How Dual Tax Residents Should Handle Crypto in Australia

Dual tax residency, where an individual is considered a tax resident of two countries simultaneously under each country’s domestic law, creates one of the most complex scenarios in Australian crypto tax. It is not as uncommon as many assume: an Australian who moves to the UK for work may remain an Australian tax resident under Australian law while also becoming a UK tax resident under UK law. Two sets of tax obligations then apply to the same person’s worldwide income and gains, including their crypto activity.

As of 1 July 2027, CGT rules in Australia are set to change. Please visit this page for the revised tax rules.

The resolution of dual residency is generally found in the double tax agreement (DTA) between the two countries. Australia has DTAs with most major economies, and these treaties contain “tie-breaker” provisions that establish which country has primary residency rights for treaty purposes. However, the treaty position and the domestic law position are different, and both may have compliance obligations attached. Understanding how dual residency interacts with crypto capital gains tax and income obligations requires specialist tax advice from professionals familiar with both jurisdictions.

 

How Australian Residency Is Determined

Australia’s tax residency rules operate under four tests: the resides test (ordinary concepts), the domicile test, the 183-day test, and the superannuation test. Most Australians who have left Australia for work or personal reasons continue to satisfy the domicile test if their permanent home (domicile) remains in Australia, making them Australian residents even when physically abroad for extended periods.

An individual can be an Australian tax resident even if they spend less than 183 days in Australia in a year, as long as the domicile test or the resides test continues to be met. The ATO’s approach to residency has become more conservative in recent years: the High Court’s decision in Harding v Commissioner of Taxation (2019) clarified aspects of the domicile test in ways that may affect individuals who maintain a permanent home in Australia while living overseas.

For Australian crypto investors who establish ties in another country, whether through employment, property ownership, or long-term residence, a formal residency analysis by a tax professional should precede any assumption about whether Australian or foreign tax law applies to their crypto gains. Incorrectly assuming that overseas residency has commenced (and therefore ceasing to file Australian returns) when Australian residency has in fact been maintained is a significant legal risk.

 

Double Tax Agreements and Their Effect on Crypto

Australia’s DTAs generally include a tie-breaker provision that determines residency for treaty purposes when an individual qualifies as a resident under both countries’ domestic laws. The tie-breaker typically looks first at which country the individual has a permanent home, then at the centre of vital interests (family, economic, social connections), then at habitual abode, and finally at nationality. The country that wins the tie-breaker has primary taxing rights for treaty purposes.

For capital gains from crypto, Australia’s DTAs typically follow the OECD model treaty’s position on “other income” or general capital gains provisions. Crypto assets are generally treated as intangible property under most DTAs, with the residence country having primary taxing rights on capital gains. This means that if the DTA tie-breaker awards residency to Australia, Australia has the primary right to tax your worldwide crypto capital gains.

The treaty position does not eliminate the other country’s right to tax: it only establishes which country has primary rights and how double taxation is avoided. If Australia wins the treaty tie-breaker, the other country may still tax gains on Australian residents under its domestic law for certain categories of assets, with a foreign income tax offset available in Australia to reduce double taxation. The interaction requires advice from a tax professional with expertise in both Australian tax law and the relevant DTA.

 

Practical Steps for Dual Residents Holding Crypto

Australian investors who have established or are establishing ties in another country should, as a first step, obtain a formal residency determination covering both Australian and foreign domestic law. This determination establishes which country’s tax rules apply, and whether both apply simultaneously, and forms the foundation for correct tax compliance.

During any period of dual residency, all crypto activity must be reported to the tax authorities of the relevant country (or countries). For Australian residents, Australian tax return obligations continue regardless of where physical activity occurs: all crypto disposals and income must be disclosed in the Australian return. Crypto tax records must capture the date, AUD value, and nature of every transaction throughout the period.

Foreign income tax credits or offsets for crypto taxes paid to another jurisdiction are available in Australia under the foreign income tax offset (FITO) provisions and under the relevant DTA. To claim the FITO, the Australian taxpayer must have paid foreign tax on the same income or gain, and the foreign tax must be of a comparable nature to Australian income tax. Maintaining documentation of foreign tax assessments and payments is essential for correctly calculating the FITO claim.

 

The Departure Tax and Arrival Date Considerations

For individuals who arrive in Australia and establish Australian tax residency for the first time, there is a formal mechanism for determining the cost base of assets held at the time of arrival. Under Division 855 of the Income Tax Assessment Act 1997, non-residents who become Australian residents are generally taken to have acquired their assets at market value on the date they became a resident. This means that for cryptocurrency held before becoming an Australian resident, the cost base is reset to market value on the date of Australian residency commencement, and only gains accruing after that date are subject to Australian CGT.

The converse applies for individuals ceasing Australian residency (the deemed disposal on departure discussed in the overseas temporary residence guide). For dual residents navigating the start and end of Australian residency, correctly identifying the relevant commencement and cessation dates, and the cost base implications for crypto holdings at those dates, requires precise legal analysis.

For investors who hold cryptocurrency acquired before arriving in Australia, or who contemplate ceasing Australian residency while holding crypto with significant unrealised gains, proactive tax planning with an Australian and international tax specialist is essential. The timing of residency changes, the AUD values of crypto holdings at those dates, and the interaction with the other country’s tax rules all affect the outcome. These decisions often have six-figure tax implications, making professional advice a proportionate investment.

This article is for educational purposes only and does not constitute financial or tax advice. Australian crypto tax laws are complex and subject to change. Always consult a registered tax agent or accountant for advice tailored to your specific circumstances.