Australian Tax Rules For Expats in 2023
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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.
However, there are certain exceptions to these rules.
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Types of Australian Residency Tests
The ATO offers four tests to determine your residency status. You become a tax resident if you pass any one of these tests. These include the following:
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 the expat has left Australia or plans to return.
Income Tax for Australian Tax Residents
The updated Australian expat tax rules differ on what you pay tax on and depend 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 2% 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. The Medicare Levy Surcharge only applies in certain situations, not a blanket “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: The tax-free threshold protects Australian residents from paying 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, with the low income tax offset.
- Low and middle-income offset: Tax residents 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 with the foreign income tax offset.
- 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 tax offsets and exemptions are only available to Australian tax residents, not expats and foreign residents. For example, although expats are still Australian citizens, they don’t receive the CGT main residence exemption 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 our sister company, Odin Tax to prevent double taxation.
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
The following countries have Double Taxation Agreements with Australia.
- Singapore
- Canada
- New Zealand
- Philippines
- China
- United Kingdom
- United States
- Vietnam
- And many more
Australian expats in some countries may need to seek expat tax services to determine if there are any offsets for foreign income tax. Our tax advisors are trained to help you find the best tax deductions and exemptions.
2023-2024 Income Tax Rates for Non-Residents
The following income tax rates apply to non-resident taxpayers in Australia for 2022-23.
| 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 our sister company, Odin Tax today to get the best tax advice for Australian expats based on your situation. Odin Tax helps Australian expats and overseas residents file their Australian tax returns.
We offer a fully digital service that can be completed online, and they can also provide assistance with more complex tax situations.
Understand the Tax Obligations of Your Home Loan with Odin Mortgage
Odin Mortgage is an Australian mortgage brokerage that specialises in assisting Aussie expats and overseas residents secure home loans in Australia. We have a team of experienced mortgage brokers who can help you understand the right loan options and the tax obligations that come with homeownership Down Under.
We can help you complete your mortgage application from getting a pre-approval to the settlement process, making sure that you enjoy a smooth and hassle-free process.
Contact us to get a free consultation on how you can apply for a home loan in Australia.
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FAQs about Australian Expat Tax Rules
Do expats have to pay tax in Australia?
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.
How are non-residents taxed in Australia?
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.
What are the expat tax rules in Australia?
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 Australian Expat Tax Rules page.
Can non-Australian residents claim a tax-free threshold?
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.
Can you be a tax resident in two countries?
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 (DTA) with more than 40 countries to offset foreign taxation against your Australian taxable income.
How does Australian expat capital gains tax work?
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. expatriates and foreign residents are charged a higher rate.
You must pay the Foreign Resident Capital Gains Withholding Tax (FRCGW) at 15% if you are a foreign resident selling property over $750,000.
What are the Australian tax rules for Aussie expats living in Singapore?
Australian citizens and permanent residents are taxed on their worldwide income, regardless of where they live. This means that if you are an Australian expat living in Singapore, you are still required to declare all of your income on your Australian tax return, including your Singaporean income.
However, there are a few exceptions to this rule. For example, you may not have to pay Australian tax on your Singaporean income if you are a:
- Non-resident for tax purposes. This means that you have not maintained a permanent home in Australia and have not been in Australia for more than 60 days in the tax year.
- Foreign resident for tax purposes. This means that you have been living and working in Singapore for at least 60 days in the tax year and have no other significant ties to Australia.
If you are unsure of your tax residency status, you should contact the Australian Taxation Office (ATO).
Even if you are not required to pay Australian tax on your Singaporean income, you may still be able to claim a foreign income tax offset (FITO) to reduce the amount of Australian tax you owe. The FITO is a tax credit that can be claimed for foreign income tax that you have already paid.
The amount of the FITO you can claim depends on the amount of foreign income tax you have paid and your Australian tax liability. You can find more information about the FITO on the ATO website.
It is important to note that the Australian tax rules can be complex, and there are many factors that can affect your individual tax liability. If you are an Australian expat living in Singapore, you should speak to an experienced tax accountant to get advice on your specific situation.
Here are some additional things to keep in mind about Australian tax rules for Aussie expats living in Singapore:
- You may have to pay Australian capital gains tax (CGT) on the sale of any assets you own, including property, shares, and investments.
- You may also have to pay Australian superannuation (super) contributions. If you are not working in Australia, you may be able to make voluntary super contributions to keep your super account growing.
- You should keep accurate records of all of your income and expenses, as you may need to provide this information to the ATO when you lodge your tax return.
What are the Australian tax rules for Aussie expats living in Hong Kong?
The Australian tax rules for Aussie expats living in Hong Kong are similar to the rules for expats living in Singapore. Australian citizens and permanent residents are taxed on their worldwide income, regardless of where they live. This means that if you are an Australian expat living in Hong Kong, you are still required to declare all of your income on your Australian tax return, including your Hong Kong income.
However, there are a few exceptions to this rule. For example, you may not have to pay Australian tax on your Hong Kong income if you are a:
- Non-resident for tax purposes. This means that you have not maintained a permanent home in Australia and have not been in Australia for more than 60 days in the tax year.
- Foreign resident for tax purposes. This means that you have been living and working in Hong Kong for at least 60 days in the tax year and have no other significant ties to Australia.
If you are unsure of your tax residency status, you should contact the Australian Taxation Office (ATO).
Even if you are not required to pay Australian tax on your Hong Kong income, you may still be able to claim a foreign income tax offset (FITO) to reduce the amount of Australian tax you owe. The FITO is a tax credit that can be claimed for foreign income tax that you have already paid.
The amount of the FITO you can claim depends on the amount of foreign income tax you have paid and your Australian tax liability. You can find more information about the FITO on the ATO website.
It is important to note that the Australian tax rules can be complex, and there are many factors that can affect your individual tax liability. If you are an Australian expat living in Hong Kong, you should speak to an experienced tax accountant to get advice on your specific situation.
Here are some additional things to keep in mind about Australian tax rules for Aussie expats living in Hong Kong:
- You may have to pay Australian capital gains tax (CGT) on the sale of any assets you own, including property, shares, and investments.
- You may also have to pay Australian superannuation (super) contributions. If you are not working in Australia, you may be able to make voluntary super contributions to keep your super account growing.
- You should keep accurate records of all of your income and expenses, as you may need to provide this information to the ATO when you lodge your tax return.
What about Aussies living in the UAE? What are the Australian tax rules for them?
Australian citizens and permanent residents are taxed on their worldwide income, regardless of where they live. This means that if you are an Australian expat living in the UAE, you are still required to declare all of your income on your Australian tax return, including your UAE income.
However, there are a few exceptions to this rule. For example, you may not have to pay Australian tax on your UAE income if you are a:
- Non-resident for tax purposes. This means that you have not maintained a permanent home in Australia and have not been in Australia for more than 60 days in the tax year.
- Foreign resident for tax purposes. This means that you have been living and working in the UAE for at least 60 days in the tax year and have no other significant ties to Australia.
The UAE does not have an income tax, so if you are an Australian expat living in the UAE and you are classified as a non-resident or foreign resident for tax purposes, you will not have to pay Australian tax on your UAE income.
However, you may still have to pay Australian tax on other types of income, such as:
- Income from property you own in Australia.
- Income from shares or investments you own in Australia.
- Capital gains you make on the sale of assets you own in Australia.
- Superannuation contributions you make to an Australian super fund.
If you are unsure of your tax residency status or whether you have to pay Australian tax on your UAE income, you should contact the Australian Taxation Office (ATO).
Here are some additional things to keep in mind about Australian tax rules for Aussie expats living in the UAE:
- You should keep accurate records of all of your income and expenses, as you may need to provide this information to the ATO when you lodge your tax return.
- You may be able to claim a foreign income tax offset (FITO) to reduce the amount of Australian tax you owe. The FITO is a tax credit that can be claimed for foreign income tax that you have already paid.
- You should also be aware of the Australian government’s foreign resident tax (FRT) rules. The FRT is a tax that applies to certain types of income earned by foreign residents, such as rental income from property owned in Australia.
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