Vanuatu Tax Residency: Why Australians May Still Be Taxable in Australia
Vanuatu’s appeal is obvious: no personal income tax, no company tax, no capital gains tax, no wealth or inheritance tax. Apart from a 12.5% VAT on goods and services, the country promotes itself as a straightforward, low-tax environment.
However, Vanuatu tax residency does not automatically remove an Australian from Australia’s tax system. If you remain an Australian tax resident, or if your Vanuatu company is effectively controlled from Australia, the ATO can still tax your income.
This guide explains the key reasons why Australians living, investing or doing business in Vanuatu may still be taxable in Australia.
1. Vanuatu Tax Residency Doesn’t Override Australia’s Residency Tests
Australia taxes residents on their worldwide income, regardless of where that income is earned. There is no Australia–Vanuatu tax treaty, so there is no treaty tie-breaker to determine residency between the two countries. There is a Tax Information Exchange Agreement (TIEA), which allows both countries to share financial information.
You only need to satisfy one of Australia’s four residency tests to be considered a tax resident:
• Resides Test
Do your personal, social and economic ties show that you “reside” in Australia in an ordinary sense?
• Domicile Test
If your legal domicile is Australia, you remain a resident unless you establish a permanent place of abode outside Australia. This is where many Vanuatu tax residency attempts fail.
• 183-Day Test
If you are physically in Australia for 183+ days in a tax year, residency is likely.
• Superannuation Test
Certain Commonwealth employees (and family members) remain residents automatically.
Key case: Harding v FCT confirmed that a “permanent place of abode” offshore does not require owning a long-term home, but it does require a stable and settled living arrangement overseas.
Indicators that strengthen Australian residency status:
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Keeping Medicare and Australian private health cover
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Available accommodation in Australia
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Spouse or children based in Australia
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Significant time spent in Australia
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Running or directing business affairs from Australia
2. Living Full-Time in Vanuatu Doesn’t Guarantee Non-Residency
To genuinely cease Australian residency, you must demonstrate:
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Long-term accommodation in Vanuatu
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A durable, ongoing intention to live offshore
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Minimal ties to Australia
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Limited time spent in Australia
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Reduced social and economic footprint here
Hotel stays, temporary arrangements, frequent returns, or maintaining strong family/commercial links in Australia can all undermine a Vanuatu tax residency position.
3. Vanuatu Companies Can Still Be Taxed in Australia
A company becomes an Australian tax resident if:
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It is incorporated in Australia, or
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Its central management and control occurs in Australia.
If strategic decisions, contracts, finances, or board-level control happen from within Australia, the ATO may treat the “Vanuatu company” as an Australian-resident company.
This follows the principles from Bywater and subsequent ATO rulings.
Even if the company remains non-resident, CFC (Controlled Foreign Company) and anti-avoidance rules can attribute income back to an Australian shareholder.
4. Receiving Dividends in Vanuatu Doesn’t Remove Australian Tax
Vanuatu’s zero-tax environment may allow profits to build locally.
However, this provides no protection if:
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You are an Australian tax resident, or
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Your company is Australian-resident through management and control.
Dividends, wages or distributions can still be fully taxable in Australia.
5. The ATO Has Access Through a Tax Information Exchange Agreement
The TIEA between Australia and Vanuatu allows Australian authorities to request and receive:
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Bank records
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Ownership and share registers
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Accounting records
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Company documentation
“No income tax” does not mean “no visibility.”
6. Common Facts That Keep People in the Australian Tax Net
People attempting Vanuatu tax residency often get caught by:
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Keeping Medicare or private health in Australia
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Owning available Australian property
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Spending significant time in Australia
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Directing offshore business operations from Australia
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Maintaining strong lifestyle footprints (vehicles, clubs, personal effects)
Each of these suggests continued residency under the resides or domicile tests.
7. What Strong Non-Residency Looks Like
Characteristics of a sustainable non-resident position include:
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Long-term housing in Vanuatu, not temporary accommodation
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Deep economic and social ties to Vanuatu
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Minimal time in Australia
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Offshore management and control of all business affairs
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Documented evidence of relocation and integration
Even then, outcomes depend heavily on individual circumstances.
Takeaways
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Vanuatu tax residency does not automatically remove Australians from the ATO’s reach.
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Australia has no income tax treaty with Vanuatu, but strong information-sharing arrangements.
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Residency is determined by facts: housing, ties, time spent, and behaviour — not by offshore intentions alone.
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Companies managed from Australia can be fully taxable here, even if incorporated elsewhere.
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Anyone seeking certainty should obtain tailored advice and maintain strong factual evidence of offshore residency and offshore management.