Selling, Leasing, or Keeping Your Australian Home: What It Means for Australian Business Owners Moving Offshore

Introduction

Moving offshore, it is easy to treat the family home as a personal or financial decision to sort out later. What you do with it is also a tax & residency decision that shapes how the Australian Taxation Office (ATO) reads your departure.

This article explains what each option signals about your Australian tax residency & the ongoing tax obligations that follow, so you can decide before you leave rather than after.

Interactive Tool: See How Your Home Choice Affects Your Tax Residency

Why Your Family Home Is the ATO’s First Point of Reference

The Resides Test & Your Permanent Place of Abode

For Australian business owners moving offshore, the family home is not only a personal asset. It is one of the clearest facts considered when the ATO assesses whether Australia remains the place where an individual resides.

Under Section 6(1) of the Income Tax Assessment Act 1936 (Cth) (‘ITAA 1936‘), the resides test is the primary tax residency test. The ATO considers the whole pattern of life, including:

• Physical presence in Australia;
• Family location, home & economic ties; and
• Social connections & intentions about the overseas move.

Keeping Australia as the practical centre of family life can make a non-resident position harder to support, even where an overseas move has occurred. The risk is that property decisions, family arrangements & Australian economic ties can point to continued Australian tax residency.

The Impact of Taxation Ruling TR 2023/1

The central issue is sequence: the ATO applies the resides test before considering the other residency tests. Taxation Ruling TR 2023/1 (‘TR 2023/1’), issued in January 2023, consolidated the Commissioner’s view of all four residency tests, including the resides test as the starting point.

A family home provides visible evidence of where an individual lives, keeps personal connections & maintains a settled base. That evidence is weighed against the same pattern-of-life factors set out above, rather than in isolation.

For a departing business owner, treating the property decision as only a financial choice can leave the tax residency position inconsistent with the facts.

What Retaining Your Australian Home Actually Signals to the ATO

The Domicile Test & Maintaining Australian Ties

Keeping an Australian home available for personal use can make it difficult for Australian business owners to show that a permanent place of abode has been established overseas. Under Section 6(1) of the ITAA 1936, the domicile test considers whether the individual’s domicile remains in Australia, unless a permanent place of abode exists outside Australia.

A family home retained in Australia & available for the owner’s personal use is the ATO’s most concrete indicator that Australia remains the owner’s permanent home. The property does not decide tax residency by itself, but it can undermine an otherwise credible departure position when combined with continuing family, home, or economic ties.

How the ATO Views Vacant Properties

Leaving a former home vacant, or using it as a holiday house, can preserve the property’s main residence treatment for capital gains tax purposes because it is not being used to produce income. However, that treatment does not remove the residency question, since the home remains available for personal use rather than showing a clear break from Australia.

For Australian business owners, this can create a difficult mismatch: the property may remain eligible for an unlimited main residence exemption period, yet its continued availability can signal that Australia remains the owner’s real home. The ATO may therefore view the vacant property as evidence that the owner has not genuinely departed.

Does Leasing the Property Change the Residency Picture

Demonstrating a Break in Personal Use

Leasing an Australian home at arm’s length can support a genuine departure narrative because the property is no longer available as a personal residence. The position is stronger when the move is supported by settled overseas accommodation & other evidence of establishing a permanent home abroad.

Leasing the property at arm’s length is a positive residency indicator, but it does not resolve the residency question on its own. Rental income also remains Australian-sourced & assessable regardless of where the owner lives. As a result, Australian business owners can still face an unfavourable tax residency outcome if the wider facts continue to show Australia as the place of residence.

The Six-Year Absence Rule for Rented Properties

In practice, this matters for business owners when a former home is rented after departure, but the owner remains an Australian tax resident. Under Section 118-145 of the Income Tax Assessment Act 1997 (Cth) (‘ITAA 1997‘), the owner can elect to treat the former home as the main residence for up to six years of an income-producing absence, preserving the Capital Gains Tax (CGT) main residence exemption for that period.

The six-year period can apply to each separate absence if the owner moves back in & genuinely re-establishes the property as the main residence. However, there is a trade-off:

• another property cannot also receive the main residence exemption for the same period; and
• exceeding six years can create a taxable portion of the capital gain.

Selling the Property as the Strongest Signal of Genuine Departure

Severing the Primary Residential Tie

Selling the Australian family home removes the most significant residential tie for Australian business owners planning a permanent move offshore. Without that property remaining available as a personal home, the departure position is more consistent with the factors considered under the resides test & domicile test.

In assessing the wider facts, the ATO weighs the same pattern-of-life factors already outlined, with particular attention to where the family home is located & whether a permanent place of abode has been established outside Australia.

Retaining the property may make the departure position harder to support, while selling it removes a central fact pointing back to Australia.

The Critical Timing of the Main Residence Exemption

The timing of the sale can determine whether a capital gain remains exempt or becomes taxable Australian property. Section 118-110 of the ITAA 1997 provides the general framework for the main residence exemption, subject to the foreign resident changes applying to sales after 30 June 2020.

Practically, this matters for business owners when the property is intended to be sold as part of an offshore move:

• selling the family home before becoming a non-resident preserves the main residence CGT exemption; and
• selling after becoming a non-resident loses it entirely for sales from 1 July 2020 onward.

The narrow life events test may preserve limited access, but ordinary employment-driven overseas postings do not qualify. This creates a material CGT exposure if residency changes before the sale.

The Tax Consequences That Apply Regardless of What You Decide

Ongoing Taxation of Australian-Sourced Rental Income

Leasing an Australian property can support a departure narrative, but it does not remove Australian tax on the rent. For Australian business owners, rental income from Australian properties remains Australian-sourced income that must be declared by a foreign resident.

Foreign resident tax rates apply at 30 cents in the dollar from the first dollar with no tax-free threshold. This cost can become material where rent continues after departure, particularly because the non-resident rate applies even when the owner’s overseas income is outside the Australian tax return.

Foreign Resident Capital Gains Withholding Obligations

It matters for business owners when selling property in Australia after becoming a foreign resident because the sale proceeds may not be received in full at settlement. For contracts signed from 1 January 2025, the buyer must withhold 15% of the purchase price when a foreign resident sells Australian real property.

The withholding obligation arises under Section 14-200 of Schedule 1 of the Taxation Administration Act 1953 (Cth). The withheld amount is credited against the seller’s actual CGT liability when the tax return is lodged, with any excess refunded; the immediate effect is reduced cash flow available after selling property.

State-Based Land Tax Surcharges for Absentee Owners

It matters for business owners when an Australian property is retained after departure because state-based land tax can continue alongside rental income tax. Absentee-owner surcharges include:

• Victoria – a 4% surcharge for absentee owners from 1 January 2024.
• New South Wales – a 4% surcharge for absentee owners.
• Queensland – a 2% surcharge for absentee owners.

These charges add an ongoing holding cost to Australian properties, whether the property is leased or retained for personal use. The amount payable depends on the state in which the property is located, so retaining Australian real estate can create continuing tax obligations after the move offshore.

What Must Be Decided & Documented Before Leaving

Aligning Property Decisions with Your Departure Narrative

For Australian business owners, the Australian home decision needs to fit within strategic residency planning for moving offshore rather than sit as a separate financial choice. The property outcome should be considered alongside the intended tax residency cessation date, overseas accommodation, remaining Australian ties, rental arrangements, or a proposed sale.

The departure position becomes harder to support when the property decision conflicts with the wider evidence. Relevant matters include:

• Selling before departure, where the intention is to preserve the main residence CGT exemption.
• Leasing at arm’s length, where personal use is ending.
• Keeping the property, where the ongoing Australian connection is understood as part of the residency assessment.

Essential Records to Maintain for the ATO

Property records should be retained well before departure because the ATO may need evidence of the home’s use, each absence, rental activity, or the establishment of a permanent home abroad. Missing documents can make it harder to support the intended tax residency status or calculate the correct capital gain.

The relevant records include:

• Purchase contracts & settlement statements for the Australian property.
• Evidence of genuine main residence use, including utility bills, electoral enrolment, mail, personal effects, or a driver licence.
• Rental agreements, rent records, & agent documents for each leasing period.
• Market valuation on the first day of rental, where the property first becomes income-producing.
• Dates of moving out & returning, plus evidence of any later re-establishment as the main residence.
• Evidence of a permanent home abroad, including one-way flights, overseas lease agreements, cancellation of Australian memberships, or other departure evidence.

Conclusion

For Australian business owners moving offshore, keeping, leasing, or selling an Australian home can affect the departure narrative, tax residency analysis, rental obligations, CGT exposure, & cash flow on sale. Keeping the property available for personal use supports continuing Australian ties; leasing at arm’s length supports departure but leaves Australian-sourced rental income assessable; selling removes the strongest residential tie, with timing before non-residency critical to the main residence CGT exemption.

These decisions should be settled before departure, with records supporting main residence status, a permanent home abroad, foreign resident capital gains withholding, & state-based land tax obligations. Australian business owners considering this decision can speak with WealthSafe’s specialists about strategic residency planning for moving offshore for tailored advice. WealthSafe helps develop a structure that remains legally sound, defensible, & consistent with how life, property, and business actually operate.

Frequently Asked Questions