“Permanent Place of Abode” Explained: Why Owning Property Overseas Doesn’t Make You a Non-Resident

Introduction

If you’re an Australian business owner planning to move overseas, it’s easy to assume that buying or renting a home abroad is enough to cut ties with the Australian tax system. It is not — the permanent place of abode test turns on whether you have genuinely commenced living permanently overseas, & property is just one factor in that assessment.

This article explains how the domicile test actually works for departing Australians, why the ATO looks beyond property ownership, & what it takes to establish that your permanent place of abode is outside Australia.

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Why Property Ownership is Not Enough

Many Australian business owners assume that buying or renting a home overseas is enough to establish non-residency for tax purposes. It is not.

Owning or renting property overseas is not sufficient to establish a permanent place of abode. The ATO applies a holistic assessment of whether you have genuinely commenced living permanently overseas, & Taxation Ruling TR 2023/1 confirms there are no hard & fast rules — no single factor, including property ownership, is decisive.

A purchased apartment or signed lease does not, by itself, answer the question the ATO is actually asking. Business owners who depart with a lease or a property purchase can discover, years later, that the ATO's assessment of their residency is very different from their own.

What “Permanent Place of Abode” Actually Means

The Plain-English Definition

A permanent place of abode is a settled, stable home that represents a person's fixed & habitual place of living. It is the opposite of temporary or transitory accommodation. “Permanent” does not mean everlasting — it means the opposite of temporary.

Following Harding v Commissioner of Taxation [2019] FCAFC 29 ('Harding'), “place of abode” refers to physical surroundings, extending to a town or country rather than just a specific dwelling. A person does not need to live in a particular house for their place of abode to be permanent. What matters is whether the nature of their presence in that town or country is consistent with both abandoning residency in Australia & living there permanently.

What the Test Is Not

Property ownership alone does not answer the residency question. A person can own a house in Singapore & still have their permanent place of abode in Australia.

TR 2023/1 illustrates the point: a taxpayer staying in whichever Malaysian hotel had the best available rate, without a fixed or habitual base, was found not to have a permanent place of abode in Malaysia. The standard is living permanently in a country, not owning property there. This is where Australian business owners get caught: treating a property purchase as a finished residency strategy.

How It Sits Inside the Domicile Test

The Structure of the Test

Most Australian business owners have an Australian domicile of origin — a legal concept that establishes Australia as their permanent legal home. That domicile persists until definitively changed.

Under subsection 6(1) of the Income Tax Assessment Act 1936 (Cth) ('ITAA 1936'), an individual with an Australian domicile is an Australian tax resident unless the Commissioner of Taxation is satisfied that their permanent place of abode is outside Australia. The test operates in two stages:

1. first, confirm the Australian domicile; and
2. second, assess whether the permanent place of abode is outside Australia.

This is the test that catches departing Australian business owners who have not established genuine permanent living elsewhere, a situation that requires careful advice on how to properly exit Australian tax residency. A business owner who has left but not truly settled overseas finds their entire tax position resting on a single, evidence-heavy question.

The Burden Sits With the Individual

The burden sits with the individual to demonstrate a permanent place of abode overseas. The ATO does not need to prove the absence of one — it starts from the position that an Australian-domiciled person is a resident.

The structure of the domicile test, confirmed in TR 2023/1, is that a person is a resident unless the Commissioner is satisfied as to the relevant proviso. A person without a compelling evidentiary case will not satisfy this test, regardless of their subjective belief about their residency.

Under Australia's self-assessment system, you must take a reasonable view of how the Commissioner would apply the test to your facts. This is where business owners who rely on assumptions rather than documented evidence find the test working against them.

What Does & Does Not Satisfy the Test

Situations Unlikely to Satisfy the Test

Based on TR 2023/1 & the case law it incorporates, the following five situations are unlikely to satisfy the permanent place of abode test:

1. maintaining an overseas rental while retaining the Australian family home available for personal use;
2. staying in hotels, serviced apartments, or short-term accommodation without a fixed or habitual base;
3. being overseas on a temporary work assignment with a clear intention to return;
4. moving between multiple countries without settling permanently in anyone; and
5. living overseas while the immediate family remains in Australia.

TR 2023/1 is explicit: if a person is living in both Australia & overseas, it is unlikely their permanent place of abode is overseas.

Situations More Likely to Satisfy the Test

Based on TR 2023/1 Example 10  (Brian, who relocated to Vietnam with his family) & Example 9 (Alicia, who took up a long-term work contract in Poland, purchased a home there, and leased her Sydney home at arm's length), these five situations are more likely to satisfy the test:

1. selling the Australian family home & relocating the family where the Australian home is retained, leasing it at arm's length with no personal access retained;
2. signing a long-term lease or purchasing property in the overseas country;
3. obtaining permanent residency or citizenship in the new country;
4. building genuine social & economic connections — employment, banking, community involvement; and
5. demonstrating that return visits to Australia are clearly holidays, not returns to an ongoing Australian life.

A permanent place of abode exists when a person has commenced living permanently overseas — not just when they have accommodation there.

The Factors the ATO Actually Looks At

The Key Indicators

The ATO does not look for one smoking gun when assessing permanent place of abode. As TR 2023/1 makes clear, the assessment is holistic — based on the entire collection of facts & circumstances.

The six indicators are:

1. Continuity & duration of overseas stay — less than two years is unlikely to satisfy the test
2. Family relocation — spouse & children remaining in Australia strongly indicates continued Australian residency
3. Australian property status — retained & available versus leased at arm's length
4. Overseas accommodation — fixed & habitual versus temporary & transient
5. Stated & demonstrated intention — does behaviour match the stated plan?
6. Settlement steps — permanent residency, local employment, banking, community ties

Treating these as isolated boxes to tick, rather than a single integrated picture, is where many business owners' residency planning fails under review.

The Intention Trap

Stating an intention to leave Australia permanently is not enough. TR 2023/1 confirms that residency is not shed when departing Australia merely by asserting an intention to never live in Australia again — it must be supported by objective conduct.

Consider an Australian business owner who moves to Dubai, declares they have left permanently, but returns frequently, keeps the family home available, & runs their economic life from Australia. The ATO will look straight past the stated intention & focus on the behaviour. Subjective intention is one input into the holistic assessment — not the answer.

Why Getting This Wrong Is Expensive

The Tax Consequences

When an Australian business owner incorrectly files as a non-resident, the ATO does not treat it as a minor adjustment. Australian residents are taxed on worldwide income, while non-residents are generally assessable only on Australian-source income. Every year, the individual filed as a non-resident becomes a year of back taxes on worldwide income.

The liability compounds quickly. A residency error spanning three or four years means each year is assessed separately, with each carrying its shortfall. Penalties for failure to take reasonable care can reach 25% of the tax shortfall, & the total across multiple years builds into a liability far larger than most business owners expect.

The Structural Cost

A residency error rarely stays confined to the individual's tax return. Australian business owners who build offshore structures on the assumption of non-residency may discover those structures do not work as designed when the ATO determines they remained resident.

The sequencing problem is what makes this expensive. Structures built for a non-resident must be re-examined when residency persists. The cost of unwinding & rebuilding after the fact far exceeds the cost of a structure that was aligned with the true tax residency position from the outset.

Conclusion

The permanent place of abode test turns on whether you have genuinely started living permanently overseas — not whether you own or rent property there. The ATO looks at the full picture, & the burden sits with the individual to demonstrate that their Australian residency has been abandoned.

Australian business owners planning to leave & seeking certainty on where their residency actually sits should speak with WealthSafe's advisory team before building an offshore structure. WealthSafe helps Australian business owners design residency positions to exit the Australian tax system & build international structures that hold up under ATO review, not just on paper.

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