The first one is a statement. You can agree with the statement with "Yes, that's right" or you can reinforce it with "No, I don't." The first sounds more natural to me, unless you added where you do live. "No, I don't. I live in Australia."
The second is a question. You can't agree with the question with a "yes" response when you don't. For this one, only 4 would be suitable.
As an additional note, when you are asked a "yes/no" question and the answer is "no" there is an expectation that you will provide the correct information in your response.
No, I live in Australia. No, I used to, but I moved back home to Canada a few months ago.