Katich ends his stay at Derbyshire
The 32-year-old has averaged over 75 this summer but he admits the strain of playing consecutive campaigns for Derbyshire and Australian state New South Wales has taken its toll.
He said: "I have thought long and hard about this decision and it has been a difficult one for me to make.
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Hide Ad"I have never played two back-to-back full seasons of county cricket, and being captain of both sides would make it very difficult because you can't keep going at 100 per cent the whole time."
Derbyshire head of cricket John Morris revealed a desire to add to his 23 Test caps was behind Katich's decision.
"I am obviously disappointed that Simon feels unable to come back next year due to the fact that he still has ambitions to play for Australia," Morris said.
"He has never returned to England for a back-to-back second term with any of the other counties that he has represented in the past.
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Hide Ad"Simon feels that if he is to achieve his ambition to again one day play for Australia, he needs to commit his future to New South Wales.
"We have made a financial offer to Simon that I am sure was very attractive, but I have to respect that his decision is not financial but is purely to do with his own ambitions as an Australian player."
Katich has shone for Derbyshire this season despite their inability to challenge for promotion from County Championship Division Two, while they have also struggled in all the one-day competitions.
He previously played for Durham, Hampshire and Yorkshire in country cricket.
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Hide AdChairman Don Amott added: "I would like to thank Simon for everything he has done for us this season in what at times have been difficult circumstances.
"Simon helped the club immensely by taking charge of cricket matters after the mid-season departure of former director of cricket David Houghton and we thank him especially for that."