Made a move to Australia and you’re wondering how the taxes in Australia for foreigners work? Fret not, we’ve compiled a list of information on all you need to know about Australian tax year running from 1 July to 30 June with Australian tax return due on 31st October every year.
Understanding the workings of the Australian tax system is essential for anyone relocating to or already moving there. The good news is that Australia is a major financial hub and has a well-established network of financial institutions to help you acclimatise to your new home.
Some of the key factors that can affect the cost of living in Australia include the following:
-
- Housing: The cost of housing in Australia can vary depending on the location and type of property. However, the cost of renting or buying a home in Australia is relatively high. The average cost of renting a one-bedroom apartment in the city centre is around AUD 2,000 per month while the average cost of buying a three-bedroom house in the suburbs is around AUD 600,000.
-
- Food: Cost of food in Australia is generally higher than many other countries. Basic groceries such as milk, bread, and eggs can be relatively inexpensive, but more specialised or imported items can be quite expensive. The average cost of a meal at a mid-range restaurant is around AUD 20-30 per person.
-
- Transportation: The cost of transportation in Australia can vary depending on the location and the mode of transport. Public transportation is generally relatively affordable, with the average cost of a one-way ticket on a city bus or train around AUD 3-4. The cost of owning and maintaining a car, however, can be quite high due to the high cost of fuel and car insurance.
-
- Healthcare: The cost of healthcare in Australia is generally high, although it is subsidised by the government for Australian citizens and permanent residents. Basic medical care is generally affordable, but more specialised treatment or procedures can be quite expensive. It is important for individuals to have adequate health insurance to cover the costs of medical treatment in Australia.
Overall, the cost of living in Australia can be relatively high. Therefore the high salaries and strong economy can help offset some of these costs. It is important for individuals to carefully research and budget for the cost of living in Australia before moving to the country. Need advice on preparation? Get in touch with us here.
*This guide deals with the individual income tax and not corporate taxes paid by businesses, and should not be used in isolation to make any financial decisions about your Australian tax affairs, you should always consult a tax specialist for professional advice.
Income bracket
In Australia, residents are subjected to Australian tax on worldwide income and non-residents are subjected to the same tax on Australian-source income only. There are exemptions from Australian tax on certain income is available for individuals, potentially expats, who qualify as temporary residents. For those that are temporary residents of Australia, they are exempted from tax on foreign-source investment income. *But not foreign employment income) and capital gains realised on assets that are not taxable Australian property (TAP).
You can refer to this link for more information regarding tax exemption as a temporary resident and whether or not you satisfy the requirements of being a temporary resident.
What percentage of taxes do you pay in Australia?
Australian resident
| Annual Income (AUD) | Tax On This Amount |
| 0 – $18,200 | NIL |
| $18,201 – $45,000 | 19 cents for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
Note: This table is based on tax rates for the year 2020 to 2021, which is subject to change and should be used as a rough guide.
In addition to income tax, there is a 2 per cent Medicare Levy that Australian residents need to pay. You may be exempted from paying the Medicare Levy if you meet certain medical requirements or are not entitled to Medicare benefits.
Foreign Australian resident
| Annual Income (AUD) | Tax On This Amount |
| 0 – $120,000 | 32.5 cents for each $1 |
| $120,001 – $180,000 | $39,000 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45 cents for each $1 over $180,000 |
Note: This table is based on tax rates for the year 2020 to 2021, which is subject to change and should be used as a rough guide.
Do note that the foreign Australian rates apply to individuals who are foreign residents for tax purposes. Your residency for taxes in Australia is not dependent on what visa you have but rather determined by a test administered by the Australian Tax Office (ATO).
Generally, for expats, you will declare your tax return on any income you earned in Australia, including (but not limited to):
-
- Employment income
-
- Rental income
-
- Australian pensions and annuities (unless an exemption is available under Australian tax law or a tax treaty)
-
- Capital gains on any Australian assets
As you are not entitled to the tax-free threshold, you pay tax on every dollar of income you earn in Australia. In addition, you are not entitled to Medicare health benefits as you do not need to pay the Medicare levy as an expat.
The good news? An offset is available for payments of foreign tax that are similar to the Australian income tax payable on the same income. What this means is that both Australian and foreign resident expat taxpayers may claim a tax offset (equal to the lower of an equivalent foreign tax paid or the amount of the Australian tax payable) for an amount included in the taxpayer’s assessable income, on which you have paid foreign income tax. Given that Australia has entered into double tax treaties with 45 countries, this means that you need not pay double income tax!
The Australia Tax Office has a useful calculator here that helps you determine your liability for tax in Australia as an expat!
Citizenship
What is your tax residency status?
As mentioned above, foreign Australian tax rates apply to individuals who are foreign residents for tax purposes. Your residency for taxes in Australia is not dependent on what visa you have but rather determined by a test administered by the Australian Tax Office (ATO). Primarily, there are 4 statutory tests to determine your residency.
1. Residency test
This is the primary test to determine residency and whether or not you need to pay taxes in Australia. If you reside in Australia, you are considered an Australian resident for tax purposes and do not need to apply for any of the other residency test. Some of the factors that can be used to determine residency status include:
-
- Physical presence
-
- Intention and purpose
-
- Family
-
- Business or employment ties
-
- Maintenance and location of assets
-
- Social and living arrangements
If you don’t satisfy the residency test, you’ll still be considered an Australian resident if you satisfy one of three statutory tests below. More information about the residency test can be found here
2. Domicile test
You’re an Australian resident if your domicile (the place that is your permanent home) is in Australia unless otherwise proven that your permanent place of abode is outside Australia.
More information about the domicile test can be found here.
3. 183-day test
This test only applies to individuals arriving in Australia. You will be a resident under this test if you’re actually present in Australia for more than half the income year, whether continuously or with breaks.
More information about the 183-day test can be found here.
4. The Commonwealth superannuation test
This test applies to Australian Government employees working at Australian posts overseas and who are members of the Commonwealth Superannuation Scheme (CSS) or Public Sector Superannuation Schemes (PSS). If this is the case, you (and your spouse and children under 16) are considered to be a resident of Australia regardless of any other factors.
More information about the Commonwealth superannuation test can be found here.
How to file your tax returns?
Now that you know all about taxes in Australia and how much you need to pay as a foreigner, it’s time to get down to the nitty-gritty of how you can go about doing so. Fortunately, the process of paying your taxes in Australia is a relatively simple one.
The quickest and easiest way to pay is with BPAY or a credit/debit card. Note that you will have to contact your bank or financial institution to make this payment from your Australian cheque, savings, debit card or credit card (Visa or MasterCard) account. Once you’ve done so, you can now add and update stored credit or debit card details directly on ATO online to make your payment.
The first time you file your taxes in Australia, you will need to set up a myGov account and link it to your Australian Tax Offices myTax account. The instructions below will help you set up your online account:
-
- Have your tax file number (TFN) ready.
-
- Create a myGov account here.
-
- Call the ATO at 13 28 61 and enter your TFN and date of birth as requested. Select 1 at the prompt to get your unique linking code, which will verify your account from an operator. Note that each unique code will expire after 24 hours!
-
- Sign into myGov and link to the ATO from the “Services” page.
-
- Select “I have a linking code” and follow instructions as prompted.
Voila! With that, your myTax account has been set up and you can easily pay your taxes online. For those that prefer a more hands-on, traditional approach, you can also pay by phone by dialling the Government EasyPay service at 1300 898 089.
Need more help deciding and what to do?
Check out our comprehensive guide on moving to Australia
Feeling ready to make the big move?
Head over here to begin your journey
Or start ticking off your relocation checklist here
Still unsure?
Learn more about Australia here
Explore more destinations here
