Australia – Taxation

How does the tax system in Australia work?

Australia operates a unified federal income tax system. In contrast to countries where regional or state governments impose their own layers of income tax, personal income tax in Australia is collected exclusively at the national level by the Australian Taxation Office (ATO). Individual states and territories do levy certain charges — stamp duty on property purchases and payroll tax for employers being the most prominent — but the overarching income tax framework is a federal one.

Individuals are assessed at progressive rates applied to their total taxable income, a structure broadly comparable to those found in Canada, Germany, or the UK, where higher earners shoulder a proportionally greater tax burden. From 1 July 2024, a series of rate changes took effect: the 19% band was reduced to 16%, the 32.5% rate was cut to 30%, the threshold at which the 37% rate begins was lifted to AUD $135,000, and the top 45% rate now applies from AUD $190,000. For the most current figures, always refer to the ATO’s tax rates page.

The single most important concept for anyone arriving in Australia to grasp is tax residency. Australian tax residency is entirely independent of citizenship or visa category — the ATO applies specific legal tests to determine whether you qualify. Those who meet the criteria for tax residency are liable for tax on their worldwide income and gains, while non-residents — commonly called foreign residents — are typically only liable for tax on income and gains with an Australian source.

For 2024 and 2025 tax returns, four tests derived from the Income Tax Assessment Act 1936 are used to assess tax residency: the Resides Test, which considers intention, physical presence, family connections, and business ties; the Domicile Test, under which you are treated as a resident if your domicile is in Australia unless your permanent place of abode is abroad; the 183-Day Test, a statutory test that can be rebutted if your customary home is outside Australia; and the Commonwealth Superannuation Test.

A widespread misconception is that the government’s proposed “Modernising Individual Tax Residency” framework is already operative. This is not the case — as of late 2025, the proposed “Bright Line” tests had not received Royal Assent and had not superseded the existing common law tests. Before drawing any conclusions about your own position, always consult the ATO’s tax residency page for the latest authoritative guidance.

Unlike the UK’s PAYE system, where most workers’ tax is largely settled through payroll, Australian workers are subject to Pay As You Go (PAYG) withholding by their employers, yet most individuals are still required to lodge an annual tax return to reconcile their final tax position. This approach more closely resembles the year-end filing norms found in France or Germany.

Does Australia have double taxation agreements, and how do they affect expats?

Tax treaties are formal bilateral arrangements concluded between two countries. Australia has entered into such agreements with more than 40 jurisdictions. Also referred to as tax conventions or double tax agreements (DTAs), these instruments serve to prevent the same income from being taxed twice and to discourage tax evasion, while promoting administrative cooperation between Australia and partner countries in enforcing their respective tax laws.

Australia employs a range of mechanisms to alleviate double taxation, including the exemption method, the credit method, reduced withholding tax rates, and Mutual Agreement Procedures (MAP). In practical terms, if you earn income in a DTA partner country and pay tax on it there, you can ordinarily claim a credit against your Australian tax liability for the foreign tax paid — ensuring you are not taxed twice on the same earnings.

Australian tax residents must declare their worldwide income in full. Any foreign tax already paid may be credited against the corresponding Australian liability via the Foreign Income Tax Offset (FITO), though only up to the amount of Australian tax attributable to that income. This mechanism operates in a manner similar to foreign tax credit systems available in countries such as Ireland or the Netherlands.

The majority of Australia’s tax treaties incorporate a “tie-breaker” provision, which treats a dual resident as being solely a resident of one contracting jurisdiction for tax purposes. This is especially relevant for expats who may simultaneously satisfy residency criteria in both Australia and their country of origin. To access DTA benefits, taxpayers must generally be residents of one of the contracting states and satisfy specific qualifying conditions, including economic substance requirements and adherence to treaty provisions. Understanding precisely which conditions apply is essential to making full use of any available treaty protection.

A comprehensive list of Australia’s tax treaties is maintained by the Treasury and is available at the Australian tax treaties page on treasury.gov.au. Given the technical complexity of treaty provisions, anyone with income or assets spanning multiple countries should seek specialist advice.

What taxes do expats need to pay in Australia?

The Australian tax landscape for an incoming expat encompasses several distinct areas. Which taxes apply to you — and at what rates — depends primarily on whether the ATO classifies you as a tax resident, a temporary resident, or a foreign resident.

Income Tax

Australian income tax operates on a graduated scale. The table below sets out the 2024–25 and 2025–26 income tax rates for Australian residents aged 18 and over, and does not include the Medicare Levy of 2%.

Non-residents — including newly arrived expats who have not yet qualified as tax residents — are not entitled to any tax-free threshold. Such individuals are taxed at 30% on all Australian-sourced income up to $135,000, at 37% on income between $135,001 and $190,000, and at 45% on any income above $190,000. Always verify the prevailing non-resident rates directly with the ATO, as these figures can change.

Medicare Levy

The majority of Australian residents are required to pay a Medicare Levy equal to 2% of their taxable income. Higher earners who do not hold adequate Australian registered private hospital cover may additionally be liable for the Medicare Levy Surcharge, which ranges from 1% to 1.5% depending on income level. For the 2024–25 financial year, individuals with a taxable income of $27,222 or less are not liable for the Medicare Levy; those earning between $27,222 and $34,027 pay a reduced amount.

Foreign residents are exempt from the Medicare Levy and may claim an exemption in their Australian tax return for the number of days in the income year during which they held foreign resident status. Temporary migrants from countries without a reciprocal healthcare agreement may also qualify for a Medicare exemption by obtaining a Medicare Entitlement Statement from the relevant authority.

Capital Gains Tax (CGT)

As a general rule, foreign and temporary residents are subject to CGT only on taxable Australian property — which encompasses real estate situated in Australia and assets used in carrying on an Australian business. The full 50% CGT discount is generally unavailable to foreign and temporary residents for assets acquired after 8 May 2012, though an apportioned discount may apply where the individual was an Australian resident for part of the ownership period before departing.

Foreign residents disposing of Australian property are also captured by the Foreign Resident Capital Gains Withholding (FRCGW) scheme. Under this scheme, the buyer must withhold a prescribed percentage of the purchase price unless the seller presents an ATO clearance certificate confirming their Australian residency, or a variation certificate specifying a lower applicable rate. From 1 January 2025, the foreign resident capital gains withholding rate was raised to 15% and now applies to all real property transactions, with no minimum $750,000 threshold.

Superannuation

Superannuation is Australia’s mandated retirement savings system. Employers are required to contribute under the Superannuation Guarantee at a rate of 11.5% for 2024–25, rising to 12% from 1 July 2025. Concessional (pre-tax) contributions are capped at $30,000 per year, and non-concessional (after-tax) contributions are capped at $120,000 per year. Earnings within a superannuation fund are taxed at 15%, and withdrawals made after the age of 60 are generally entirely tax-free.

Property and Stamp Duty

There is no national land or wealth tax in Australia, though payroll tax is imposed at the state level on employers and its operation varies between jurisdictions. As a general matter, it applies to salaries, wages, allowances, superannuation contributions, and fringe benefits provided to employees working in a given state. Stamp duty — a once-off transactional tax on property acquisitions — is also a state and territory impost, and rates differ markedly across jurisdictions. Many states levy additional surcharges on foreign purchasers on top of standard stamp duty; check the relevant state revenue authority’s website for up-to-date figures.

Inheritance, Gift, and Wealth Taxes

Australia imposes no federal inheritance tax, gift tax, or net wealth tax, and there is no estate duty. That said, CGT consequences can arise in relation to inherited assets — if an asset has risen in value since it was originally acquired and is subsequently sold, CGT may be payable by the new owner. Professional advice should always be sought when acquiring or disposing of inherited assets in or from Australia.

Are there any tax breaks or special regimes for expats in Australia?

The most significant tax concession available to incoming expats in Australia is the temporary resident regime. This is a distinct and valuable arrangement that differs considerably from schemes such as Portugal’s former NHR programme or Italy’s flat-tax regime — it is structured around visa status rather than income category, and it narrows the scope of Australian taxation rather than applying a reduced flat rate.

Temporary residents — such as those holding skilled, student, or partner visas — are ordinarily only liable for Australian tax on income sourced in Australia and on gains from taxable Australian property. The CGT position is particularly favourable for temporary residents: gains on assets situated outside Australia are generally disregarded for CGT purposes for as long as temporary resident status is maintained.

Most foreign passive investment income falls outside the scope of Australian tax for temporary residents, though foreign employment income may still be taxable. In practice, this means that dividends, interest, and capital gains on overseas investment holdings are generally not subject to Australian tax during the period of temporary residency — a material advantage for expats who arrive with established offshore investment portfolios.

To qualify as a temporary resident, you must hold a temporary visa and be neither an Australian citizen nor a permanent resident. The status is defined in income tax legislation and administered by the ATO; there is no application process, as eligibility is determined automatically based on your visa class and satisfaction of the remaining statutory conditions. Given the technical nuances involved, it is strongly advisable to confirm your status with the ATO or a suitably qualified tax professional before making any investment decisions.

Full Australian tax residents may also be entitled to certain offsets and exemptions. The first $18,200 of income falls within the tax-free threshold. A Capital Gains Tax Principal Residence Exemption is available on the sale of a main residence where the owner has occupied the property for at least 12 months. A Low-Income Tax Offset of up to $700 is also available to residents whose total income is below $66,667.

Australia has no equivalent to Spain’s Beckham Law or Italy’s new arrivals flat-tax regime. The temporary resident scheme remains the primary concession for newcomers, and it ceases to apply once permanent residency is obtained or full tax residency is established under the applicable tests. From that point, worldwide income becomes fully liable to Australian tax.

How and when do expats file a tax return in Australia?

The Australian tax year covers the period from 1 July to 30 June. Individuals lodging their own returns must generally do so by 31 October. Where you engage a registered tax agent, a later deadline may be available — contact the ATO or your agent to confirm the current position. Lodgement deadlines should be verified on the ATO website each year, as they are subject to change.

The step-by-step process for filing as an expat is as follows:

1. Obtain a Tax File Number (TFN). A Tax File Number is a unique personal reference used across Australia’s tax and superannuation systems. Applications can be submitted through the ATO’s online portal. If you do not have a TFN, your employer must deduct tax from your wages at the highest marginal rate.
2. Determine your residency status. Establish whether you are a full tax resident, a temporary resident, or a foreign resident, as this classification dictates what income must be declared. Use the ATO’s residency tool at ato.gov.au or obtain professional advice if your circumstances are not straightforward.
3. Create a myGov account linked to the ATO. You can file your return online via your myGov account or through a registered Australian tax agent. The myGov portal serves as the principal access point for self-lodged returns.
4. Gather your income documents. Collect payment summaries or income statements from your employers — these are now delivered digitally via Single Touch Payroll — together with records of any rental income, investment income, foreign income, and capital gains events that occurred during the year.
5. Lodge your return via myTax or a registered tax agent. Individual tax returns may be submitted online via myTax or through a registered tax agent. myTax automatically pre-populates many fields using information the ATO already holds on you.
6. Include any overseas income schedules if required. The foreign income schedule (NAT 2541-F) is used to report overseas income. Full tax residents must declare all worldwide income and claim the Foreign Income Tax Offset where eligible.
7. Pay any tax owing or receive your refund. Once your return has been processed, the ATO will issue a Notice of Assessment setting out any amount payable or any refund to which you are entitled.

Penalties for late lodgement begin at one penalty unit ($330 in 2025) for each 28-day period the return is overdue, up to a maximum of five units, with interest also accruing. Persistent non-compliance can lead to audits and escalated penalties. It is important to lodge a return even if you believe no tax is owed — if you hold a TFN, the ATO will generally expect a return unless you have formally notified them otherwise.

If you are departing Australia permanently and will no longer receive Australian-sourced income beyond interest, dividends, and royalties, you may lodge your return prior to leaving. Returns can also be lodged online from outside Australia, provided you have a myGov account linked to the ATO.

What are the tax implications of leaving Australia?

Leaving Australia as a tax resident carries significant capital gains tax consequences that are frequently underestimated. When you cease to be an Australian tax resident, an “exit tax” known as CGT event I1 may be triggered: you are deemed to have disposed of most non-Australian assets at their market value on the date of departure. You may pay CGT in that tax year or elect to defer it until the assets are actually sold.

Australian real property and assets employed in an Australian business are excluded from this deeming rule and remain subject to Australian CGT whenever they are eventually disposed of. This means that CGT obligations on Australian property and business assets continue to follow you even after you have left the country.

When you stop being an Australian tax resident, you are treated as having sold your CGT assets — other than taxable Australian property — at their market value at the time residency ceased. This is commonly referred to as “deemed disposal”. You have the option to elect out of the deemed disposal treatment, in which case CGT is deferred until the assets are actually disposed of, though the assets remain within the Australian CGT net in the interim.

An important distinction applies to those who were temporary residents immediately before ceasing Australian residency: CGT event I1 does not apply to them. The exit tax is a consequence of full tax residency, not temporary residency, coming to an end.

If you cease to be an Australian tax resident and later sell your former Australian home, special rules apply. For sales occurring after 30 June 2020, former residents are not entitled to the main residence exemption unless they satisfy specific statutory requirements, meaning CGT may be payable on the gain. This stands in contrast to the treatment in some other countries, where a former principal residence retains its exempt status for a period following the owner’s departure.

Leaving Australia and ceasing to be a tax resident does not automatically extinguish all Australian tax obligations. A final tax return covering the period of Australian residency in the year of departure must be lodged, and Australian-sourced income — such as rent from Australian property or dividends from Australian companies — must continue to be reported in subsequent years. It is essential to keep detailed records of the date residency formally ceased, the market value of all relevant assets on that date, and any foreign tax paid in your new country of residence.

Practical tips for managing taxes as an expat in Australia

• Clarify your residency status from the outset. Whether you are liable for tax on worldwide income or only on Australian-sourced income hinges on your tax residency classification. Confirm your status with the ATO or a qualified adviser as soon as you arrive — do not assume that holding a temporary visa automatically places you in any particular tax category.
• Maintain detailed records of your entry and exit dates. The precise dates on which you became — or ceased to be — an Australian tax resident are critical for determining your taxable income and whether exit CGT applies. Retain boarding passes, visa documentation, tenancy agreements, and bank records as supporting evidence.
• Apply for your TFN without delay. In the absence of a TFN, your employer is obliged to withhold tax from your wages at the top marginal rate, and investment income will similarly attract maximum withholding. Apply online via the ATO website as soon as you arrive.
• Get to grips with superannuation from day one. Superannuation is a compulsory employer-funded retirement savings scheme, currently payable at 12% of Ordinary Time Earnings from 1 July 2025. Confirm that your employer is contributing to a compliant fund and keep track of your superannuation balance — particularly if you plan to depart Australia and wish to claim a Departing Australia Superannuation Payment (DASP) upon leaving.
• Make active use of double taxation agreements. To substantiate claims for treaty relief, you must hold adequate documentation, including evidence of your residency status, the foreign income received, and the taxes paid abroad. These records should be retained for the required period in case the ATO requires verification of any claim made in your return.
• Take professional advice before disposing of significant assets. The interaction between the CGT rules, the temporary resident regime, and the exit tax provisions is technically demanding. Consult a qualified tax professional before selling any substantial assets, especially if your residency status is about to change.
• Engage a registered tax agent for complex cross-border affairs. Single Touch Payroll Phase 2 has substantially increased ATO compliance monitoring, with extended data-sharing obligations specifically designed to capture non-compliance by expatriates and their employers. A registered tax agent with cross-border expertise can help you meet your obligations, access extended lodgement deadlines, and minimise the risk of penalties.
• Stay abreast of proposed legislative changes. Australia’s individual tax residency rules are currently under review. Monitor the ATO website and the Treasury website for updates on the proposed Bright Line residency tests and any other developments that may affect your tax position.

Frequently asked questions about taxation in Australia for expats

Do I pay tax on my worldwide income in Australia?

Australian tax residents are liable for tax on their worldwide income and gains. Foreign residents are, as a general rule, only taxed on income and gains with an Australian source. Temporary residents occupy a middle position: they are taxed on Australian-sourced income but are ordinarily exempt from Australian tax on most foreign income and on gains arising from assets situated outside Australia.

What is the tax-free threshold in Australia, and do expats get it?

For Australian tax residents, the first $18,200 of income is not subject to tax (as of 2024–25). Non-residents — including newly arrived expats who have not yet established tax residency — are not entitled to claim the tax-free threshold. Once you satisfy the criteria for tax residency, you can claim the threshold when submitting your first return.

When is the deadline for filing a tax return in Australia?

Australia’s tax year runs from 1 July to 30 June. Individuals lodging their own returns must generally do so by 31 October (as of 2025). Those who engage a registered tax agent may have access to extended deadlines. Always check the current deadline on the ATO website before each filing season.

How is foreign pension income taxed in Australia?

If you are an Australian tax resident, foreign pension income is ordinarily included in your assessable worldwide income and taxed at your applicable marginal rate. The precise treatment, however, can vary depending on the nature of the pension and whether a DTA between Australia and the country of source allocates taxing rights to that other jurisdiction. Where sole taxing rights rest with the country of residence, this is usually expressed as “shall be taxable only in that country”; where the source country retains limited withholding tax rights, the wording is typically “may be taxed in that other state”. Specialist advice is recommended if you receive foreign pension income.

Will I pay tax on my overseas investments if I move to Australia?

The answer depends on your residency classification. Temporary residents are generally liable for Australian tax only on income sourced in Australia and on gains from taxable Australian property, meaning most foreign passive investment income falls outside the scope of Australian tax. Full tax residents, by contrast, must declare all worldwide investment income and gains, though the Foreign Income Tax Offset may be available to reduce or eliminate double taxation where foreign tax has already been paid on that income.

Is there an inheritance tax or gift tax in Australia?

Australia does not levy a federal inheritance tax, estate duty, or gift tax. However, CGT may become payable when inherited assets are eventually sold — particularly where those assets have increased in value since they were first acquired by the deceased. State-based duties on transfers of property may also apply in certain circumstances. A tax professional in the relevant state or territory should be consulted to confirm the position.

How does superannuation work for expats who later leave Australia?

Australian citizens and permanent residents who leave Australia — whether temporarily or permanently — remain subject to the standard superannuation access rules. This means their accumulated superannuation balance cannot be withdrawn until they reach preservation age and satisfy a condition of release. Temporary residents departing Australia for good may be able to claim their superannuation as a Departing Australia Superannuation Payment (DASP), though tax is withheld from the payment at the time it is made. Current DASP tax rates are available on the ATO website.

What happens if I am considered a tax resident of two countries at the same time?

Most of Australia’s tax treaties incorporate a tie-breaker clause that treats a dual resident as being solely a resident of one of the two contracting jurisdictions for tax purposes. The determination typically turns on factors such as domicile, the location of the individual’s permanent home, and the place of habitual abode. Where no DTA exists between Australia and the other country concerned, both jurisdictions may seek to tax your worldwide income simultaneously, creating a potentially complex cross-border tax exposure. Professional advice is strongly recommended in any dual residency situation.