Tax residency after Quy: Why living overseas is not enough

With a large client base regularly seeking advice on moving overseas or relocating to Australia, our tax advisers unpack the latest Federal Court guidance on tax residency. The Quy decision highlights why residency outcomes depend on far more than simply where you live and work.

Tax residency after Quy: Why living overseas is not enough 

The Federal Court's recent decision in Quy v Commissioner of Taxation [2026] FCA 1316, handed down on 4 September 2026, is a timely reminder that moving overseas for work does not automatically result in the cessation of Australian tax residency.

In upholding the earlier decision of the Administrative Review Tribunal in Quy and Commissioner of Taxation [2025] ARTA 174, the Court reinforced the difficulties taxpayers can face in establishing non-resident status where significant personal, financial and family connections with Australia are retained.

For many Australians accepting long-term overseas assignments, the assumption is often that spending several years abroad, working full-time and maintaining accommodation overseas will be sufficient to establish foreign tax residency. The Quy decisions demonstrate that the position may be far more complex.

The facts related to Quy's case

Mr Quy lived and worked in Dubai between 2015 and 2021 under an international assignment with his long-standing Australian employer. During the relevant period he:

• lived in Dubai for approximately five years;
• held UAE residency permits;
• maintained accommodation in Dubai;
• worked full-time in Dubai;
• returned to Australia only periodically for short visits; and
• established social and community connections in Dubai.

Importantly, however, he also retained significant ties to Australia, including:

• the family home in Perth;
• investment properties in Australia;
• Australian bank accounts and superannuation;
• motor vehicles and personal belongings; and
• close family members who remained predominantly in Australia.

The Tribunal's findings

The 2025 Tribunal decision reached a somewhat unusual conclusion. It found that Mr Quy did not reside in Australia under the ordinary concepts test, accepting that his day-to-day life was centred in Dubai during the relevant years.

However, that was not the end of the residency analysis.

Because Mr Quy retained an Australian domicile, the Tribunal was required to consider whether it was satisfied that his permanent place of abode was outside Australia. While acknowledging his lengthy presence in Dubai, the Tribunal was ultimately not satisfied that he had established a permanent place of abode outside Australia and therefore concluded that he remained an Australian resident under the domicile test.

The Federal Court subsequently upheld that decision, finding no legal error in the Tribunal's reasoning.

Australian tax residency risks highlighted by the Quy case

The decision is significant because it demonstrates that satisfying the ordinary concepts test may not be enough.

A taxpayer can successfully establish that they are not residing in Australia yet still remain an Australian tax resident. That was precisely the outcome in Quy. Although the Tribunal accepted that Mr Quy's day-to-day life was centred in Dubai and that he did not reside in Australia under ordinary concepts, he nevertheless remained an Australian resident because he retained an Australian domicile and failed to establish that his permanent place of abode was outside Australia.

This is also consistent with the ATO's current view in Taxation Ruling TR 2023/1 Income tax: residency tests for individuals, which explains that the domicile test extends residency beyond the ordinary concepts test and that an Australian-domiciled individual must demonstrate that they have both abandoned Australian residency and commenced living permanently overseas.

Alignment with TR 2023/1

While Quy turned on its own facts, the decision closely reflects the themes expressed in TR 2023/1.

The Ruling emphasises that:

• there are no bright-line residency rules;
• residency depends on the totality of the individual's connections with Australia;
• a person can cease residing in Australia under ordinary concepts yet remain a resident under the domicile test;
• the focus is on whether the taxpayer has abandoned Australian residency and commenced living permanently overseas; and
• factors such as family location, assets, accommodation and durability of association remain relevant.

The ATO also states that residency is ultimately a question of connection rather than mere physical presence and that each case must be determined on its own facts.

Key lessons for Australians moving overseas 

1. Physical absence alone is insufficient

Spending years overseas, even under a full-time employment arrangement, will not necessarily break Australian residency.

Mr Quy spent the substantial majority of his time in Dubai over a five-year period, yet this was not enough to establish that his permanent place of abode was outside Australia.

2. Retaining strong Australian connections can be problematic

The Tribunal and Federal Court placed weight on factors such as:

• retaining a family home;
• maintaining Australian investments;
• keeping Australian bank accounts and superannuation;
• retaining vehicles and personal possessions; and
• maintaining significant family connections in Australia.

While none of these factors was determinative in isolation, collectively they contributed to the conclusion that Mr Quy had not established a sufficiently permanent life outside Australia.

3. Employment assignments require particular care

A notable feature of the case was the Tribunal's view that Mr Quy's overseas presence arose through successive work assignments with the same employer and that his international career exhibited an element of mobility rather than a settled commitment to a particular overseas location.

This highlights a risk for employees who move overseas on employer-sponsored assignments while retaining substantial Australian ties.

4. Harding is not a safe harbour

Many advisers and taxpayers have relied heavily on Harding v Commissioner of Taxation [2019] FCAFC 29; (2019) 269 FCR 311 (“Harding”) when considering overseas residency outcomes. In that case, the Full Federal Court held that an Australian-domiciled taxpayer could cease Australian tax residency where they had definitely abandoned their Australian residence and commenced living permanently overseas, notwithstanding that they may one day return to Australia.

The Quy decisions are a reminder that Harding was not a "time overseas" case. Rather, the Full Federal Court's focus was on whether the taxpayer had abandoned Australian residence and established a permanent life overseas. Quy demonstrates that a lengthy overseas assignment will not, of itself, produce that outcome.

Practical considerations for Australians to consider before relocating overseas

Individuals intending to cease Australian tax residency should carefully consider:

• where their spouse and family members will live;
• whether Australian residential property will be retained
• the extent of Australian investments and financial arrangements;
• the nature of overseas accommodation;
• the expected duration of the overseas move;
• local immigration and residency rights; and
• whether their actions objectively demonstrate that their life has shifted offshore.

As TR 2023/1 recognises, no single factor is determinative and residency outcomes depend on the overall factual matrix.

Final insights from our tax advisers in Melbourne

The combined effect of the Tribunal's decision in 2025 and the Federal Court's decision in 2026 is a timely reminder that Australian tax residency remains one of the most fact-intensive areas of tax law.

The Quy decisions demonstrate that living and working overseas for an extended period will not, of itself, be sufficient to cease Australian tax residency where significant Australian connections are retained.

In many respects, the outcome in Quy v Commissioner of Taxation [2026] FCA 1316 reinforces the principles reflected in TR 2023/1 Income tax: residency tests for individuals, namely that residency is determined by the totality of a taxpayer's circumstances rather than any single factor, including time spent overseas.

For taxpayers contemplating an overseas move, obtaining residency advice before departure is likely to be far easier and less costly than attempting to challenge an adverse residency position years later in an ATO review, audit or dispute.

If you're considering relocating, get in touch with your local tax adviser to equip yourself with sufficient understanding prior to making the decision.