Australian Tax Residency When You Work Overseas: What the Quy Case Decided (2026)

You took a job in Shanghai, Hong Kong, Singapore or Dubai. You live there, work there and pay tax there. The family home in Melbourne or Brisbane is still yours, the car is still registered, and you fly back for Christmas. When your Australian tax return asks “Are you an Australian resident?”, the honest answer may be yes, even though you have not lived here for years.

On 4 September 2026 the Federal Court dismissed an appeal by an engineer who spent five years working in Dubai and argued he had left Australia for tax purposes. He lost on a test most people have never heard of: the domicile test.

The four residency tests in one place

The ATO uses four tests to decide whether an individual is an Australian resident for tax purposes. If you meet any one of them, you are a resident.

Residency for tax is a separate question from citizenship or visa status. The ATO states that it does not use the same rules as the Department of Home Affairs, so a citizen can be a foreign resident for tax and a visa holder can be an Australian resident for tax.

What the domicile test asks

The domicile test has two steps. First, where is your domicile? Second, if it is Australia, is your permanent place of abode outside Australia?

Domicile is the place the law treats as your permanent home. You acquire a domicile of choice by moving somewhere with the intention of making it your home permanently or indefinitely. The ATO’s position is that a resident who has always lived in Australia keeps an Australian domicile while overseas unless they choose to migrate permanently to another country. For most migrants who settled here and became citizens, the same applies: Australia became the domicile of choice, and taking a job abroad does not change it by itself.

That leaves the second step, which is where cases are won and lost. Case law gives “permanent” a narrow meaning here: the ATO describes it as being contrasted with temporary or transitory. The factors the ATO and the courts weigh, drawn from Taxation Ruling TR 2023/1, are:

• how long you intended to stay overseas and how long you did stay, including whether the stay was continuous
• whether you established a home overseas
• whether you kept a residence in Australia while you were away
• your family and financial ties

The ATO adds one more line that matters for people on rolling assignments: if you have no fixed or habitual place of abode overseas and move from one country to another, you are not considered to have a permanent place of abode outside Australia.

Quy v Commissioner of Taxation: the facts

Mr Quy migrated to Australia in 1978. He worked for the same engineering group from 1986. In 2015 he took a full-time permanent position based in Dubai under an assignment letter that expected the posting to last about 24 months. He stayed until 2021 and then moved to Thailand with the same group. The dispute covered the five income years ended 30 June 2016 to 30 June 2020.

The Tribunal accepted a lot of his case. He lived in one Dubai apartment for about five years, furnished it for a comfortable life, bought a car there, attended a new church and had a social life. Between 2015 and 2020 he came back to Australia 12 times, for periods of five to 35 days, and the Tribunal accepted those trips were visits and holidays. On the resides test, the Tribunal found he was not residing in Australia.

He was still found to be an Australian resident under the domicile test. His domicile was accepted to be Australian, and the Tribunal was not satisfied that his place of abode in Dubai was more than temporary. The connections it pointed to were specific:

• the family home in Perth was kept and his daughters lived in it
• several cars and a motorcycle stayed registered in his name, and he kept his Western Australian driver’s licence
• personal belongings stayed at the Perth house, including musical instruments and winter clothing
• Australian bank accounts stayed open, part of his salary was paid into one, and his super stayed in Australia
• he and his wife kept two investment properties in New South Wales
• the Dubai apartment was leased by his employer’s host entity, and his UAE residency permits were issued for 24 months at a time

The Tribunal also noted that he had moved between locations inside and outside Australia following assignments for one long-term employer, and it treated that pattern as pointing away from a permanent home in any one of them. In the Tribunal’s words, a person must show they “have abandoned their residence in Australia, and established a place where they are residing permanently (rather than on a temporary basis, even if not indefinitely)”.

The Federal Court did not re-decide those facts. Justice Horan held the Tribunal had applied the correct legal test and its conclusion was open to it. The judgment acknowledges that “different minds might reach different conclusions” on these facts, and that the question was entrusted to the Commissioner, or the Tribunal standing in the Commissioner’s place. The appeal was dismissed with costs. This was the fourth decision in the case: the Administrative Appeals Tribunal ruled against him in February 2024, the Federal Court sent it back in 2024, and the Administrative Review Tribunal ruled against him again in February 2025.

Three points worth taking from the decision

Passing one test does not end the question

A residency check that stops at the resides test would have got Quy wrong. He passed it and was still a resident. If you have been away for years, the domicile test is usually the one that decides your status.

The burden of proof is on you

Under the Taxation Administration Act, a taxpayer disputing an assessment has to prove it is excessive or otherwise incorrect. The domicile test is also framed around whether the Commissioner is satisfied that your permanent place of abode is overseas. If the evidence is mixed, the default is Australian residence.

An employer posting reads as temporary

An assignment letter with an expected end date, a “point of hire” in Australia, home leave entitlements, housing leased by the employer and visas tied to sponsorship all fit a temporary posting. If you are working in mainland China, Hong Kong or Singapore on an assignment from an Australian or multinational employer, check your own letter for these terms. By contrast, the ATO’s own example of a foreign resident describes a family that moved overseas together on a three-year contract, rented a home there and rented out the Australian home.

Why the answer changes your tax bill

An Australian resident must declare worldwide income, including salary earned overseas, even if tax has already been paid on it abroad. Foreign tax paid may give you a foreign income tax offset, but if you are working in a lower-tax country, the Australian tax on that salary can exceed the offset. This is the cost Mr Quy was disputing: the Commissioner accepted his Dubai salary had a foreign source and was taxable in Australia only if he was a resident.

A foreign resident is generally taxed only on Australian-sourced income, and at different rates. For 2025-26, foreign residents pay 30 cents in the dollar from the first dollar up to $135,000, with no tax-free threshold. Residents have a tax-free threshold of $18,200, then 16 cents in the dollar up to $45,000.

Take someone whose only Australian income in 2025-26 is $30,000 of net rent. As a foreign resident for the full year, tax on that is $9,000. As a resident with no other income, it is $1,888 before the Medicare levy. That comparison is our arithmetic on the ATO’s two 2025-26 rate tables, and it ignores offsets and the person’s foreign income, but it shows the residency answer cuts both ways. Being a resident costs more for some people and less for others.

In Quy, five years in Dubai, one apartment and a local social life were not enough, because the Australian home, cars, licence, accounts and investments stayed in place and the job was structured as an assignment.

If your status changed during 2025-26

If you stopped being an Australian resident part way through the year, the ATO says to answer “yes” to “Are you an Australian resident?” in your 2025-26 return and provide the date your residency changed. Resident rates then apply, with a part-year tax-free threshold. The ATO states that part-year residents get at least $13,464, with the remaining $4,736 of the full $18,200 pro-rated by the months you were a resident.

From the date you ceased to be a resident, the ATO says you do not include foreign-sourced income in the return, and Australian interest, dividends and royalties you receive are subject to withholding as a final tax. You can also claim the days you were not a resident as exempt days for the Medicare levy. If you have a HELP or other study loan, you may still need to report your worldwide income.

If you are also treated as a resident of the other country under its own law, you are a dual resident. Where Australia has a tax treaty with that country, a tie-breaker test in the treaty usually decides which country has the right to tax your income.

Lodging your own 2025-26 return means working to the 31 October deadline, and our note on overdue tax returns and 31 October 2026 explains why that date does not roll forward this year. If earlier years were lodged on the wrong residency basis, those years need attention too.

A checklist before you answer the residency question

Write down the facts for each income year, because the answer can differ from year to year:

1. The date you left, and what your contract or visa said about how long you would stay.
2. Where you lived overseas, who held the lease or title, and whether your spouse and children lived there with you.
3. What happened to your Australian home: sold, rented to strangers, lived in by family, or left empty for your visits.
4. What you kept here: cars, driver’s licence, bank accounts, investment properties, health cover, memberships, belongings.
5. How many days you spent in Australia in each income year, and why you came back.
6. Where your salary was paid and whether the employer treated you as on assignment with home leave.
7. What you declared on incoming and outgoing passenger cards. The Tribunal read Mr Quy’s cards, which were inconsistent.

If you sell Australian property while you are a foreign resident, the purchaser can be required to withhold part of the price unless you provide a clearance certificate, which we covered in our clearance certificate guide. If you are a temporary resident leaving for good, our guide to claiming super when you leave Australia covers the other side of a departure. Readers who prefer Chinese can find our note on money transferred from overseas here.

Will the rules change?

Treasury consulted in July 2023 on replacing the current tests with a new framework built around a 183-day bright-line test, following a Board of Taxation report. For now the four tests remain the ones the ATO lists on its residency pages, updated 3 June 2026, and the Federal Court applied the domicile test in Quy on 4 September 2026. Your 2025-26 return is assessed under the current rules.

Frequently asked questions

What is the domicile test for Australian tax residency?

It is one of four statutory residency tests. You are an Australian resident if your domicile, the place the law treats as your permanent home, is in Australia, unless the ATO is satisfied that your permanent place of abode is outside Australia. The ATO describes “permanent” as being contrasted with temporary or transitory. The test mostly affects Australians who work overseas for long periods. Source: ATO, Residency, the domicile test, QC17138, last updated 3 June 2026.

Can I be an Australian tax resident if I do not live in Australia?

Yes. In Quy v Commissioner of Taxation [2026] FCA 1316, decided 4 September 2026, the Tribunal found an engineer working in Dubai from 2015 to 2021 was not residing in Australia, yet he was still a resident under the domicile test for 2015-16 to 2019-20. His Perth home, registered cars, driver’s licence, bank accounts and investment properties stayed in place, and his Dubai role was an employer assignment. The Federal Court dismissed his appeal.

How many days can I spend in Australia and still be a foreign resident?

The domicile test has no day count. Mr Quy returned 12 times over about five years, for five to 35 days each, and the Tribunal accepted those were visits, but the domicile test still made him a resident. The separate 183-day test applies when you are in Australia for more than half the income year, unless your usual place of abode is overseas and you do not intend to live here. Source: ATO, Your tax residency, QC59296.

What tax rates apply to a foreign resident for 2025-26?

Foreign residents pay 30 cents in the dollar on taxable income up to $135,000, $40,500 plus 37 cents for each dollar from $135,001 to $190,000, and $60,850 plus 45 cents above $190,000. There is no tax-free threshold, and foreign residents do not pay the Medicare levy. Source: ATO, Tax rates, foreign resident, QC73321, last updated 1 June 2026.

I left Australia during 2025-26. How do I complete my tax return?

The ATO says to answer “yes” to “Are you an Australian resident?”, give the date you stopped being a resident and the number of months you were one. Resident rates apply with a part-year tax-free threshold of at least $13,464. Foreign income after that date is not included, Australian interest and dividends after that date are taxed by withholding, and non-resident days can be claimed as Medicare levy exempt days. Source: ATO, QC59296 and QC65132.

Has the 183-day bright-line residency test become law?

Not as at the date of this article. Treasury released a consultation paper on modernising individual tax residency in July 2023. The ATO’s residency pages, last updated 3 June 2026, still list the resides, domicile, 183-day and Commonwealth superannuation tests, and the Federal Court applied the domicile test in Quy on 4 September 2026.

Talk it through

Send us the income years you are unsure about and the answers to the checklist above: when you left, where you live and on what terms, what you kept in Australia, and how many days you were back each year. We will tell you which way the residency tests are likely to fall for each year, what that means for your 2025-26 return, and whether earlier years need to be revisited.

Book a 20 minute call, or phone us: Melbourne 03 9600 0803 | Brisbane 07 3188 8081.

A residency question rarely comes alone. The same move usually involves an Australian rental property, foreign salary, a possible property sale and super. At Wiselink those are handled in one practice, split by function with senior review on the work that carries risk, so the residency position in your return matches the treatment of your rent, your foreign income and any sale. If you want someone looking at the year ahead as well as the one behind, the planning versus compliance check sets out what to look for. Our accounting and tax services page lists the rest.

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Sources

• Federal Court of Australia, Quy v Commissioner of Taxation [2026] FCA 1316, Horan J, 4 September 2026 (appeal from Quy and Commissioner of Taxation [2025] ARTA 174).
• ATO, Your tax residency (QC59296), last updated 3 June 2026.
• ATO, Residency, the domicile test (QC17138), last updated 3 June 2026.
• ATO, Australian resident for tax purposes (QC65132), last updated 3 June 2026.
• ATO, Tax rates, foreign resident (QC73321), last updated 1 June 2026.
• ATO, Tax rates, Australian resident (QC73320), last updated 13 August 2026.
• Treasury, Modernising individual tax residency, consultation paper, July 2023 (consultation page).

All sources retrieved 24 September 2026. The $30,000 rent comparison is our arithmetic on the ATO’s 2025-26 rate tables and is labelled as such in the text. This article is general information and does not take your circumstances into account. Residency depends on the facts of each income year.

Reviewed by Lily Zhang, CPA and registered tax agent, founder of Wiselink Accountants. Wiselink has worked with small businesses and individual taxpayers in Melbourne and Brisbane, in English and Chinese, since 2013.