Relocation From Israel to Australia

Australia offers diverse opportunities for Israelis considering relocation abroad, whether for work, investments, studies, retirement, or improving quality of life. The distant continent attracts attention due to a unique combination of advantages: high standard of living, advanced education systems, active Jewish communities in Melbourne and Sydney, quality healthcare services, a stable economy, and high environmental quality.

However, relocating to Australia requires thorough planning and a comprehensive understanding of the legal, financial, and tax implications associated with the move. This article outlines the key considerations to address before making the move.

What Does the Relocation Process to Australia Involve?

The relocation process consists of several essential steps. 

First, conduct a thorough review of employment opportunities in Australia, the cost of living (which varies between cities and regions), the local tax system, educational options for children, available healthcare services, and other important factors.

Second, consider whether you wish to terminate your Israeli tax residency and the numerous implications that come with it. It is important to plan how you will manage your finances and assets, as well as arrange for private health insurance. In Australia, all citizens and permanent residents have access to the public healthcare system known as Medicare. However, foreign nationals holding work visas without permanent residency status are not eligible for Medicare coverage. These individuals must obtain private health insurance to ensure they have adequate medical coverage during their stay in Australia.

Simultaneously, you must arrange your legal status in Australia by obtaining the appropriate work permit, residency, citizenship, or visa, as applicable.

In this regard, one of the main challenges in relocating to Australia is obtaining the appropriate residence visa. Each visa type has different requirements, such as age, education, income, minimum investment, employment contract, health insurance, and more. It is essential to select the visa that best suits your circumstances and to arrange it in advance.

Currently, if you’re not an Australian citizen, permanent resident, or eligible New Zealand citizen, you can’t buy an existing home in Australia from April 2025 to March 2027— Unless the purchase meets certain conditions, however, you can still purchase new properties or land intended for construction if you have received approval from the Foreign Investment Review Board (FIRB).

Tax Aspects of Relocation to Australia

Whenever moving to a foreign country, the question arises whether you will still have tax obligations in Israel after the move. The answer usually depends on whether you have terminated your Israeli tax residency.

Termination of Tax Residency

One of the main issues in the relocation process is determining your residency for tax purposes. In Israel, Israeli residents are taxed on their worldwide income, while non-residents are taxed only on income sourced in Israel. Residency status is determined according to your “center of life,” which is examined using both qualitative and quantitative tests.

If you intend to settle in Australia for the long term, it may be preferable to sever your residency from Israel (for both income tax and National Insurance). Note that Israelis who sever their residency are required to pay an “exit tax” on certain assets.

According to Section 1 of the Israeli Income Tax Ordinance, residency is determined based on the center of life test, and a rebuttable presumption based on the number of days you stayed in Israel, as follows:

• The center of life test – This is a substantive test, in which all personal, family, economic, and social ties are examined. These include a permanent place of residence, a place of economic activity, a location of economic interests, and more.
• Days test – An individual is considered an Israeli resident if they spent 183 days or more in Israel in a single tax year, or if they spent 30 days or more in the current tax year and a total of 425 days or more in Israel during the current tax year and the two preceding years. This presumption can be rebutted if the individual proves that, despite their stay in Israel, their center of life is not in Israel.

Anyone who meets the days test, i.e., is considered an Israeli resident under this test, must file Form 1348 – “Declaration of Residency” – with the Israel Tax Authority (“ITA) to declare the termination of Israeli tax residency and detail the circumstances supporting that their center of life is not in Israel.

It is important to note that terminating tax residency is usually not a one-time event but an ongoing process, and the ITA may review your residency status even years after leaving. Therefore, it is recommended to keep detailed documentation of all actions indicating the transfer of your center of life to Australia, and to avoid creating new ties to Israel.

These days, a dramatic bill to amend the Income Tax Ordinance regarding the definition of Israeli residency for tax purposes has been submitted to the Knesset.

According to the proposal, there will be absolute presumptions (which cannot be rebutted) based on the number of days that define an individual as an Israeli resident, and the ‘center of life’ test will serve only as a secondary tool in cases not covered by these presumptions.

As a result, there may be situations where an individual who has terminated their residency in Israel will still be considered an Israeli resident for tax purposes in future years, since, in many cases, the number of days they spent in Israel will be sufficient.

Double Taxation Treaty between Israel and Australia

Israel and Australia have a double taxation treaty intended to prevent individuals from being taxed twice on the same income. The treaty sets out clear rules for determining tax residency in cases of dual residency, establishes the applicable tax rates for passive income (such as dividends, interest, and royalties), and governs the taxation of employment income.

Under the treaty, employment income earned by an Israeli resident who works in Australia is generally subject to tax in Australia, provided the work is physically performed there. However, if the employee is present in Australia for less than 183 days in a 12-month period and certain additional conditions are met, Israel may retain the right to tax that income. Each case should be assessed based on its specific circumstances.

In addition, the treaty also addresses dual residency. In cases where an individual is considered a resident for tax purposes in both countries, the treaty offers equalization rules for determining residency, as follows:

1. The individual shall be deemed to be a resident only of the State in which a permanent home is available to that individual; if a permanent home is available in both States, that individual shall be deemed to be a resident only of the State with which the individual’s personal and economic relations are closer (centre of vital interests);
2. If the State in which the centre of vital interests is situated cannot be determined, or if a permanent home is not available to the individual in either State, the individual shall be deemed to be a resident only of the State in which that individual has a habitual abode;
3. If the individual has a habitual abode in both States or in neither of them, the individual shall be deemed to be a resident only of the State of which the individual is a national;
4. If the individual is a national of both States or of neither of them, the competent authorities of the Contracting States shall endeavour to resolve the question by mutual agreement.

To read the Double Taxation Convention between Israel and Australia in English – click here.

Exit Tax

Israelis leaving Israel may be required to pay an “exit tax” on certain assets. This tax is intended to capture the latent gain in assets held by Israeli residents.

According to Section 100A of the Income Tax Ordinance, an individual who ceases to be an Israeli resident is deemed to have sold their assets on the day before terminating the tax residency (“Exit Day”). The tax is calculated on the notional gain between the original purchase price and the value on the exit day.

Exit tax applies to certain assets when an individual ceases to be an Israeli tax resident. This tax is levied on unrealized capital gains of various qualifying assets at the time of departure, though some assets like Israeli real estate may be exempt as they remain taxable in Israel regardless of residency status.

There are various methods for calculating and paying exit tax liability, each with different implications for the taxpayer. The timing and structure of these payments can significantly impact the overall tax burden. It is highly recommended to consult with an international tax expert before departing Israel to develop a tax strategy that best aligns with your specific circumstances and financial goals.

How Will Terminating Tax Residency Affect Taxation of Income?

If the move to Australia is temporary, you remain an Israeli resident for tax purposes and cannot terminate tax residency. This means you are liable for Israeli tax on your worldwide income and must report all income, including income from Australia, to the Israeli tax authorities.

If tax residency is not terminated, it is often possible to claim a tax credit for taxes paid in Australia.

If the move to Australia is permanent and you have terminated your Israeli tax residency, you will only be liable for Israeli tax on income sourced in Israel, while all other income will be subject to tax in Australia.

For more information on the termination of residency, click here.

Tax System in Australia

In Australia, an individual will be considered a tax resident if they meet one of the following criteria: staying in Australia for 183 days or more during a single tax year, residing in Australia, or the individual’s place of residence is in Australia (and not in another country).

Australia’s tax system is structured across three levels: federal, state, and municipal, reflecting the federation of six states and two territories. At the federal level, taxes include income tax (including capital gains tax), Goods and Services Tax (GST), and others. At the state level, taxes include Payroll Tax, land tax, stamp duty, etc. Municipal taxes are typically charges and levies for property and services.  Australia has a progressive personal income tax system.

The tax brackets in Australia for taxable income of an Australian resident are:

• Up to AUD 18,200, tax exempt.
• AUD 18,201 – 45,000 – 16%.
• AUD 45,001 – 135,000 – 30% + AUD 4,288.
• AUD 135,001 – 190,000 – 37% + AUD 31,288.
• Above AUD 190,000 – 45% + AUD 51,638.

In addition to income tax, every Australian resident is subject to a Medicare levy on the taxable income of Australian resident individuals at a rate of 2% to fund the public health system. There may be an additional levy for high-income earners without additional private health insurance.

The tax brackets in Australia for taxable income of non-residents are:

• Up to AUD 135,000 – 30%.
• AUD 135,001 – 190,000 – 37% + AUD 40,500.
• Above AUD 190,000 – 45% + AUD 64,550.

Capital gains tax in Australia is considered regular income (according to tax brackets). However, there are concessions and benefits that apply only to capital gains. For example, holding an asset for more than 12 months will entitle an individual to a 50% discount on the gain for tax purposes

The corporate tax rate in Australia generally stands at 30%, however, small and medium-sized companies with an annual turnover of less than 50 million Australian dollars are eligible for a reduced rate of 25%.

A significant advantage in Australia is the absence of inheritance or estate tax, which allows for the transfer of assets between generations without tax liability. However, it is important to note that capital gains tax may apply when the asset is sold in the future by the heirs.

National Insurance

An Israeli resident staying abroad is required to pay National Insurance (Bituach Leumi) contributions, but if tax residency is terminated, there is no obligation to pay National Insurance, and you are not entitled to health or social security benefits in Israel.

Between Israel and Australia, there is no social security agreement. In the absence of such an agreement, you may be subject to social security liability in both jurisdictions. Therefore if you intend to immigrate to Australia, it is recommended to terminate your residency in Israel as well as in national insurance and arrange private health insurance in the destination country.

Transferring Funds from Israel to Australia

You should review the various options for transferring funds abroad – bank transfers, international credit cards, etc. Each option has its advantages and disadvantages in terms of fees, transfer times, exchange rates, amount limits, and regulations. Pay attention to reporting requirements for authorities and banks, following anti-money laundering laws and international regulations (FATCA, CRS). It is also advisable to open an Australian bank account in advance.

According to Section 170(a) of the Ordinance, when making a payment from Israel to a foreign resident that constitutes taxable income, withholding tax applies. Therefore, transfer of funds which are not constitute taxable income may not be subject to tax but may require an upfront approval from the ITA.

For more information, see the article “Transferring Funds from Israel Abroad.”

Opening a Bank Account in Australia

Opening a bank account in Australia is possible for foreigners, including non-residents and new immigrants. The process usually requires a valid passport, visa/residence permit, proof of address in Australia, proof of income, and, in some cases, a tax file number (TFN). Many banks allow accounts to be opened online before arrival, which can simplify fund transfers and integration upon entry.

Returning to Israel

Upon returning to Israel, you should consider the various legal, tax, and social implications. If you have terminated your tax residency, you may be entitled to benefits as a regular or veteran returning resident (depending on the length of your stay abroad), including tax exemptions on income and capital accumulated abroad.

You should also consider the waiting period (up to 6 months) for the renewal of National Insurance rights and possible benefits from the Ministry of Aliyah and Integration.

 In short, relocation to Australia offers many opportunities, but it is a complex process that requires professional planning, personal guidance, and a thorough understanding of all legal and tax aspects. It is recommended to consult with international tax experts to ensure early and comprehensive planning for a smooth and successful transition to your new life in Australia.

Nimrod Yaron & Co. specializes in terminating tax residency and providing comprehensive advice for relocation to foreign countries, including Australia. Our team of experts will assist you in optimal tax planning and residency. For an initial consultation, click here.

Q&A