Taxes in Australia for expats: Which should I pay?

We’re sure you already know that a country’s taxes directly affect its citizens’ purchasing power. They determine how much of their salary people can save, whether they can buy property, and even the quality of their groceries. They also influence how efficient public services are. Although few people choose where to live or start a business based on the tax system, it’s one of the most important things to consider before moving abroad. That’s why today we’ll talk about taxes in Australia for expats and foreigners.

By understanding them, you’ll know what tax obligations you’ll have once you arrive and whether it’s worth owning property, investing, or starting a company. You’ll also discover every tax benefit and exemption available. Join us to find out if the land of kangaroos and opportunities suits you.

Types of Foreigners in Australia

Before diving into tax details, do you know what type of foreigner you are? It’s essential to identify which category you fit into. This not only defines your tax obligations but also the rates and possible benefits. Understanding these differences helps you manage your assets and legal responsibilities more efficiently. In Australia, as in most countries, there are two main types of foreigners from a tax perspective: Individuals and companies or properties.

People

When we say “individual”, we mean a person with a name and surname. Someone earning an income, working, owning or renting property, and having tax obligations. We’re not talking about companies or organisations, but people who, depending on whether they’re residents or non-residents in Australia, face certain obligations and applicable rates. Foreigners settling in the country have different goals and personal circumstances that define their tax responsibilities. Here are the main groups:

• Skilled professionals: Workers who arrive to fill roles in key sectors like mining, engineering, technology, healthcare, or education. Cities such as Sydney, Melbourne, and Perth are top destinations in Australia for this group, offering better opportunities and higher living standards.
• International students: With universities like Melbourne or Sydney among the world’s best, Australia attracts young people seeking quality education. Many also come to improve their English while working part-time.
• Expat families: Many families move to Australia for its economic stability, quality of life, and access to advanced public services like healthcare and education. Coastal cities are most popular among expats who want a safe environment for their children.
• Retirees: Although not as popular as Europe for retirement, Australia still attracts some foreign retirees looking for a warm climate, safety, and world-class healthcare.

Companies or properties

On the other hand, we have companies or properties. These aren’t individuals but legal entities or assets that generate economic value in Australia. Both companies and properties have tax obligations different from individuals. Understanding how these categories are taxed is crucial for managing your responsibilities as a foreign investor. So, what types of businesses and properties can we find in Australia?

• Subsidiaries of multinationals: Many large corporations open offices or branches in Australia to benefit from its connection to Asian markets and strong local economy. These businesses usually operate in sectors like mining, finance, and technology.
• Startups and small businesses: Australia supports innovation. Programmes like the Business Innovation and Investment Program attract international entrepreneurs developing projects in technology, renewable energy, or healthcare.
• Real estate investments: Properties in cities such as Sydney, Melbourne, or Brisbane are highly sought after by foreigners seeking second homes or rental income, especially in high-demand areas.
• Agricultural and rural projects: Regions like Queensland or Tasmania are ideal for those investing in farming, livestock, or food production. These areas also offer rural tourism opportunities, with farms turned into unique holiday stays.

Taxes for Foreign Individuals in Australia

Now that we understand the difference between individuals and legal entities, let’s go into detail. We’ll start with the taxes you’ll pay when moving to Australia. As in most countries, your tax depends on your fiscal status (resident or non-resident) and your income type. Let’s look at the most relevant taxes in Australia. Since this topic can feel complex, we’ll include clear examples for each case.

1. Income tax

Income tax is the most important one for any individual in Australia. It applies to income earned from salaries, rent, investments, and other economic activities. The rules vary depending on your tax residency status:

• Tax residents: Pay tax on all worldwide income. This includes income earned both in Australia and abroad. The rates are progressive, based on annual earnings:
  • Up to AU$18,200 (€11,800.00 ($12,900.00)): Exempt.
  • Between AU$18,201 (€11,801.00 ($12,900.00)) and AU$45,000 (€29,200.00 ($31,900.00)): 19 %.
  • Between AU$45,001 (€29,201.00 ($31,900.00)) and AU$120,000 (€78,000.00 ($85,000.00)): 32.5 %.
  • Between AU$120,001 (€78,001.00 ($85,000.00)) and AU$180,000 (€117,000.00 ($127,500.00)): 37 %.
  • Over AU$180,000 (€117,000.00 ($127,500.00)): 45 %.
  • Additionally, there’s a 2% levy for Medicare, Australia’s public health system (check our guide on health insurance for foreigners in Australia).
  • Example: If you’re a tax resident earning AU$70,000 (€45,500.00 ($49,600.00)) per year, you’ll pay 19% on the first AU$45,000 (€29,200.00 ($31,900.00)) and 32.5% on the remaining AU$25,000 (€16,200.00 ($17,700.00)). That’s about AU$14,697 (€9,550.00 ($10,500.00)) in taxes.
• Non-residents: Pay tax only on income generated in Australia and don’t benefit from the tax-free threshold. The rates are higher:
  • Up to AU$120,000 (€78,000.00 ($85,000.00)): 32.5 %.
  • Between AU$120,001 (€78,001.00 ($85,000.00)) and AU$180,000 (€117,000.00 ($127,500.00)): 37 %.
  • Over AU$180,000 (€117,000.00 ($127,500.00)): 45 %.
  • Example: A non-resident temporarily working in Australia and earning AU$90,000 (€58,500.00 ($63,800.00)) will pay 32.5%, or AU$29,250 (€19,012.00 ($20,750.00)) in tax.

2. Goods and Services Tax (GST)

The GST is a 10% tax applied to most goods and services in Australia. Although businesses collect it, consumers pay it in the final price. Some essentials, such as basic food, medical, and educational services, are exempt.

3. Capital Gains Tax (CGT)

CGT applies to profits made from selling assets. In other words, you’ll pay it when selling property, shares, or investments. Rules differ for residents and non-residents:

• Tax Residents: They are taxed on capital gains generated anywhere in the world. Additionally, they can benefit from a 50% discount if they hold the asset for more than 12 months before selling it.
• Non-residents: Pay tax only on gains from Australian assets and can’t claim the 50% discount.
• Example: If you buy property for AU$500,000 (€325,000.00 ($354,000.00)) and sell it for AU$700,000 (€455,000.00 ($496,000.00)) after two years, as a resident you’ll pay tax only on half the gain: AU$100,000 (€65,000.00 ($71,000.00)).

4. Tax on rent

If you rent out a property in Australia, the income is taxable under the income tax system. You can deduct certain property-related expenses, such as repairs, mortgage interest, and management fees. Example:

• Example:If you earn AU$25,000 (€16,250.00 ($17,700.00)) in rent per year but have AU$7,000 (€4,550.00 ($4,960.00)) in deductible expenses, you’ll be taxed on AU$18,000 (€11,700.00 ($12,750.00)).

Tax Benefits for Foreign Individuals in Australia

When completing your tax returns, you may claim certain tax benefits and deductions. Let’s look at the most relevant ones for foreign residents in Australia.

Foreign Income Tax Offset (Double Tax Credit)

If you pay taxes on the same income in both Australia and another country, you can request a tax credit to avoid double taxation. This is especially useful for digital nomads working remotely from Australia or earning income abroad.

• Example: If you pay income tax in Canada while working from Australia, you can deduct that amount from your Australian tax return.

International tax treaties

Australia has tax agreements with many countries to reduce or eliminate double taxation. These treaties usually apply to income such as dividends, interest, and royalties.

• Example: A UK citizen receiving dividends from an Australian company can benefit from a reduced tax rate under the treaty between both countries.

Capital Gains Tax Discounts

Tax residents can enjoy a 50% discount on CGT if they’ve held the asset for more than 12 months before selling it. This benefit isn’t available to non-residents.

• Example: A resident selling an investment with a AU$50,000 (€32,500) gain will pay tax on only AU$25,000 (€16,250).

Exemptions for International Students

International students working part-time in Australia may be exempt from tax if their annual income doesn’t exceed AU$18,200 (€11,800.00 ($12,900.00)).

Taxes for Foreign Companies or Properties in Australia

Ready to move on? Let’s now look at the tax obligations for foreign-owned properties and companies in Australia. If you plan to invest in the land of kangaroos, this section is crucial. Australia’s tax system ensures that foreign businesses and property owners contribute fairly to the country’s economic growth. Just like before, we’ll use examples to make everything clear.

1. Land Tax

Land tax applies to property and landowners in Australia. This tax is administered at the state and territory level. This means that rates and exemptions vary depending on the location of the property. In many states, foreign owners pay an additional surcharge, known as the Foreign Ownership Surcharge. For example, in New South Wales, foreign owners pay a 5% surcharge on the property’s taxable value, while in Victoria it can reach 4%. In Victoria, this surcharge can reach 4%.

2. Capital Gains Tax (CGT)

CGT applies to profits from selling commercial assets or properties in Australia. Non-residents can’t access the 50% discount available to tax residents.

• Example: If you buy a property for AU$1,000,000 (€650,000.00 ($708,000.00)) and sell it for AU$1,200,000 (€780,000.00 ($850,000.00)), the AU$200,000 (€130,000.00 ($142,000.00)) gain is fully taxable at CGT rates, which can reach up to 45%, depending on your income level.

3. Corporate Tax

Corporate tax in Australia applies to profits earned by both local and foreign companies operating within the country. Foreign companies are taxed at a general rate of 30% on their income earned in Australia. Except for small businesses with annual income under 50 million Australian dollars (€32.5 million), which can benefit from a reduced rate of 25%.

• Example: If your company earns AU$500,000 (€325,000.00 ($354,000.00)) in profit, you’ll pay AU$150,000 (€97,500.00 ($106,000.00)) in tax under the 30% standard rate.

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4. Goods and Services Tax (GST)

The 10% GST applies to most goods and services sold in Australia. Foreign companies earning over AU$75,000 (€48,750.00 ($53,100.00)) per year must register to collect and remit this tax.

• Example: If your company sells products worth AU$100,000 (€65,000.00 ($70,800.00)) annually, you must remit AU$10,000 (€6,500.00 ($7,080.00)) to the ATO as GST.

Tax Benefits for Foreign Companies in Australia

If you’re reading this because you’re planning to start a business, you’ll be glad to know that, just like individuals, foreign companies in Australia can access various tax incentives. These programmes encourage international investment and boost innovation across key sectors. They can also help you reduce your tax burden and improve profitability.

Research and Development (R&D) Tax Incentive

Australia offers a tax credit of up to 43.5% for companies investing in research and development activities. This incentive is one of the government’s key tools for promoting business innovation and attracting foreign investment. The exact credit rate depends on company size and annual turnover. From 1 July 2025, gambling and tobacco-related activities will be excluded from this scheme.

• Small businesses (annual turnover below AU$20,000,000 (€13,000,000.00 ($14,200,000.00))) receive a refundable 43.5% tax credit. This means that even if the company doesn’t make enough profit to pay tax, it can still receive a cash refund.
• Large businesses (turnover of AU$20,000,000 (€13,000,000.00 ($14,200,000.00)) or more) qualify for a non-refundable 38.5% tax credit, which can increase up to 46.5% if R&D investment exceeds 2% of total annual turnover.

Asset Depreciation Deductions

Companies can deduct the cost of assets like machinery, equipment, or technology through accelerated depreciation schemes.

• Instant depreciation: Small and medium-sized businesses (with turnover under AU$5,000,000,000 (€3,250,000,000.00 ($3,540,000,000.00))) can immediately claim deductions for assets costing less than AU$20,000 (€13,000.00 ($14,200.00)) purchased between 1 July 2024 and 30 June 2025.
• General depreciation: For higher-value assets, companies can claim deductions gradually under the general depreciation schedule.

Regional Investment Incentives

The Australian Government encourages investment in regional and strategic sectors such as renewable energy, mining, and technology through additional tax deductions.

• Expanded Deductions: Extended deductions: companies investing in eligible projects can claim higher-than-standard tax deductions. For example, renewable energy investments may qualify for deductions up to 150% of the original asset value.

Taxes on Foreign Investments in the Australian Stock Market

Thinking about investing in the Australian stock market? This also involves specific tax obligations. The rules vary depending on your tax residency status (resident or non-resident) and the type of investment you make.

• Capital Gains Tax (CGT): If you make a profit when selling shares, that gain will be subject to CGT. As a foreign investor, you’ll only pay tax on profits earned from the Australian stock market. You won’t be eligible for discounts available to tax residents.
• Dividend Withholding Tax:Dividends paid by Australian companies are subject to a withholding tax. The standard rate is 30%, but it may be reduced under Australia’s tax treaties with other countries.

Frequently Asked Questions about Taxes for Foreigners in Australia

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