Written by

Steven Lee

Mortgage Director, ODIN Mortgage & Tax

10+ years in Australian banking and mortgage lending

Last reviewed

Updated on: September 29, 2026 View profile →

When you move overseas, your Australian tax residency status does not simply follow you out the door. The ATO applies a layered set of tests to determine whether you remain an Australian tax resident, and the answer has significant consequences for your existing mortgage, future borrowing capacity, and the obligations lenders will place on you. Getting your tax residency classification wrong can lead to double taxation on worldwide income and unexpected complications at settlement ^[1]. This article explains how the ATO’s residency framework intersects with your Australian property loan, and what shifts when your status changes.

What Are the ATO’s Four Residency Tests?

Australian tax residency rules are not determined by where you pay rent or which country issued your driver’s licence. The ATO applies four statutory tests under TR 2023/1, and an individual only needs to satisfy one of them to be classified as an Australian tax resident ^[6].

• The Resides Test: Whether you “reside” in Australia based on your physical presence, intention, family ties, and living arrangements. This is the primary test ^[2].
• The Domicile Test: You are a resident if your domicile (legal home) is in Australia, unless you have a permanent place of abode overseas ^[4].
• The 183-Day Test: If you are present in Australia for 183 days or more in a financial year, you are treated as a resident unless your usual place of abode is outside Australia and you do not intend to take up residence ^[4].
• The Superannuation Test: Applies to Australian government employees and their spouses and children. Rarely relevant to private-sector expats ^[4].

The practical implication is that many Australian expats assume they have ceased to be residents when they have not. Courts and the ATO have repeatedly found that maintaining a home in Australia, having a spouse remain in the country, or returning frequently can all preserve residency status under the domicile or resides tests ^[1].

How Does a Change in Tax Residency Status Affect Your Mortgage?

Lenders treat this question differently from the ATO, and that distinction is important. The ATO’s residency determination governs your tax obligations; a lender’s classification governs your loan eligibility and conditions. These two classifications can diverge, and expats sometimes fall into a gap between them.

When you shift from resident to non-resident status in the eyes of a lender, your existing mortgage terms are generally not automatically revised. However, if you refinance, purchase an additional property, or seek a loan increase, lenders will reassess your file under non-resident lending criteria. That typically means foreign income shading, different verification requirements, and in some cases, a different set of available lenders.

What Is Foreign Income Shading and Why Does It Matter?

Building on the lending differences described above, the harder practical challenge for most expats is how lenders treat the income they are actually earning. Foreign income shading refers to a lender’s internal policy of accepting only a percentage of your overseas income for serviceability calculation purposes.

• Shading policies vary significantly across lenders and are not published publicly.
• The currency of your income matters: some lenders accept USD, HKD, SGD, AED, and GBP at more favourable rates than less common currencies. Lender policies on currency acceptance are subject to change.
• The structure of your employment (PAYG vs. self-employed) also affects how income is verified and shaded.
• Borrowing power under a non-resident mortgage in Australia can differ markedly from equivalent resident borrowing power, depending on which lender you approach. Outcomes depend on individual circumstances and lender policy.

ODIN Mortgage holds proprietary income shading data across 40+ Australian lenders, built from over a decade of deal flow. This data is not publicly available. Understanding how each lender treats foreign income in specific currencies can be a significant factor in loan outcomes for Australian expats. This is general information only and not personal credit advice; your individual outcome will depend on your circumstances and lender policy at the time of application.

What Happens to Capital Gains Tax When You Become a Non-Resident?

Stepping back from the lending mechanics, a separate concern for property owners is what happens to capital gains tax (CGT) when residency status changes. This is an area where the financial stakes are high and the rules are frequently misunderstood.

• From the date you become a foreign resident for tax purposes, the CGT main residence exemption no longer applies to your Australian home unless specific conditions are met ^[3].
• The ATO treats your property as having been acquired at market value on the date you ceased residency, which creates a deemed disposal event for CGT purposes ^[3].
• If you sell your Australian property as a non-resident, the buyer is legally required to withhold a portion of the purchase price and remit it to the ATO unless you hold a valid clearance certificate. Current withholding rates are 12.5% of the purchase price for residential property (or 15% for other property), though these figures are subject to legislative change ^[5].
• Obtaining an ATO clearance certificate confirms your Australian resident status for tax purposes at the time of sale and avoids the withholding ^[5].

These rules underscore why getting your tax residency classification right matters well beyond your annual tax return. The CGT exposure on an investment property held for a decade can be substantial, and the timing of when you are deemed to have become a non-resident affects the calculation significantly ^[7].

What Should Australian Expats Do Before Their Residency Status Changes?

Cross-border tax risk for Australian expats is a known ATO priority area in 2026 ^[7]. The practical steps below are not a substitute for personalised advice, but they frame the key decisions expats typically need to work through.

1. Determine your actual residency status: Do not assume. The ATO’s tests are technical, and self-assessment errors are common ^[1]. Engage a registered tax agent with expat specialisation before you file.
2. Review your loan structure: If your tax residency status changes, your lender may reclassify your loan in certain situations. Understand your current terms and whether a refinance is on the horizon.
3. Assess your CGT exposure before selling: The CGT calculation on a property sold as a non-resident can differ significantly from the resident equivalent ^[3].
4. Apply for an ATO clearance certificate well before settlement: The process takes time, and delayed applications can complicate or delay property sales ^[5].
5. Coordinate your mortgage and tax position together: Loan structuring decisions, such as interest-only periods and offset accounts, have tax implications. Handling these in isolation through separate firms creates gaps.

Selling Australian Property as a Non-Resident

When selling Australian property as a foreign resident, the withholding rules under Division 14 of Schedule 1 to the Taxation Administration Act 1953 apply. For contracts entered into on or after 1 July 2020, buyers are required to withhold a portion of the purchase price and remit it to the ATO unless the vendor holds a valid ATO clearance certificate. Current withholding rates are 12.5% of the purchase price for residential property, or 15% for other property, and are subject to legislative change ^[5]. The clearance certificate confirms the vendor is not a foreign resident and prevents the withholding from applying.

Frequently Asked Questions

Does moving overseas automatically make me a non-resident for tax purposes?

No. The ATO applies multiple tests, and you may remain an Australian tax resident even after relocating overseas if you retain a domicile in Australia, maintain strong family or financial ties here, or fail to establish a permanent place of abode elsewhere ^{[1] [2]}.

Can I still get an Australian expat home loan if I am classified as a non-resident?

Yes. A non-resident mortgage in Australia is available through a range of lenders, though lending conditions, income verification requirements, and borrowing parameters depend on individual circumstances and lender policy. Not all lenders accept foreign income, and those that do apply varying shading policies.

Will my existing mortgage change if my tax residency status changes?

Your current loan terms are generally not automatically altered. However, any new application for credit, including refinancing or a top-up loan, will be assessed under the criteria applicable at the time of that application. This is general information only, not personal credit advice.

What is a clearance certificate and do I need one?

An ATO clearance certificate confirms that a seller is an Australian resident for tax purposes, not a foreign resident ^[5]. Without it, buyers of Australian property are required by law to withhold a portion of the purchase price and pay it to the ATO. Current withholding rates are 12.5% of the purchase price for residential property (or 15% for other property), and are subject to legislative change. If you are selling while overseas, you should apply for this certificate well before settlement.

How does Australian tax residency affect capital gains on my investment property?

Foreign residents are generally not entitled to the CGT main residence exemption and may face CGT on gains accruing from the date they became a non-resident ^[3]. The specific outcome depends on individual circumstances; this is general information only and not personal tax advice.

What is the 183-day test and does it apply to most expats?

The 183-day test treats you as a tax resident if you are present in Australia for 183 days or more in a financial year, unless your usual place of abode is outside Australia and you do not intend to take up residence ^[4]. Most expats living and working overseas full-time will not trigger this test, but it can catch those who return frequently or work on project-based rotations.

Can ODIN Mortgage help with both my home loan and tax residency questions?

ODIN Mortgage handles the mortgage structuring and lending side for Australian expats, and operates as part of ODIN alongside ODIN Tax. The integrated model means your loan structure is coordinated with your tax position from day one, not managed in isolation. This is not personal tax advice; your specific residency and tax position should be assessed by a registered tax agent.

References

1. A General Guide to Property Transfers and ATO Clearances (ymlgroup.com.au)
2. ATO issues new ruling on tax resident tests for individuals | Tax Alerts – July 2023 | Deloitte New Zealand (www.deloitte.com)
3. Cross-Border Tax Risk: Five ATO Pressure Points to Watch in 2026 | Accountants Daily (www.accountantsdaily.com.au)