Digital Nomad
Case Study: Navigating Tax for Australians Living Abroad
What happens when Australians move overseas? Explore tax residency, foreign income reporting, and avoiding surprises in this real-life inspired case study.
By NomadicTax Research Team • 5 min read • November 22, 2025
## Scenario: Meet Sarah — A Digital Nomad in Lisbon
Sarah, an Australian citizen, moved to Lisbon in early 2025 for freelance work. She works online for clients globally and plans to stay indefinitely.
## Key Tax Issues for Sarah
Here are the major areas she must address:
### 1. Tax Residency
Australia’s tax law considers factors such as **physical presence**, **ties such as home, family or assets**, and **intent**. Even if Sarah lives abroad, she may still be deemed an Australian resident for tax purposes if she maintains strong ties.
- If Sarah remains an Australian tax resident, she must report **worldwide income**, including earnings in Lisbon.
- If she becomes a **foreign resident**, she reports only Australian-source income and may not access certain offsets or benefits.
### 2. Foreign Income & Double Taxation
Sarah receives income from Lisbon, clients in the US and in Australia. She needs to:
- Determine what income is foreign-sourced.
- Check whether any relevant **double taxation agreements** (DTA) exist between Australia and those countries, to prevent being taxed twice.
- Claim foreign tax credits where appropriate.
### 3. Superannuation and Retirement Savings
While working overseas, Sarah might still contribute to Australian super, or even leave money invested in Australia.
- Super contributions might be limited if she isn’t an Australian resident.
- If she doesn’t maintain Australian residency, concessional cap rules and eligibility for things like the Low Income Super Tax Offset may change or be lost.
### 4. Reporting Obligations & Compliance
- Sarah must lodge an Australian tax return if she remains an Australian tax resident.
- Declare foreign-income, interest, dividends etc.
- Maintain proper documentation such as receipts, bank statements, and foreign tax assessed documents.
## Practical Actions Based on the Case
- Seek professional advice as soon as possible to assess residency status.
- If moving permanently, formally sever or reduce ties (sell property, close bank accounts, reassign interests) to strengthen foreign resident status.
- Keep careful records of days spent in/out of Australia, and assets & financial links.
- Stay updated on superannuation implications and any intergovernmental agreements.
## Outcome Potential for Sarah
Depending on what actions she takes and her ties, Sarah might still be taxed in Australia on worldwide income, lose access to some rewards, and face foreign tax credit processes. Alternatively, she might successfully shift to foreign residency, reduce her Australian tax compliance, but also lose some entitlement.
## Key Takeaways
- Tax residency is often the deciding factor for foreign workers.
- Foreign income reporting and tax treaties are essential for avoiding double taxation.
- Superannuants abroad need special planning.
- Acting proactively and obtaining advice protects both tax efficiency and compliance, avoiding surprises later.