Australian Expat Tax: A Guide

Australian expats must carefully navigate their tax obligations while living overseas.

This is because the Australian Taxation Office (ATO) determines Australian expat tax liability based on residency status rather than physical location.

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Even if an expat has moved abroad, they may still be considered an Australian tax resident and be required to report worldwide income and file Australian expat tax.

Conversely, non-residents for tax purposes are taxed only on Australian-sourced income, but often at higher tax rates than residents.

Australian Expat Tax Rules: Determining Tax Residency

Do Australian expats have to pay taxes back to Australia?

The answer depends on tax residency. The ATO assesses residency based on behavior and intent, rather than just time spent abroad.

Australian expats must undergo four key residency tests, and failing any of these may still result in being classified as a tax resident.

The Four Residency Tests

Resides Test

• The primary test for tax residency, assessing whether an individual “resides” in Australia based on lifestyle, family ties, and employment history.
• Factors include ownership of Australian property, bank accounts, business interests, and regular visits back to Australia.
• Expats who retain strong ties to Australia may still be classified as tax residents even if they spend most of their time abroad.

Domicile Test

• Australians with their permanent home (domicile) in Australia are generally considered tax residents unless they establish a permanent place of residence overseas.
• Merely moving overseas for work does not automatically sever tax residency—expats must prove they have cut significant ties with Australia.

183-Day Test

• If an individual spends 183 days or more in Australia within a tax year, they are generally classified as a resident for tax purposes unless they can prove their permanent home is overseas.
• This is not applicable to non-residents, meaning expats who stay out of Australia for an extended period do not automatically lose residency.
• This test is meant to be considered alongside the other tests. It alone cannot determine tax residency.

Superannuation Test

• Australians working for government agencies or Australian employers abroad (such as diplomats or defense personnel) are always considered tax residents, regardless of time spent overseas.

Severing Australian Expat Tax Residency

To be classified as a non-resident for tax purposes, expats must demonstrate that they have permanently left Australia by:

• Selling or renting out their primary residence in Australia.
• Closing or minimizing use of Australian bank accounts.
• Cancelling Medicare, voting registration, and driver’s licenses.
• Establishing a long-term home and job overseas.

Simply moving overseas temporarily does not sever residency. The ATO scrutinizes expat banking, travel, and financial activity to determine whether tax residency has actually changed.

Expats who fail to fully sever ties may still be considered Australian tax residents and required to pay tax on worldwide income.

Returning Expats – When Tax Residency Resumes

Expats who return to Australia are immediately considered tax residents if they:

• Resume living in Australia permanently or for an extended period.
• Own or rent a primary residence in Australia.
• Take up employment or business activities in Australia.

Returning expats must declare foreign income earned while abroad if they become tax residents again. Foreign pensions, overseas investment earnings, and rental income may all be subject to Australian taxation upon re-entry.

Australian Expat Taxes

For Tax Residents Living Abroad: Taxation of Worldwide Income

Australian tax residents living overseas must report and pay tax on their global income. This includes foreign salary and wages, where income earned from overseas employment is taxable in Australia.

Expats can claim foreign tax offsets if they pay tax in their host country under a Double Taxation Agreement (DTA).

Income from foreign investments, including interest, dividends, rental earnings, and capital gains, must also be declared. Some foreign income may be exempt under tax treaties, but this depends on the country of residence.

Superannuation contributions remain tax-free when made voluntarily, but withdrawals may be taxed, depending on the individual’s residency status and age.

However, expats running an Australian-registered business or working as self-employed individuals abroad must still report and pay tax on their business income in Australia, even if they operate from overseas.

For Non-Residents: Australian Income Tax

Expats classified as non-residents for tax purposes are only taxed on Australian-sourced income.

For example, rental income from Australian properties must be declared on an Australian tax return, with non-residents subject to a 30+% tax rate on net rental earnings, without access to the tax-free threshold.

Dividends and interest from Australian investments are also taxable. Unfranked dividends are subject to a 30% withholding tax, unless reduced by a tax treaty, while interest income may be exempt from Australian tax if paid by an Australian financial institution.

Non-residents also face Capital Gains Tax (CGT) on Australian assets, including real estate and company shares.

Superannuation and pension withdrawals may be taxed based on the recipient’s country of residence and relevant tax treaty agreements. Some expats may qualify for exemptions or reduced taxation rates under bilateral tax treaties with Australia.

Australian Income Tax Rates for Expats

Australian non-residents are taxed on their Australian-sourced income according to the following tax brackets for the 2024-2025 financial year.

• $0 – $135,000: 30c for each $1
• $135,001 – $190,000: $40,500 plus 37c for each $1 over $135,000
• $190,001 and over: $60,850 plus 45c for each $1 over $190,000

It is crucial to consult the ATO website for the most up-to-date tax rates as they are subject to change.

Business and Self-Employment Income / Corporate Tax

Expats who own an Australian business or operate as self-employed professionals may still have tax obligations in Australia.

Businesses registered in Australia must file tax returns and pay corporate tax. Freelancers and consultants earning Australian-sourced income may be liable for tax in both Australia and their host country, depending on tax treaties.

Australia Capital Gains Tax

Expats selling Australian real estate or shares are subject to Capital Gains Tax (CGT). Non-residents cannot claim the Main Residence Exemption, meaning CGT applies even if the property was once their primary home.

Previously, if a property is sold for more than AUD 750,000, the buyer must withhold 12.5% of the sale price and remit it to the ATO. However, as of 1 January 2025, the threshold has been removed; hence, for all property sales that entered into on or after 1 January 2025, a 15% withholding tax applies. The seller may later claim this amount as a tax credit when filing their return.

Withholding Tax

Non-residents receiving Australian-sourced rental income, dividends, or royalties are subject to withholding tax. Rates depend on DTAs but generally include:

• 30% on unfranked dividends and royalties
• 10% on interest payments, depending on financial institution policies

If you are tax residents of a country who has a tax treaty with Australia, a lower rate may be applicable.

Australian Expat Tax Advice: Filing and Compliance

Australian expats must comply with the ATO filing requirements, even if they live abroad.

As stated, residents for tax purposes must file a tax return annually and declare global income. Non-residents for tax purposes must file a tax return only if they earn Australian-sourced income.

Expats who have no Australian income and have severed tax residency may not need to file, but it is recommended to notify the ATO to confirm non-residency status.

Key Tax Deadlines for Expats

The Australian financial year runs from July 1 to June 30, and tax filing deadlines depend on whether an expat is filing independently or through a tax agent:

• Self-filers: Deadline is October 31, starting from 1 July of the same year.
• Using a registered tax agent: Deadline can be extended to May 15 of the following year.
• Expats who owe tax must pay by November 21 unless they have a payment plan with the ATO.

How to File an Australian Tax Return from Overseas

Australian expats who still qualify as tax residents of Australia can lodge tax returns online through the ATO’s myTax system using a myGov account. Steps include:

1. Registering for a myGov account (if not already done).
2. Linking the ATO to myGov to access tax records.
3. Filling out the tax return with income, deductions, and residency details.
4. Declaring foreign income (if required) for tax residents.
5. Submitting before the deadline to avoid penalties.

For expats without a Tax File Number (TFN), they must apply for one before filing or use a registered tax agent to file manually.

ATO Tax Audits and Penalties for Non-Compliance

Expats who fail to meet tax filing obligations face penalties, interest charges, and potential legal consequences. The ATO actively monitors:

• Undeclared rental income from Australian properties.
• Capital gains on property or asset sales.
• Failure to declare global income (for tax residents).
• Misrepresentation of tax residency status.

Common penalties include:

• Failure to Lodge (FTL) penalty: It depends on the type and size of the entity (e.g. small, medium or large) and how long the lodgment is overdue,
• General interest charges (GICs) for late tax payments.
• ATO audits on foreign transactions, especially for expats claiming non-residency while maintaining Australian ties.

Non-Resident Tax File Number (TFN) Requirements

Australian expats earning Australian income must maintain an active TFN for tax filing. Without a TFN:

• Rental property managers must withhold 47% of rental income instead of the lower 32.5% non-resident tax rate.
• Banks apply higher withholding tax rates on Australian dividends and interest.

Expats can apply for a TFN online through the ATO or through an Australian embassy or consulate if residing overseas.

To avoid compliance risks, expats should regularly check the ATO website for updates, maintain clear records of income and expenses, and consult with expat tax professionals or expat financial advisors for personalized tax planning.

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