Non Resident Tax Australia

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Navigating Australia’s tax rules as a non-resident can feel like a maze… especially with residency traps, double taxation fears, and recent changes like the new super earnings tax. 

At GM Tax & Accounting, we’ve helped hundreds of expats, visa holders, and investors simplify their taxes.

This guide breaks down what you need to know for the 2025-26 tax year, focusing on your obligations for Australian-sourced income only (with exceptions like student loans). Whether you’re an Aussie abroad or a working holiday maker, let’s get you compliant and confident.

Unsure about your residency status? Contact us for a free initial chat, our UK and Australia-based experts are here to help.

 

Am I An Australian Tax Resident For Tax Purposes?

Your tax residency isn’t tied to your visa or citizenship; it’s based on specific ATO tests. Getting this right is crucial, as residents pay tax on worldwide income, while non-residents focus on Australian sources.

There are statutory tests to determine your residency:

The primary test of tax residency is called the resides test.  If you reside in Australia, you are considered an Australian resident for tax purposes and you do not need to apply any of the other residency tests.

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.

A person can be an Australian or foreign resident for tax purposes, regardless of their citizenship or visa status.

There Are Several Aspects Of The Resides Test

  • What does it mean to ‘reside‘ – “to dwell permanently, or for a considerable time, to have one’s settled or usual abode, to live, in or at a particular place”. The usual meaning of ‘reside’ in tax law refers to the standard or everyday understanding of living in a place permanently or for a significant period.
  • Entering Australia
  • Behaviour while in Australia, what is your intention & purpose?
  • Physical presence in Australia
  • Nationality

You are an Australian tax resident of your domicile (the place that is your permanent home) is in Australia, unless your permanent place of abode is outside of Australia.

A domicile is a place that is considered to be your permanent home by law.  For example, it may be a domicile by origin (where you were born) or by choice (where you have changed your home with the intent of making it permanent).

There Are Two Steps To This Test:

1. Determine your domicile

  • If not in Australia, the domicile test is not satisfied.
  • If in Australia, go to step two.

2. Determine your permanent place of abode

  • If not in Australia, the domicile test is not satisfied.
  • If in Australia, you are considered an Australian resident for income tax purposes.

It is important to note that being a permanent resident of Australia (holding a permanent resident visa) does not automatically make you a tax resident. Your tax residency is determined by the domicile and permanent place of abode tests.

If you meet the criteria for residency in both Australia and another country, you may be considered a dual resident. In such cases, double tax treaties and tie-breaker rules may determine your tax obligations.

 

This test only applies to individuals arriving in Australia. You will be a tax resident of Australia under this test if you are physically present in Australia for more than half the income year, whether continuously or with breaks.

Under this test, you may be said to have a constructive residence in Australia unless it can be established that:

  • your usual place of abode is outside Australia
  • you have no intention to take up residence here.

In this test, your usual place of abode must be outside of Australia. This is different to the first test (domicile) that requires us to be satisfied that your permanent place of abode is outside Australia.

If you are an Australian government employee, you are considered a resident of Australia for tax purposes, even if you live outside the country. This applies to employees who contribute to certain public sector superannuation schemes.

Under the Commonwealth superannuation test, you are an Australian tax resident if you are a contributing member of:

  • the Public Sector Superannuation Scheme (PSS), or
  • the Commonwealth Superannuation Scheme (CSS).

This test does not apply if you are a member of the Public Sector Superannuation Accumulation Plan (PSSAP).

If you are an Australian resident under either of these tests, your spouse and any children under 16 years old are also Australian residents for tax purposes.

Case Studies

For example, if you are an expat working overseas but still own property in Australia with family ties, you might unexpectedly be deemed a resident, leading to tax on global income. Temporary visa holders (e.g., 417/462 working holiday) are often non-residents but could trigger tests if ties build up.

If you are considered to be a dual resident (meeting criteria in Australia and another country), tax treaties and tie-breaker rules apply to avoid double taxation.

Use the ATO’s online residency tool for a quick self-check. Confused? Our team at GM Tax specialises in expat residency advice, and get in touch for personalised guidance.

If Declared An Australian Resident

You must prepare an Australian Tax Return and declare income earned worldwide regardless of whether any income is remitted to Australia.

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Tax Obligations for Non-Residents

As a non-resident, you’re generally taxed only on Australian-sourced income, like wages from local work, rental income, or dividends from Aussie shares. If you earn income in Australia as a non-resident, you are required to file a tax return. 

A non-resident pays tax only on Australian-sourced income. Foreign-sourced income is exempt, unless you have an outstanding student loan (e.g., HELP/HECS), which requires declaring worldwide income for repayment calculations.

Key types of taxable Australian-sourced income:

  • Rental income from properties.
  • Wages or business income earned in Australia.
  • Income from overseas employment is not taxable for non-residents.
  • Managed investment funds (not all distributions are taxable – e.g., foreign components may be exempt).
  • Interest earned by non-residents from Australian bank accounts is subject to withholding tax, generally at 10% unless a different rate applies under a double taxation agreement. Providing an overseas address is necessary to avoid higher withholding rates.

Special cases:

  • Temporary residents (e.g., on skilled visas) get exemptions on most foreign income and capital gains.
  • Working holiday makers/backpackers: Taxed at special rates (see below) on Australian earnings.
  • Medicare levy: Full exemption if non-resident for the whole year; partial if only part-year (no dependants required).

High-net-worth individuals: Watch for the new Division 296 tax – if passed into law from July 1, 2025, super balances over $3M face 15% tax on earnings, including unrealised gains. This could impact expats with large super funds.

Foreign Residents Medicare Levy Exemption

Foreign residents are typically exempt from the Medicare levy, which funds Australia’s public health system. This exemption applies because non-residents aren’t entitled to Medicare benefits.

  • Full-year exemption: If you were a foreign resident for tax purposes for the entire 2025-26 income year, you can claim a full exemption from the Medicare levy. No levy is payable on your Australian-sourced income.
  • Part-year exemption: If you were a foreign resident for only part of the year, you can still claim a full exemption for that specific period, provided:
    • You didn’t have any dependants during that period, or
    • All your dependants were in a Medicare levy exemption category (e.g., also foreign residents or entitled to full Medicare benefits).

To claim, simply select the appropriate exemption category in your tax return (e.g., via myTax or a tax agent). If you’re unsure, the ATO considers your residency status and dependants when processing – no separate application needed, but keep records like visa details or residency proofs.

At GM Tax, we can review your situation to ensure you’re claiming correctly and avoiding any surprises.

Non-Resident Tax Rates for 2025-26

Non-residents do not get the tax-free threshold (unlike residents, who have up to $18,200 tax-free). Rates apply directly to your Australian-sourced income.

Taxable Income Range Tax Payable
$0 – $135,000 30% on entire amount
$135,001 – $190,000 $40,500 + 37% on amount over $135,000
$190,001 and over $60,850 + 45% on amount over $190,000

These tax rates are for standard foreign residents in the 2025-26 financial year (July 1, 2025 – June 30, 2026).

For working holiday makers (visas 417/462):

  • $0 – $45,000: 15%
  • $45,001 – $135,000: $6,750 + 30% on excess over $45,000
  • Higher brackets align with standard non-resident rates.

Compared to residents, non-residents pay higher effective rates on lower incomes, no offsets like the low-income tax offset apply.

Capital Gains Tax (CGT) for Non-Residents

CGT applies to profits from selling Australian assets acquired after September 19, 1985 (pre-1985 assets exempt). Common taxable assets:

  • Real estate (e.g., investment properties – main residence exemption may not apply if non-resident).
  • Shares/units in Australian companies.
  • Cryptocurrency held as an investment.
  • Collectables or intangible assets.

Exemptions: Cars, personal-use items under $10,000. Non-residents pay CGT only on “taxable Australian property.”

Example: Selling a rental property? Calculate your capital gain as sale price minus cost base (purchase + improvements), then apply your marginal rate. As of 1st January 2025, a withholding rate of 15% applies to the value of all property sales by foreign residents.

Pay attention: Under Division 296, unrealised gains in large super funds will count toward taxable earnings.

Special Considerations

  • Rental Income from Australian Property: Declare all rent received; deduct expenses like management fees or repairs. Keep 5-year records to support claims.
  • Working Holiday/Visa Holders: Enjoy lower initial rates but ensure super is claimed on departure (DASP – Departing Australia Superannuation Payment).
  • Investors/HNWI: Consider offshore structures for CGT minimisation, but comply with anti-avoidance rules. Recent super changes add complexity.

Leaving Australia: Cease residency properly to avoid ongoing obligations, we can help with exit strategies.

Penalties For Late Lodgement

The ATO generally does not apply late filing penalties automatically if you are late in lodging your Tax Returns.

The ATO will consider your circumstances when deciding what action to take.

If you fail to lodge, the ATO will advise you by phone or in writing.

You may receive a Failure to lodge (FTL) on time penalty if you have an obligation to lodge a return, report or statement to the ATO by a particular day, but you do not lodge by the due date.

Should the ATO apply FTL penalty which varies of the size of the entity and the period of time since the due date for lodgment.you will be notified in writing and will include:

  • the reason for the penalty
  • the amount of the penalty
  • the due date for payment (at least 14 days after we give notice).

Please refer to the ATO website as to how to calculate the FTL penalty.

Tax Treaties and Double Taxation Relief

Australia has treaties with over 45 countries to prevent double taxation. If your home country has one (e.g., UK, US), you can claim reduced rates or offsets on Australian income like rentals or interest.

  • For non-residents: Treaties may cap withholding tax (e.g., 10-15% on dividends) and allow credits in your home country.
  • For Australian residents abroad: Claim foreign income tax offsets (up to Australian tax payable) on overseas earnings.
  • Temporary residents: Similar relief, plus exemptions on foreign capital gains.

To claim: Provide residency proof when filing. Other relief includes the foreign income tax offset for residents. Always consult pros – tax law treats residents/non-residents differently (e.g., no Medicare for non-residents).

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Get in touch

Ready to Simplify Your Non-Resident Taxes?

At GM Tax, we offer fixed-fee Australian non-resident tax return services, electronic lodgment, and advisory for expats leaving or investing in Australia. With offices nationwide in Australia and the UK, we’re your trusted partners.

Complete our online enquiry, call your nearest office, or hit the contact button for a fixed-fee proposal.

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FAQs

Yes, if you are in receipt of Australian sourced income or you have an outstanding student loan.

Yes,  if you are in receipt of Australian sourced income or you have an outstanding Student Loan.

Your Tax File Number is all that is required to file a tax return.

You will pay tax in the country to which you are a tax resident at your highest marginal rate of tax.  You will pay tax in Australia on your Australian sourced income ONLY and you may be eligible to claim a foreign tax credit in the country to which you are considered to be a tax resident to the extent that your Australian sourced income is reported and taxed in your country of resident.

Unless registered with a tax agent you have until 31st October to lodge your tax return.

Otherwise you can benefit from an extended filing deadline of the following May if you use a tax agent such as GM Tax.

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