Working overseas does not automatically make you a non-resident for Australian tax purposes
If you leave Australia to work overseas, you might assume that living and earning income in another country means you have ceased being an Australian tax resident. That is not necessarily the case.
A recent Federal Court case involving an engineer who lived and worked in Dubai for five years demonstrates why Australian tax residency when working overseas depends on the individual circumstances, rather than simply the length of the overseas assignment.
An engineer who worked in Dubai for five years
The engineer lived and worked in Dubai for approximately five years but was found to have remained an Australian tax resident during that period.
Among the factors considered were that he:
- retained his Perth family home;
- owned two Australian investment properties;
- maintained several motor vehicles registered in Australia;
- retained Australian bank accounts and superannuation;
- had a wife and children who remained in Australia; and
- returned to Australia 12 times during the five year period.
The case illustrates that even a lengthy overseas posting does not necessarily end Australian tax residency.
In particular, a person may cease to “reside” in Australia under the ordinary concepts test but remain an Australian tax resident under the domicile test if their domicile remains in Australia and they have not established a permanent place of abode outside Australia.
How Australian tax residency rules work
Australian tax law contains several tests for determining whether an individual is an Australian tax resident. Depending on your circumstances, you may be a resident under any one of these tests.
The main tests are:
- The ordinary concepts test – considers whether you reside in Australia.
- The domicile test – generally applies where your domicile is in Australia, unless you establish that your permanent place of abode is outside Australia.
- The 183-day test – considers whether you are present in Australia for more than half of the income year, subject to the relevant requirements.
- The Commonwealth superannuation test – applies to certain Commonwealth Government employees and their spouses and children.
Importantly, you can cease to reside in Australia under the ordinary concepts test and still be an Australian tax resident under the domicile test.
That was an important feature of the Dubai case.
Why Australian tax residency matters when working overseas
Your tax residency status can have a significant effect on your Australian tax obligations.
An Australian tax resident is generally taxed on worldwide income, whereas a foreign resident is generally taxed in Australia only on Australian sourced income and certain other amounts.
In the Dubai case, the taxpayer’s employment income was accepted as being foreign sourced. However, because he remained an Australian tax resident, that income remained relevant for Australian income tax purposes.
Having a foreign employer, receiving your salary into an overseas bank account or paying tax in another country does not, by itself, determine your Australian tax residency.
Is there a two-year rule for working overseas?
No. There is no automatic two-year rule that makes an Australian worker a foreign resident for tax purposes.
The duration of an overseas assignment is relevant, but it is only one factor.
In the Dubai case, the engineer’s assignment was initially expected to last approximately 24 months and was subsequently extended. Other factors also pointed towards continuing Australian connections, including his Australian employment arrangements, salary being paid in Australian dollars, Australian bank account and continuing superannuation contributions.
A fixed-term overseas assignment does not, by itself, establish that you have permanently relocated your life outside Australia.
What factors can affect Australian tax residency?
Tax residency is determined by looking at the whole of your circumstances.
Factors that may be relevant when determining whether you have established a permanent place of abode overseas can include:
- the nature and duration of your overseas employment;
- the reason for leaving Australia;
- whether your overseas assignment is temporary or indefinite;
- where your spouse and children live;
- whether you retain a home in Australia;
- whether Australian property is retained as an investment or remains available for your use;
- where your personal belongings are located;
- the location of your financial and investment interests;
- your visa and immigration status;
- the nature of your accommodation overseas;
- your social and living arrangements overseas; and
- the frequency and nature of your return visits to Australia.
No single factor necessarily determines the outcome.
The importance of your Australian home and family
In the Dubai case, the Court accepted that retaining the Perth family home did not, on its own, mean the taxpayer continued to reside in Australia under ordinary concepts.
The home was retained so that his daughters could complete their education.
However, when the domicile test was considered, the broader circumstances were important. These included his family’s continuing connection with Australia, Australian properties and vehicles, personal belongings, Australian financial arrangements and employment and superannuation connections.
The Court also considered the nature of his accommodation and life in Dubai. Although his employer leased an apartment for him and there was evidence of an established social life overseas, this was not enough, in the circumstances, to establish a permanent place of abode outside Australia.
What this means for Australians working overseas
If you are moving overseas for work, do not assume that a long absence from Australia automatically makes you a foreign resident for tax purposes.
There is no simple number of months or years that determines the outcome. Instead, Australian tax residency depends on the facts and circumstances of each individual.
Documents and records can be particularly important, including:
- employment and overseas assignment letters;
- accommodation leases;
- visas and immigration documents;
- travel records;
- evidence of where your family lives;
- evidence of your living arrangements overseas; and
- information about your Australian property, financial and employment connections.
These records can help establish the circumstances surrounding your departure from Australia and the nature of your life overseas.
What about the proposed changes to Australia's tax residency rules?
The Australian Government announced proposed changes to simplify the individual tax residency rules in the 2021–22 Federal Budget.
However, those proposed reforms do not replace the existing residency tests.
The current rules therefore remain important when determining your Australian tax residency.
Get advice before moving overseas
If you are an Australian resident planning to work overseas, or you have already moved overseas and are unsure of your tax residency status, it is important to consider the issue before lodging your Australian tax return as a foreign resident.
We can review your circumstances, including:
- Australian tax residency;
- the application of the domicile test;
- double tax treaty issues;
- foreign income and foreign tax credits;
- Australian withholding obligations; and
- capital gains tax consequences.
If you are planning an overseas secondment or permanent move overseas, contact us before you leave Australia so your tax residency position can be properly considered and documented.
Published 25 September 2026