UK IT contractor working from Australia

A UK IT contractor who moves to Australia for a long stint will often stop being UK resident under the statutory residence test and become an Australian resident, and possibly a temporary resident, under the ATO’s tests. The 2003 UK Australia treaty settles dual residence, but there is no UK Australia social security agreement on HMRC’s list, so National Insurance needs separate thought.

Do you stay UK resident after moving to Australia?

HMRC’s RDR3 guidance on the statutory residence test says you are automatically non resident for a tax year if you spend fewer than 16 days in the UK, where you were UK resident in one or more of the previous three years. The third automatic overseas test applies if you work full time overseas, spend fewer than 91 days in the UK and work more than 3 hours on fewer than 31 UK days. Full time means averaging 35 hours or more a week under HMRC’s sufficient hours calculation. Spending 183 days or more in the UK makes you automatically resident. Our statutory residence test guide covers the ties test for everyone else.

In the year you leave, split year Case 1 can apply if you were UK resident in the previous year and are non resident in the following year because you meet the full time work overseas test. See split year treatment.

When does the ATO treat you as an Australian resident?

The ATO lists four residency tests: the resides test, the domicile test, the 183 day test and the Commonwealth superannuation test. The resides test is the primary one, and if you reside in Australia you do not need to apply the others. For people coming to Australia, the ATO says you are generally resident if you have been in Australia continuously for 6 months or more and for most of that time worked in one job and lived at the same place.

Australian residents must declare all income earned in Australia and overseas. You can also be a temporary resident, which applies alongside resident or foreign resident status, if you hold a temporary visa and neither you nor your spouse is an Australian resident under the Social Security Act 1991. Temporary residents declare income earned in Australia, capital gains on taxable Australian property and, in certain circumstances, income from employment or services performed overseas. Other foreign income does not have to be declared. How salary or dividends from your UK company are treated is a question for an Australian adviser.

What are the Australian tax rates?

For 2025 to 2026 the ATO gives resident rates of nil up to $18,200, 16c for each $1 over $18,200 up to $45,000, then $4,288 plus 30c for each $1 over $45,000 up to $135,000, $31,288 plus 37c over $135,000 up to $190,000, and $51,638 plus 45c for each $1 over $190,000. These rates do not include the 2% Medicare levy. Foreign residents pay 30c for each $1 up to $135,000 in the same year, and are not required to pay the Medicare levy.

If you trade in Australia, the ATO says you must register for GST once your GST turnover is $75,000 or more, within 21 days of being required to, and you need an Australian business number first.

What does the UK Australia treaty say?

The gov.uk Australia tax treaties page lists the 2003 Australia UK convention, signed on 21 August 2003 and in force from 17 December 2003, and a synthesised text showing changes made by the Multilateral Instrument. Under Article 4(3), an individual resident in both countries is treated as resident where a permanent home is available. If there is a home in both or neither, residence goes to the country with which personal and economic relations are closer. If that cannot be decided, nationality follows, and then the tax authorities try to resolve it by mutual agreement. Unlike many UK treaties, there is no habitual abode step.

Article 5 defines a permanent establishment, Article 7 deals with business profits, Article 14 covers employment income, and Article 14(4) applies the employment rules to a director’s pay from the company as if the company were the employer. Article 22 provides relief from double taxation. Read our guides to how double tax treaties work and foreign tax credit relief.

What happens to your National Insurance?

Australia does not appear in the list of countries with a UK social security agreement in HMRC’s NI38 guidance, so there is no certificate of coverage route. NI38 says that in a country with no agreement, an employee must pay Class 1 contributions for the first 52 weeks abroad if the employer has a place of business in the UK, the employee is ordinarily resident in the UK and was resident in the UK immediately before starting the work abroad.

A director employed by their own UK company should look at whether those conditions are met. After that, voluntary contributions may be worth considering, but from 6 April 2026 voluntary Class 2 for periods abroad was removed for most people, and new Class 3 applicants need ten years of UK residence or qualifying contributions. See National Insurance when working abroad.

What happens to your UK limited company and IR35?

HMRC’s International Manual says a company incorporated in the UK is UK resident, as is a company whose central management and control is in the UK. If it is also resident in a treaty country and the tie breaker awards residence there, it is treaty non resident and not UK resident. For companies, Article 4(4) of the Australia treaty, as replaced by the Multilateral Instrument, asks the authorities to agree residence having regard to place of effective management and other factors, and without agreement the company gets no treaty relief. A sole director running the company from Sydney should read our pages on company residence and keeping a UK limited company after moving abroad.

On IR35, HMRC’s Employment Status Manual says a worker who is not UK resident and is working outside the UK is unlikely to be chargeable to UK tax or National Insurance, and if not chargeable the off payroll rules will not apply. Where a medium or large client has no UK residence and no UK permanent establishment, Chapter 10 does not apply and the company should consider Chapter 8. See IR35 when the client is overseas.

Point	Position
UK automatic non residence	Fewer than 16 UK days, or full time work overseas with fewer than 91 UK days and fewer than 31 UK work days
Australian residence	Resides, domicile, 183 day and Commonwealth superannuation tests
Treaty	2003 convention, in force 17 December 2003, modified by the MLI
Tie breaker	Article 4(3): permanent home, closer personal and economic relations, nationality, mutual agreement
Social security	No agreement listed; 52 week Class 1 rule where conditions are met
Resident top rate 2025 to 2026	45c over $190,000, plus 2% Medicare levy
GST registration	GST turnover of $75,000 or more

How might this work for a contractor?

Illustration only. Sam, a cloud architect with a UK limited company, moves to Melbourne on a temporary visa with his partner, rents a flat on a 12 month lease and keeps working for a UK client. He spends 12 days in the UK in the next UK tax year, working on 4 of them, so he is automatically non resident for that year. He is likely to be an Australian resident and, on his visa, also a temporary resident. He asks an Australian adviser how his company income will be taxed and whether his company could be resident or have a permanent establishment in Australia.

What should you check before you go?

• Plan UK days and UK working days for the year you leave and the next.
• Check whether split year Case 1 applies.
• Work through the ATO residency tests and whether you will be a temporary resident.
• Read Articles 4, 14 and 22 of the treaty on gov.uk.
• Check the 52 week Class 1 rule and whether you qualify for voluntary contributions.
• Review where your company is managed from and IR35 on each contract.
• Check whether you need an ABN and GST registration, and see an Australian adviser.

HMRC can open a check into a return after a move abroad, and the accountant’s fees for dealing with it can be insured through tax investigation insurance.

Frequently asked questions

Is there a UK Australia social security agreement?

Australia is not in the list of agreement countries in HMRC’s NI38 guidance, so you cannot get a certificate of coverage for Australia.

Does the UK treaty with Australia use habitual abode?

No. Article 4(3) goes from permanent home to personal and economic relations, then nationality, then mutual agreement.

Do foreign residents pay the Medicare levy?

The ATO says foreign residents are not required to pay the Medicare levy. Residents pay it at 2% on top of the income tax rates.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Sources

• GOV.UK: Guidance note for statutory residence test srt rdr3
• GOV.UK: manual page RFIG20150
• GOV.UK: manual page RFIG21040
• www.ato.gov.au: Your tax residency
• www.ato.gov.au: Australian resident for tax purposes
• www.ato.gov.au: Foreign and temporary residents
• www.ato.gov.au: Tax rates australian residents
• www.ato.gov.au: Tax rates foreign residents
• www.ato.gov.au: Registering for gst
• GOV.UK: Australia tax treaties

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 6 November 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.