Australian Tax Rules For Expats in 2023
As an Australian expat, you must still consider Australian tax rules despite moving away from home. Even if you earn no Australian income, if you’re an Australian citizen with an Australian tax file number, the Australian Taxation Office (ATO) will expect a tax return from you.
Your tax obligations don’t end just because you have left the country. However, you don’t need to worry. We’ll help you understand the new expat tax rules in 2023.
Who are Australian tax residents?
The definition of a tax resident is vague. However, the Australian Taxation Office (ATO) has specified the criteria that define an individual as an Australian resident for tax purposes living overseas.
These criteria include having lived in Australia permanently or always having been a resident, having resided in Australia for at least six months and having worked and lived in the same place for most of that time, not establishing a permanent residence in another country while temporarily living abroad, or having studied in Australia for over six months as an international student.
In general, Australian expats living overseas are not tax residents. If you are an expat living overseas with little or no intention of returning to Australia, you will be labelled a non-resident for tax purposes. On the other hand, anyone living and working in Australia for six months or more will be considered a tax resident by the ATO, regardless of their origin.
There are some exceptions to these rules. The ATO offers four tests to determine your residency status, which include the following:
- Resides test
- Domicile test
- 183-day test
- Commonwealth Superannuation test
You become a tax resident if you pass any one of these tests.
Do Australian expats get tax benefits?
If you remain a tax resident after moving overseas, you must pay tax in Australia on your worldwide income. The Australian tax rules for expats can make this quite expensive.
You can, however, prove you’ve cut all financial ties to Australia if you are an expat to reduce the amount of taxes you pay.
For example, you could earn foreign income, open foreign financial accounts, or purchase foreign property. What you want to do is prove your long-term commitment to living overseas. This is because Australian tax rules for expats differ depending on whether you leave or return to Australia.
Learn more about your tax obligations as Australian expats or overseas residents on our Expat Tax Australia page.
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Income tax for Australian tax residents
The updated Australian expat tax rules differ on what you pay tax on and depends on whether you’re an Australian tax resident.
Australian resident tax rates are lower than non-resident taxpayers’ rates. Australian residents also benefit from a tax-free threshold of $18,200. The marginal tax rate starts at $18,201, and residents pay 19% until $45,000, and so on.
Permanent residents must also pay capital gains tax and the Medicare Levy on top of their income tax. The ATO adds your capital gains to your worldwide income and taxes you on the net sum. All Australian residents need to pay a 2% Medicare Levy, including a specific Medicare Levy surcharge in addition to the amount.
That said, temporary residents don’t have to pay the Medicare tax. However, they also cannot access Medicare services.
What are the new expat tax rules Australia?
Even if you’re not an Australian tax resident, you still need to consider tax implications on your Australian and foreign income. However, even if you’re an Australian citizen, you’re not necessarily considered a tax resident.
You still need to file your income tax return – or at least let ATO know with a Return Not Necessary form if you are an Australian expat. If you live overseas and still earn an Australian income, you must declare it on your tax return.
Tax offsets and exemptions
For Australian tax residents
If you’re an Australian tax resident living overseas, you may qualify for certain tax offsets or exemptions. This can include the following:
- Tax-free threshold: Australian residents don’t have to pay tax on the first $18,200 they earn.
- Capital gains tax exemption: Tax residents don’t have to pay CGT on selling your personal property in Australia. To qualify, it must be your principal residence, and you must have lived there for 12 months or more.
- Low-income tax offset: Residents with a total income of less than $66,667 can qualify for an offset of up to $700.
- Low and middle-income offset: Tax resident with a total income between $37,001 and $126,000 can qualify for up to $1,080.
- Foreign income tax offset: If you pay income tax on your assessable income in two countries, you might receive a full or partial offset to prevent double taxation.
- Medicare Levy surcharge exemption: You don’t have to pay the surcharge if you have sufficient private health insurance.
For Australian expats and non-residents
Most importantly, Australian expats and foreign residents don’t qualify for tax offsets and exemptions. For example, although expats are still Australian citizens, they don’t receive the CGT main residence or Medicare Levy exemptions.
The principal expat offset is the double tax agreements covered in the article below. While this doesn’t reduce your tax payments, it does prevent paying taxes twice. Unfortunately, expats cannot qualify for many other offsets.
Will I be taxed twice?
Paying double tax has always been a major concern for Australian permanent residents and overseas expats, i.e. you must pay Australian and foreign taxes on the same income.
Australia has double tax agreements or tax treaties with 40 countries. With these tax treaties, you can use the foreign income tax offset against any payable tax in Australia. Generally speaking, if you earn income in more than one country within a tax year, you won’t have to pay double tax – although it’s not impossible.
The ATO should automatically apply any offsets if you’re eligible for foreign income exclusion.
Tax treaties are complicated. You can easily make mistakes on your income tax return. If in doubt, seek professional advice from Australian expat tax services like Odin Tax to prevent double taxation.
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Australian expat tax treaties
Australia has tax treaties with over 40 countries that try to protect you from double taxation. However, tax treaties don’t always offset foreign taxes entirely. Most of the time, they might only offer partial tax benefits.
Typically, tax treaties prioritise countries that you earn taxable income in.
For instance, even if you’re living in Singapore, you must pay capital gain and income taxes in Australia if you sell Australian capital assets.
However, Singapore retains the right to tax its residents under its laws. So, if you are a dual citizen, you may still need to pay foreign taxes.
Most tax treaties include a ‘tie-breaker’ for dual citizens. The treaties also enable countries to offer foreign tax credits and tax relief against their tax.
Even if you’re eligible for foreign tax offsets, you must still declare all Australian and foreign income on your tax returns.
Countries with Double Tax Agreements with Australia
- New Zealand
- United Kingdom
- United States
- And many more
2022-2023 Income tax rates for non-residents
The following income tax rates apply to non-resident taxpayers in Australia.
|Taxable income||Tax rate on income for non-residents|
|0 – $120,000||32.5% of taxable Australian income|
|$120,001 – $180,000||37% of taxable Australian income|
|Over $180,001||45% of taxable Australian income|
For example, a non-resident earning $100,000 in Australia must pay $32,500. On the other hand, a tax resident would pay $22,967, i.e. 22.96% of their taxable income.
Get in touch with us today to get the best tax advice for Australian expats based on your situation.
FAQs about Australian expat tax rules
Expats who are tax residents must pay tax in Australia on all their income, no matter where they earned it. Those who are not tax residents only have to pay taxes on their Australian-sourced income. Regardless of whether you must pay tax in Australia, you must lodge a return with ATO if you have a tax file number.
Non-residents have to pay higher tax rates than Australian residents and don’t benefit from the tax-free threshold. However, they don’t have to pay the Medicare Levy or pay tax on foreign income. Tax residents live and work in Australia for more than half the tax year.
Expats must pay 32.5% of all Australian income up to $120,000 if they’re non-residents. Any income between $120,001 and $180,000 is taxable at 37%. Income above $180,001 is taxable at 45%. Australian expats and non-residents don’t have a tax-free threshold.
Get more information about Australian tax rules for expats on our Expat Tax Rules page.
No – non-tax residents in Australia must pay 32.5% on all Australian income up to $120,000. On the other hand, Australian residents can enjoy a tax-free threshold of up to $18,200. Moreover, residents only pay 19% on income up to $45,000.
You can be a tax resident in more than one country. Check the other country’s tax year dates and rules if this is the case. Australia has a Double Tax Agreement with more than 40 countries to offset foreign taxation against your Australian taxable income.
Australian tax residents and non-residents must pay capital gains tax on taxable Australian property.
However, CGT works slightly differently for Australian expats and overseas residents, i.e. exparitates and foreign residents are charged a higher rate.
You must pay the foreign resident capital gains withholding tax (FRCGW) if you are a foreign resident.
It means that if you sell a property worth over $750,000 to a buyer in Australia, the buyer must withhold 12.5% of the purchase price and hand it over to the ATO.