Expat Tax Planning for Citizens Leaving Australia in 2025

More and more Aussies are choosing to vote with their feet and leave Australia for good in search of a better deal elsewhere.

Soaring living costs, a deepening housing crisis and a heavy tax burden are prompting both long-term citizens and international investors to reconsider whether Australia is still worth calling home.

According to official statistics, permanent departure figures are up by more than 11% year-on-year, and the trend shows no sign of slowing.

But for those looking to exit, there’s a financial sting in the tail. Without proper planning, many will find themselves still on the hook for Australian taxes, even after they’ve moved abroad.

In recent years, the Australian Taxation Office (ATO) has tightened the regulations, making it harder for departing Australians to become tax non-residents.

So, understanding its rules is no longer enough for Australian expats, making it significantly harder for departing individuals to qualify as tax non-residents.

As a result, it’s no longer enough to simply understand the tax system in your new country – you need to also take active steps to break ties with the old one.

At Nomad Capitalist, we understand immigration and emigration and are well aware of the financial penalties countries impose on their citizens, both current and former.

Our business helps investors and entrepreneurs protect their personal and financial freedom, whether that means moving their business offshore, relocating to a tax-friendly country, or seeking a second citizenship.

Those are just some of the reasons people choose Nomad Capitalist – we have direct experience across multiple jurisdictions and will help you weigh up the pros and cons of any decision you’re thinking of making. 

So, remove all the guesswork, skip past the gatekeepers and speed up the entire process by reaching out and letting us help you go where you’re treated best. 

Pros and Cons of Leaving Australia

Pros

• There are many countries with a lower cost of living than Australia 
• Avoid -high Australian taxes if you successfully become a tax non-resident
• Remove your obligations to the Australian government
• New opportunities for global diversification and asset protection
• Better lifestyle and travel options. 

Cons

• It’s rarely quick or easy to visit friends and family back in  Australia 
• You may need to adjust to cultural differences and language barriers
• Strict tax residency rules mean you may still owe taxes in Australia after leaving.

Australian Tax Residence and Non-Residence

From a tax perspective, the first thing to understand is whether or not you’ll become a tax non-resident when you leave.

If you remain a tax resident of Australia, you’ll still have to file taxes there each year, and you’ll likely owe tax on your worldwide income. 

Tax non-residents will only owe tax on their Australian-sourced income. 

If you pass any of these four tests, you are deemed an Australian tax resident: 

• 183-day test: You spend 183 days or more in Australia in any tax year (July 1–June 30).
• Resides test:  You’re deemed to have significant ‘ties’ to Australia. This test considers the presence of family members, assets, living arrangements and even social arrangements such as your membership with local sports clubs.
• Domicile test: This considers whether you’ve established a permanent domicile in Australia or elsewhere. If you were previously domiciled in Australia and deemed not to have established a domicile elsewhere, you’ll pass this test as you’ll still be considered Australian-domiciled.     
• Superannuation test: Whether you or your partner are contributing members of the Public Sector Superannuation Scheme (PSS) or Commonwealth Superannuation Scheme (CSS).  Partner could be your spouse, another type of registered partner or someone you’re living within a domestic relationship.  

Most countries make tax residency simple. If you’re physically present there for a specific amount of days (usually 183 days per year), you’re liable to pay tax.

If you’re not, you don’t. 

To escape Australian tax residency, you have to remove your significant ties and establish a permanent domicile elsewhere. 

That is simple enough for someone moving their whole life to another country. However, for digital nomads, perpetual travellers or those establishing a base in two or more countries, it could be problematic.    

It can become nuanced in some cases, but Australia is essentially saying: ‘If you want to leave, you’ll either need to move everything to one new country or keep paying us.’ 

No wonder we’re seeing an uptick in Australians seeking our expert assistance to ensure they leave their country in a tax-efficient manner.  

If you’re planning to leave Australia for more than 183 days in any tax year, you must complete an overseas travel notification via the ATO online services. 

If you become a tax non-resident during a tax year, you’ll identify as a tax resident on your tax return for that year, but you’ll be able to claim a pro-rata tax-free threshold for the months you were outside the country.  

Australia Exit Tax

If you leave Australia and become a tax non-resident, a tax bill will be due on all of your unrealised capital gains. 

This is to ensure that all qualifying capital gains experienced while you were an Australian tax resident are taxed appropriately. 

This is essentially an exit tax, although it’s not officially labelled as such in Australia. If you leave Australia and remain a tax resident there, no such tax is due. 

Unrealised gains on all assets except Taxable Australian Property (TAP) qualify for this tax when you leave Australia and become a tax non-resident. 

TAP assets like Australian real estate and Australian business assets have their own tax rules. You’ll pay tax when selling TAP assets whether you’re an Australian tax resident or not, but there’s no tax on unrealised gains after you leave Australia.   

In Australia, no tax is due on gains of assets acquired before 19 September 1985, whether that’s after selling them or after leaving the country.

How is Exit Tax Calculated in Australia?

Capital gains are taxed as income in Australia. So, the ‘exit tax’ essentially adds to your final income tax bill as an Australian tax resident. 

With that said, there is a 50% discount available for Australian tax residents if you have held the asset for more than 12 months. 

The gains on your taxable assets are calculated by subtracting the cost base (or its market value when you became an Australian tax resident if you bought it before then) from its market value when you became an Australian resident. 

So, if you bought AUD$30,000 worth of Bitcoin as an Australian resident that’s worth AUD$130,000 on the day you leave, you’ll be taxed on the AUD$100,000 profit. 

If you bought it before moving to Australia and it was worth AUD$50,000 on the day you arrived, you’d pay tax on the AUD$80,000 profit in this case. 

Deferring Your Exit Tax

Instead of being taxed on all of your unrealised gains, you can choose to defer these payments until after you’ve sold your assets.

However, in this case, you’ll have to pay tax in Australia for the whole period of ownership, including any period when you’re a tax non-resident. 

You’ll be subjected to a more expensive set of tax brackets as a non-resident. You’ll also lose the 50% capital gains tax discount as a non-resident. So, deferring can often be more costly in the long run.   

Deferring this tax is an all-or-nothing decision. You can’t defer on some non-TAP assets but not others. You’ll make this decision on your final tax return as an Australian tax resident.

Whether you defer or not (and indeed whether or not you were ever an Australian tax resident), you’ll owe tax on your TAP assets after selling them. 

Income Tax for Australian Expats

Once you’re a tax non-resident in Australia, you’ll no longer be taxed by Australia on your worldwide income, only income sourced within the country.

However, the applicable income tax brackets differ for non-residents. They don’t get a tax-free threshold or a lower-rate bracket, meaning you’ll pay slightly more tax on Australian-sourced income once you leave.  

These non-resident rates also apply to your capital gains tax liability in Australia. 

Capital Gains Tax on your Home in Australia

There are no capital gains due on your primary residence in Australia. 

If you leave your home in Australia temporarily and rent it out, it will remain your main residence for tax purposes for up to six years. If you don’t rent it out, it will remain your main residence for tax purposes indefinitely. 

However, if you sell your home while you’re an Australian tax non-resident, capital gains tax may be due. 

So, if you’re planning on escaping Australia for good, it’s best to sell your home before you exit. 

If you cancel your private patient hospital coverage after leaving Australia, you may be liable to pay the Medicare Levy Surcharge (MLS).

Compulsory superannuation contributions no longer apply once you’re a tax non-resident of Australia. However, the rules for accessing the funds in your superannuation remain the same. 

Expats Returning to Australia

If you return to Australia, you won’t automatically become a tax resident unless you pass one of the four residency tests above. 

If you do pass one of those tests, you’ll be taxed on your worldwide income and assets from the day you return. If not, you’ll continue to be deemed a tax non-resident. 

Those returning to Australia for good are advised to consider what to do with the income they generated while overseas. 

It can be advantageous to transfer your overseas pension income into your Australian superannuation, for example. 

If you’re set to continue owing taxes in the country where you were living, it’s worth exploring whether Australia has a Double Tax Agreement (DTA) with that country and where that agreement suggests the tax will be due. 

Expat Tax Australia: FAQs

Get to Grips with Expat Taxes in Australia

If you’re leaving Australia to pursue a better life overseas, it’s more important than ever to get your financial affairs in order before you make your move.

It used to be simple enough to be classed as a tax non-resident once you exited the country. However, the rules changed on 7 June 2023, meaning expats may have more work to do to ensure they escape the Australian tax net.

Nomad Capitalist helps high-net-worth individuals through these kinds of scenarios. In fact, we’ve worked with 2,000+ investors and entrepreneurs to ensure they ‘go where they’re treated best’ without any unexpected hitches ruining their plans. 

Our clients are paired with experts in tax, investment strategy, asset protection and immigration to create and execute a holistic plan as unique as their goals. You can learn more here.