Non-Resident Tax in Australia: Rates, Returns, and Obligations

Whether you’re living in Australia temporarily, working on a visa, or you’ve left the country permanently, being a non-resident for tax purposes changes your tax liability. The applicable rates, any available tax-free thresholds, and taxable income all depend on your tax residency status, not citizenship or physical domicile.

In this article, we’ll examine the non-resident tax in Australia to help you determine your tax liability. You’ll learn: 

• What it means to be a non-resident for tax purposes
• What the rates are for non-residents
• What the withholding tax for non-residents applies to

What Is a Non-Resident for Tax Purposes in Australia?

You are a non-resident for tax purposes in Australia if you do not meet the tax residency criteria applied by the Australian Taxation Office (ATO). These criteria typically examine your physical presence in the country, intentions, and ties to the country. 

Residency for tax purposes is a separate concept from immigration status, which determines your right to reside in the country and is regulated by different laws. Residency for tax purposes only applies to your tax liabilities in Australia. 

How Is Tax Residency Status Established?

ATO uses a series of tests to determine your tax residency status. 

The main test is the resides test, and it’s typically applied to broad categories of individuals, such as migrants, foreign students, tourists, foreign workers, and academics, to determine whether they reside in Australia in the ordinary sense of the word or intend to do so. 

The test examines your behaviour while in Australia to determine: 

• Your intent and purpose for being in Australia
• Your familial and employment ties to the country
• An arrangement of financial affairs for living in Australia
• An arrangement of social and living activities in Australia

No single factor examined in this test carries sufficient weight to imply a status on its own. 

If you do not meet the criteria of the resides test, you can still be considered a tax resident of Australia, provided you meet the conditions of any of the remaining three tests: 

1. The domicile test: Typically used for Australian residents who move abroad for employment. If Australia is your permanent home in the legal sense, you remain a tax resident unless you can satisfy the ATO that your permanent place of abode is outside Australia
2. The 183-day test: Deems you a tax resident if you’re present in the country for more than half of an income year, continuously or intermittently, unless you have a usual place of abode abroad and have no intention to take up residence in Australia
3. The superannuation test: Used for government employees, it deems you a tax resident if you are a contributing member of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS). The conclusion from this test also extends to your spouse and any children under 16

If none of these tests is satisfied, you are treated as a non-resident for tax purposes in Australia. Residency can also apply for only part of an income year. If you arrive or leave partway through, you may be a resident for that period alone.

Who Is Typically a Non-Resident?

Typical scenarios where you can be considered a non-resident for tax purposes in Australia include: 

• Working holiday makers who intend to have a limited stay in Australia allowing them to travel the country and do short-term work before going back home
• Australian expats who have retained their citizenship or permanent residency but have left the country and expressed intent to make the change permanent 
• Foreign students, especially in the first months of their arrival in Australia, before the length of their stay qualifies them as tax residents
• Temporary residents who are in Australia on short-term visas for non-ongoing work activities

Do You Pay Taxes in Australia if You Are a Non-Resident?

As a non-resident for tax purposes in Australia, you are only liable for taxes on the income you derive from Australian sources, such as: 

• Employment: Salary or other remuneration for work performed in Australia
• Property: Rental income from Australian real estate
• Investments: Capital gains on Australian assets
• Pensions: Australian pensions and annuities, unless exempt under Australian law or a tax treaty

Unlike an Australian tax resident, you are usually not required to report your worldwide earnings. If you have no Australian-sourced income, you will generally not be liable for any taxes. Where you do have Australian-sourced income, your tax obligation is determined by the applicable tax bracket for non-residents.

What Is the Tax Rate for Non-Residents in Australia?

As a non-tax resident, you will be taxed from the very first dollar of your Australian income at the following rates: 

Taxable Income	Tax on the Income
Up to AUD 135,000	30%
AUD 135,001–AUD 190,000	AUD 40,500 plus 37% of income over AUD 135,000
AUD 190,001 and over	AUD 60,850 plus 45% of income over AUD 190,000

If you are a foreign resident in Australia on one of the two working holiday maker visas (417 Working Holiday or 462 Work and Holiday), the tax brackets and rates are slightly different: 

Taxable Income	Tax on the Income
Up to AUD 45,000	15%
AUD 45,001–AUD 135,000	AUD 6,750 plus 30% of income over AUD 45,000
AUD 135,001–AUD 190,000	AUD 33,750 plus 37% of income over AUD 135,000
AUD 190,001 and over	AUD 54,100 plus 45% of income over AUD 190,000

The Tax-Free Threshold and Medicare Levy for Non-Residents

Australian tax residents are entitled to a tax-free threshold of AUD 18,200. While the income above that amount is taxed, the tax-free portion reduces your overall liability significantly.

As a non-tax resident in Australia, you are not entitled to the tax-free threshold. This is why you pay income tax from the first dollar you earn in the country. If you are a non-tax resident for part of the income year, and a tax resident for the rest, you may be eligible for a reduced tax-free threshold for the portion when you were a tax resident.

You might also be exempt from paying the 2% Medicare levy as a foreign resident for tax purposes in Australia. The exemption applies for the full year if you were a foreign resident for its entire duration, or proportionally if you were a foreign resident for only a part of the year. Additionally, one of the following must apply: 

• You didn’t have any dependents
• Your dependents were also exempt from the Medicare levy in the same period 

What Is the Non-Resident Withholding Tax in Australia?

For certain types of income you can derive in Australia, tax is deducted directly from the payment by the paying company or financial institution. This is called the non-resident (or foreign resident) withholding tax, and it applies to: 

1. Income from investments and intellectual property
2. Capital gains from Australian real property

Investments and Intellectual Property

Income from the following investments and intellectual property is subject to a withholding tax: 

• Interest, such as periodic and lump-sum payments, profits on transfer of qualifying securities, and hire purchase charges
• Dividends, such as company distributions or credited amounts to shareholders, returns on equity interest, and non-share dividends not already covered by interest withholding
• Royalties, such as payments for use of copyright, patents, trademarks, or similar rights, as well as industrial and scientific equipment, broadcasting or film rights, technical knowledge, or related services

The withholding rates are: 

Type of Income	Withholding Rate
Interest	10%
Unfranked dividends	30%
Royalties	30%

The withholding tax rates can be lower if the country where you’re not a tax resident is one of the 47 countries maintaining a tax treaty with Australia. These treaties are designed to prevent double taxation, and they may stipulate a lower withholding rate.

Capital Gains From Australian Real Property

While capital gains for non-tax residents are generally not subject to taxation in Australia, any gains from the disposal of taxable Australian property (TAP) fall under the capital gains tax. 

Taxable Australian property is a category that covers mostly real property, including: 

• Real estate, such as houses, apartments, buildings, and land
• Indirect interests in Australian real property
• Mining, prospecting, or quarrying right in the country
• Assets used to carry on a business in Australia
• An option or right over real estate, interests, rights, or business assets

The capital gains from the sale of a taxable Australian property are subject to foreign resident capital gains withholding (FRCGW). When you sell a TAP as a non-resident, the buyer will withhold 15% of the purchase value of the property, or its market value if you are selling to a person close to you. 

If you have reason to believe that the rate is too high, you can apply for a variation notice and explain your reasoning. If successful, you can be granted a lower withholding rate. 

Lodging a Tax Return as a Non-Resident in Australia

To lodge a tax return as a non-resident, you will need a tax file number (TNF). If you have one from a previous period in Australia, it will still be valid, and you don’t need to apply for a new one. If this is your first time lodging a tax return, you will need to download an application form from the ATO website and submit it on paper, even if you’re applying from within Australia. 

You can lodge your tax return using the following methods: 

• Online, via the myTax portal
• By mail, as a paper tax return 
• With a registered tax agent

The window for lodging a tax return in Australia is July 1–October 31. You might be eligible to submit the return early if you’re leaving Australia before the end of the income year and you don’t intend to come back. To file an early return, you must be outside Australia without a valid visa, and you can only lodge the return in paper form.

What Income Do You Need To Report?

Your tax return should include all assessable income for non-residents, which includes salaries, rental income, and pensions derived from Australia. Even though the capital gains from selling a taxable Australian property are subject to withholding, you should still report them in your tax return so any excess withheld can be credited back to you.

If you have debt from a study and training support program such as the Higher Education Loan Program (HELP), you will need to report your worldwide income even though you’re a non-resident. Your entire income might be used to calculate your repayment rate for the loan. 

Income that is subject to a final withholding tax doesn’t need to be declared on your tax return. This includes income from:

• Interest, dividends, or royalties with tax already withheld
• Your departing Australia superannuation payment (DASP), if you’re a temporary resident and you’re eligible to apply for it

Things To Consider When Becoming a Non-Resident in Australia

If you plan to become a non-resident for tax purposes in Australia, there are several important considerations to make: 

1. Triggering deemed disposal of assets
2. Losing the main residence exemption
3. Avoiding double taxation

Triggering Deemed Disposal of Assets

Once you cease being a tax resident in Australia, you trigger a deemed disposal of your capital gains tax assets. When this happens, the ATO considers that you sold your assets at a fair market value and taxes any resulting capital gains.

Note that you have the option to disregard deemed disposal. If you choose this option, your capital gains assets will be considered taxable Australian property (which is not subject to deemed disposal), and become subject to the tax when you sell or dispose of them, or you become a resident again.

Losing the Main Residence Exemption

Foreign residents are generally not eligible for the main residence exemption from capital gains tax. 

Under the exemption, a resident can sell a qualifying property that was their main residence without incurring any capital gains tax liability. As a non-resident, you might only be eligible for the exemption in the event of adverse life events, which include you or an immediate family member being diagnosed with a terminal illness, the death of an immediate family member, or the dissolution of your marriage. 

If you plan to sell your main residence in Australia when becoming a non-resident, you should consider doing so while you’re still a tax resident.

Avoiding Double Taxation

Establishing residency in a foreign country is a crucial step in ceasing tax residency in Australia. To ensure that your passive investments in Australia are taxed at a lower rate and that other streams of income are not unnecessarily taxed by both countries, consider seeking residence in one of the countries that have an income tax agreement with Australia. 

Some of the countries with a double tax agreement that are most popular with Australian expats include: 

• United Kingdom
• United States of America
• Singapore
• Vietnam
• New Zealand

In addition to the existence of the agreement, you should also consider the general tax system and the applicable rate of your new tax jurisdiction, as well as the availability of streamlined residency programs.

However, even the most straightforward residency programs can be difficult to navigate due to an unfamiliar legal framework. For assistance with choosing the right destination and support through the residency application process, consider working with Nomad Capitalist. 

Establish Residency Abroad With Nomad Capitalist

Nomad Capitalist is an advisory firm that specialises in global mobility and wealth preservation. We’ve helped more than 1,500 clients reach their financial and lifestyle goals using methods such as: 

• Obtaining residency or citizenship in tax-friendly jurisdictions
• Exploring investment opportunities abroad
• Legally reducing tax exposure through strategic structuring

We combine these methods when creating our Action Plans to develop a strategy and execution guide for your economic and lifestyle objectives. We don’t use templates when building our Action Plan: each step included in our blueprint will be chosen based on your specific circumstances and needs. 

Here’s what partnering with Nomad Capitalist on an Action Plan looks like: 

1. We ask you to fill out a form to determine whether we’re a good match
2. We schedule a 45-minute onboarding call to learn about your situation and desires
3. Our agents create an Action Plan and present it to you for approval
4. We implement the Plan over 12 months, managing the administrative tasks
5. You continue receiving support from us even after the Plan is implemented

If you want to become a non-resident in Australia, Nomad Capitalist can assist you with planning and executing your exit from the country. We can help you determine the potential liabilities of your departure, choose the most beneficial jurisdiction for taking up residency, and manage the application process. To get started, contact Nomad Capitalist today!