Aligning Practical Steps With Stated Intentions

For Australian business owners, a permanent departure claim is stronger when the practical changes match the stated decision to cease Australian tax residency. TR 2023/1 treats the maintenance & location of assets, family ties, business connections, accommodation, social arrangements, conduct, & intention as part of the overall factual assessment.

Evidence that may support a genuine departure includes:

• Selling or no longer retaining the family home for personal use
• Relocating the family overseas
• Transitioning Australian business interests
• Establishing a settled home, routine, business, or employment arrangement overseas

Establishing Long-Term Overseas Arrangements

A long-term visa or permanent residency in the destination country can support the position that the move is intended to become an indefinite home, rather than a temporary overseas assignment. TR 2023/1 distinguishes a visa to migrate from a working visa, with the former more consistent with an intention to establish a domicile of choice.

As discussed above, conduct at & immediately after departure carries more weight than a stated plan to leave permanently. The surrounding facts can point either way:

1. A settled overseas home, family relocation, long-term work or business arrangements & limited return visits can support the intended change in residency status for tax purposes; or
2. temporary accommodation, shifting between countries or a planned return to Australia can point the other way.

What Must Be in Order Before Leaving Australia

Documenting the Wind-Down of Australian Ties

Leaving Australia with a complex business structure requires more than selecting a departure date. Australian business owners need contemporaneous evidence showing how Australian ties were wound down, where settled overseas arrangements were established, & how the facts support the claimed residency status for tax purposes.

Relevant records may include:

• Australian arrangements: lease termination, cancelled subscriptions, transferred employment arrangements, & changed banking records.
• Overseas arrangements: flight bookings, shipping receipts, a foreign employment contract, & a long-term overseas lease.

Residency is assessed from the full circumstances, so an unsupported statement of intention can leave the ATO assessing the person as an Australian resident for tax purposes. The risk is a gap between the stated plan & documented conduct, especially where business, family, property, or living arrangements remain connected to Australia.

Triggering Capital Gains Tax Event I1

Leaving Australia can create an immediate capital gains tax (CGT) issue, separate from the question of residency status. Under section 104-160 of the Income Tax Assessment Act 1997 (‘ITAA 1997’), CGT Event I1 treats a departing resident as having disposed of most assets that are not taxable Australian property at market value on the date Australian tax residency ceases.

The relevant assets must be valued at market value for the CGT Event I1 calculation, with the resulting capital gain or loss reported in the final Australian tax return. The consequence can be an immediate Australian tax liability upon leaving, even where no asset has been sold, & no cash has been received.

A deferral decision can affect the timing of that liability, so the position needs to be resolved before departure rather than during a later dispute with the ATO. For a departing business owner, late advice can make an avoidable CGT issue more expensive to address.

The Financial Consequences of Ceasing Residency

Loss of the Main Residence Exemption

For Australian business owners moving overseas, the family home can become a major tax cost after ceasing Australian tax residency. A foreign resident who sells a former main residence cannot claim the main residence exemption unless a qualifying life event occurs within a continuous six-year period after becoming a foreign resident.

The six-year absence rule available to Australian residents does not protect a former home after residency ends. As a result, the full capital gain can be left exposed to CGT in either of the following situations:

1. selling the property while it is still treated as a main residence; or
2. failing to account for the life events test.

Changes to Income Tax Rates & Medicare

Leaving Australia changes the tax treatment of Australian-sourced income from the first dollar. Non-residents lose the $18,200 tax-free threshold, & non-resident tax rates apply to Australian-sourced income from the first dollar, including income connected with Australian business interests.

Ceasing residency also ends Medicare eligibility, although a non-resident is exempt from the Medicare levy from the departure date. The final tax return includes a part-year Medicare levy exemption.

However, losing access to Medicare creates a separate cost to consider when arranging healthcare after moving overseas.

Conclusion

Leaving Australia permanently is not established by a statement alone. For Australian business owners, Australian tax residency depends on the applicable residency tests, family, business interests, the family home, overseas arrangements, evidence, & objectively observable conduct. TR 2023/1 confirms that where conduct differs from stated intention, conduct may carry greater weight, with consequences including CGT Event I1 under the ITAA 1997, changed tax rates, loss of the main residence exemption, Medicare changes, continuing superannuation rules, & a more complex final tax return.

If leaving Australia could change your residency status for tax purposes, speak with WealthSafe specialists about exiting Australian tax residency before your proposed departure. WealthSafe helps Australian business owners establish structures that are legal, defensible, & consistent with how their lives & businesses operate.

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