Topic: Digital nomads and Australian tax: compliance tips for cross-border work

Last reviewed: 17/12/2025

Focus: Accounting Practice Analysis

Digital Nomads & Australian Tax: 2025 Compliance Tips

Australian digital nomads remain subject to Australian tax and reporting obligations where they are Australian tax residents (or have Australian-sourced income), even if they perform work overseas; compliance depends on correctly determining residency, sourcing of income, withholding, superannuation, GST, and whether a double tax agreement (DTA) allocates taxing rights to another country. From an Australian accounting practice perspective, most cross-border errors arise from incorrect residency assumptions, failing to declare foreign income, misapplying foreign tax offsets, and overlooking employer/contractor compliance (PAYG, super, payroll tax) when staff work remotely offshore.

Featured Answer: Australian digital nomads must first determine Australian tax residency under ATO guidance and case law, then report worldwide income if resident (or Australian-sourced income if non-resident), manage double tax agreement outcomes, and keep evidence of travel, work location, and foreign tax paid. The most reliable compliance strategy is proactive documentation, correct withholding and super settings, and a yearly review of residency, permanent establishment risk, and foreign tax offset eligibility.

What does “digital nomad” mean for Australian tax purposes?

“Digital nomad” is not a defined category in Australian tax law; the ATO assesses your position under ordinary concepts such as residency, source of income, and whether you are carrying on business or employment.

Australian resident individual working overseas (employee or contractor)
Australian non-resident individual with Australian-sourced income
Australian company or trust paying a worker who is physically overseas
Foreign employer engaging an Australian resident worker temporarily offshore

Residency for individuals is determined under statutory tests and common law principles, not by visa labels or time overseas alone (ATO guidance: “Work out your tax residency” and related residency rulings).
“Foreign income” is assessable to Australian residents unless specifically exempt; foreign tax paid may produce a foreign income tax offset (Div 770 of the Income Tax Assessment Act 1997).

Am I still an Australian tax resident if I work overseas as a digital nomad?

Often yes; Australian tax residency is determined by tests in the Income Tax Assessment Act 1936 and supporting ATO guidance, and short-to-medium term overseas travel frequently does not break residency if Australian ties remain strong.

Intention and purpose of travel (temporary travel vs establishing life overseas)
Maintenance of a home in Australia (available for use)
Family and economic ties to Australia (spouse/children, bank accounts, investments)
Employment arrangements and continuity of Australian connections
Pattern of presence across income years

Resides test: Whether the person “resides” in Australia in the ordinary sense (fact-driven).
Domicile test: If domicile is Australia, residency continues unless a “permanent place of abode” is established outside Australia.
183-day test: Presence in Australia for 183+ days may indicate residency unless usual place of abode is overseas and no intention to reside.
Commonwealth superannuation test: Applies to certain Australian Government employees.

Document the “residency narrative” annually (what changed this year, where you lived, what accommodation you had, where personal effects were kept, where you returned).

Income Tax Assessment Act 1936 (residency tests)
ATO guidance on residency for individuals and relevant public rulings/case law principles (residency is a question of fact and degree)

Do I have to declare foreign income in Australia while travelling?

Yes, if you are an Australian tax resident you must generally declare worldwide income, including salary, contractor income, business profits, interest, dividends and capital gains, subject to specific exemptions.

Australian resident: Declare worldwide income in the Australian tax return (ITR).
Australian non-resident: Declare Australian-sourced income (and possibly certain gains on taxable Australian property).

Foreign salary paid into a foreign bank account
Platform income (Upwork, Fiverr, Amazon, app stores) where the payer is offshore
Foreign bank interest
Crypto disposals while overseas (CGT still applies if Australian tax resident, subject to specific rules)

Foreign tax paid on the same income may be creditable under the foreign income tax offset rules (Div 770, Income Tax Assessment Act 1997), subject to limitation and substantiation requirements.

An Australian resident consultant works from Portugal for 8 months and is taxed there under local rules. In Australia, the consultant still declares the income, then claims a foreign income tax offset to the extent allowed, supported by foreign assessments and payment receipts.

How do double tax agreements affect digital nomads?

DTAs can reduce double taxation by allocating taxing rights between Australia and the other country; however, DTAs do not automatically make income “tax-free” in Australia.

Tie-breaker residency rules: Where both countries treat you as resident, the DTA may deem residency to one country based on permanent home, centre of vital interests, habitual abode, and nationality.
Employment income article (common structure): May allocate taxing rights based on where employment is exercised, subject to exceptions (often involving short stays and employer residence).
Business profits and permanent establishment (PE): If you are operating through an entity, the other country may tax business profits attributable to a PE.

Obtain and retain the exact DTA article analysis for the countries involved. In an ATO review, it is not sufficient to say “the DTA applies”; the article and factual basis must be shown.

International Tax Agreements Act 1953 (gives DTAs force of law in Australia)
ATO DTA guidance and treaty texts

Where is my income “sourced” if I work remotely overseas?

Income source is a factual/legal question; for employment income, source commonly follows where duties are performed, but contracts, payer location, and other factors can also be relevant depending on the income type.

Employment income: Often sourced where the work is physically performed.
Contractor/business income: Source can be more complex and may involve where the business is carried on, where contracts are made, where customers are, and where activities occur.
Royalties/licensing/platform income: May depend on payer location and contract terms.

Keep contemporaneous evidence of where duties were performed:

What are the most common ATO compliance risks for digital nomads?

The most common ATO risk is incorrect residency treatment, followed by under-reporting foreign income and unsupported foreign tax offset claims.

Treating “being away for 6 months” as automatically non-resident (it is not)
Continuing to claim the tax-free threshold as a non-resident (or vice versa)
Failing to include foreign interest and foreign dividends
Claiming foreign tax offsets without proper proof of tax paid and assessment basis
Not considering Medicare levy and Medicare levy surcharge impacts where residency and entitlements change
Overlooking capital gains tax events (including crypto) during overseas travel

Residency and DTA positions supported by documents, not assertions
Clear reconciliation of foreign income, exchange rates, and foreign tax paid
Consistent story across returns, bank accounts, and travel records

What if I’m employed by an Australian business but I work overseas?

An Australian employer can face compliance and cross-border risk if staff perform duties overseas, including foreign payroll obligations and permanent establishment risk. From an Australian accounting firm governance perspective, this should be risk-assessed before long-term remote overseas arrangements are approved.

PAYG withholding: May still apply depending on residency and where the employment is exercised; positions must be documented.
Superannuation guarantee: May continue to apply for Australian employees; interactions with foreign pension rules may arise (specialist advice often required).
Fringe Benefits Tax (FBT): Benefits provided to employees remain within scope subject to ordinary rules.
Payroll tax: State/territory rules can be relevant where wages are connected to an Australian jurisdiction (state-based analysis needed).

Local withholding/payroll obligations in the country where work is performed
Employer registration obligations
Corporate tax exposure if a permanent establishment arises through the employee’s activities (treaty-dependent)

Create an “overseas remote work” policy with:

What if I’m a contractor or run an Australian company while nomading?

Contractors and entity owners must manage both income tax and indirect tax positions, and must also consider whether the business is being carried on overseas.

Personal services income (PSI): PSI rules can still apply even if services are performed overseas, depending on client base and business structure (ITAA 1997 rules on PSI).
Company residency and central management and control: For companies, where decisions are made can affect residency status (high-risk if directors operate overseas for extended periods).
Permanent establishment risk: If you operate in another country in a way that meets PE thresholds, profits may be taxable there under a DTA.

Many services supplied to non-residents may be GST-free under the GST law where specific requirements are met; however, the facts matter (recipient residency, use/enjoyment, and connection with Australia).

For nomads operating through an Australian company, board minutes and decision-making evidence should be maintained to demonstrate where central management and control occurs.

How should digital nomads handle record-keeping, exchange rates, and substantiation?

The compliance standard is contemporaneous records that clearly prove residency position, income derived, foreign tax paid, and deductible expenses.

Residency evidence: Travel diary, leases, utility bills, evidence of Australian home availability, family location evidence.
Income evidence: Contracts, invoices, payslips, platform statements, bank statements.
Foreign tax evidence: Foreign assessments, withholding certificates, tax payment receipts, translations where needed.
FX approach: Consistent conversion method; the ATO accepts reasonable approaches where consistently applied and supported (for example, using bank conversion rates shown on statements or reliable published rates).

A contractor invoices in USD while travelling across 4 countries. The Australian return should show AUD-converted income, with workings that reconcile invoices to receipts and the applied exchange rate basis.

What compliance tips should Australian accounting practices give digital nomad clients?

The most effective practice approach is a standardised “cross-border worker checklist” plus an annual residency and treaty review.

Residency assessment at the start of travel (and again at 30 June):
Country-by-country tax risk screen:
Income mapping:
Foreign tax offset readiness:
Pre-lodgment reconciliation:
Governance memo:

How does MyLedger help automate compliance work for digital nomad clients?

Australian practices handling digital nomads benefit most from automation in reconciliation, evidence capture, and working paper generation—because cross-border work increases transaction volume, FX complexity, and substantiation requirements.

Automated bank reconciliation: MyLedger AutoRecon reduces reconciliation from 3–4 hours to 10–15 minutes per client (around 90% faster), which is material when clients have multi-currency and platform receipts.
AI-powered categorisation: 90% auto-categorisation reduces manual coding errors that commonly trigger incorrect GST and deduction outcomes.
Automated working papers: Working papers that are typically maintained in Excel can be systematised, reducing review risk and improving file quality.
ATO integration accounting software: MyLedger’s complete ATO portal integration supports due date visibility and ATO statement/transaction imports, which is particularly useful where nomads miss correspondence while overseas.
Cost model suitable for firms: All-in-one pricing is designed for practice scale (estimated $99–199/month unlimited clients post-beta) versus per-client pricing models common in alternatives.

Reconciliation speed: MyLedger = 10–15 minutes per client, Xero/MYOB/QuickBooks = commonly 3–4 hours where statements and coding require manual intervention.
Automation level: MyLedger = AI-powered reconciliation and bulk operations, Xero/MYOB/QuickBooks = more manual processing and rules-driven workflows.
ATO integration: MyLedger = direct ATO portal integration and ATO statement/transaction imports, many competitors = limited ATO connectivity and heavier reliance on separate portals and manual downloads.
Working papers: MyLedger = automated working papers suite (including Division 7A and BAS reconciliation), competitors = working papers often remain Excel-based or split across add-ons.
Pricing model for practices: MyLedger = unlimited clients (practice-first), many competitors = per-client subscriptions that scale linearly with client count.

Who should choose what if they are a digital nomad (or advising one)?

Platform selection should be driven by volume of transactions, frequency of travel, complexity of foreign tax, and the firm’s need for standardised evidence and working papers.

Choose MyLedger if:
Consider Xero/MYOB/QuickBooks if:

Next Steps: How Fedix can help

Fedix helps Australian accounting practices systemise cross-border compliance by automating the highest-friction work: bank statement processing, reconciliation, and working paper production. Learn more about how MyLedger can help automate automated bank reconciliation, ATO integration accounting software workflows, and AI-powered reconciliation so your team can spend time on residency analysis, DTA positions, and advisory—rather than manual coding.

MyLedger vs Xero for practice-wide automation
Best practice workflows for foreign income tax offset substantiation
Policy templates for “remote work from overseas” approvals

Conclusion

Digital nomads create Australian tax complexity primarily through residency uncertainty, foreign income reporting, and DTA interactions, and compliance is achieved through disciplined documentation, correct reporting, and proactive treaty and PE risk reviews. Australian accounting practices can materially reduce time and risk by standardising cross-border checklists and using automation tools such as MyLedger to accelerate reconciliation, improve evidence trails, and generate working papers consistently.

Frequently Asked Questions

Q: Do Australian digital nomads pay Australian tax while overseas?

If they remain Australian tax residents, they generally declare worldwide income in Australia and may claim a foreign income tax offset for foreign tax paid, subject to the rules in Div 770 of the Income Tax Assessment Act 1997 and substantiation.

Q: Does staying overseas for more than 183 days make me a non-resident for tax?

Not necessarily. The 183-day test is only one part of residency law, and the ATO determines residency based on all facts, including domicile, intention, and whether a permanent place of abode exists outside Australia.

Q: Can I claim a foreign income tax offset for tax paid overseas?

Often yes, where the foreign tax is paid on income that is also assessable in Australia, but the offset is subject to limits and evidence requirements. Foreign assessments and proof of payment should be retained.

Q: What records should a digital nomad keep for ATO purposes?

At minimum, keep a travel/work location diary, contracts and invoices, payslips/platform statements, bank statements, foreign tax assessments/withholding certificates, and FX conversion workings that reconcile to reported amounts.

Q: Is there a high risk for Australian employers letting staff work overseas?

Risk can be material if the arrangement triggers foreign payroll obligations or permanent establishment exposure. Employers should implement a documented policy, country-by-country risk review, and clear limits on authority to contract overseas.

Disclaimer: This material is general information only and does not constitute tax advice. Australian and foreign tax outcomes depend on your full facts, the relevant year’s law, and any applicable double tax agreement. Advice from a qualified Australian tax professional should be obtained before acting.