Tax in Australia for Foreigners: Rates, Residency, and Refunds

If you are a foreigner earning income in Australia, you pay tax from the first dollar with no tax-free threshold, at a rate that depends on your residency status and visa. For the 2025–26 income year, foreign residents face a flat 30 percent on earnings up to $135,000, and working holiday makers on 417 or 462 visas pay 15 percent on the first $45,000.¹² Your exact obligations turn on which category the Australian Taxation Office places you in, what type of income you earn, and whether Australia has a tax treaty with your home country.

How the ATO Decides Your Residency Status

The ATO sorts individuals into three categories that carry different tax consequences: Australian resident, foreign resident, and temporary resident. Getting this classification right matters more than almost anything else, because it determines which income gets taxed and at what rate.

The primary test is the “resides” test under subsection 6(1) of the Income Tax Assessment Act 1936. The ATO looks at whether you actually reside in Australia by weighing factors together: how long you stay, where your family lives, where you keep assets, and your overall living arrangements. Six months is considered a significant period, but there is no hard cutoff. Someone here for four months with a lease and furniture could be treated as a resident, while someone here for seven months living out of a suitcase might not be.³

If the resides test does not produce a clear answer, the ATO applies backup statutory tests. The most common is the 183-day test: if you are physically present in Australia for more than half the income year, you are treated as a resident unless your usual place of abode is clearly overseas and you do not intend to settle here.⁴

Working holiday makers on subclass 417 or 462 visas fall into their own bucket with a separate scale, regardless of how long they stay. Temporary residents are typically people holding a temporary visa who are not Australian or New Zealand citizens and do not have an Australian permanent-resident spouse. That distinction matters because temporary residents get a valuable foreign income exemption.

Foreign Resident Tax Rates for 2025–26

Foreign residents pay tax on every dollar of Australian-sourced income with no tax-free threshold. The 2025–26 rates are:¹

$0 to $135,000: 30 cents for each dollar
$135,001 to $190,000: $40,500 plus 37 cents for each dollar over $135,000
$190,001 and above: $60,850 plus 45 cents for each dollar over $190,000

These rates changed with the Stage 3 tax reforms that took effect on 1 July 2024. Older guides still showing a 32.5 percent rate on the first $120,000 are out of date. Australian residents, by contrast, enjoy an $18,200 tax-free threshold before any tax kicks in.⁵ Foreign residents never get that buffer, which is the single biggest gap between the two categories.

Working Holiday Maker Tax Rates

If you hold a subclass 417 (Working Holiday) or 462 (Work and Holiday) visa, the ATO treats you as a working holiday maker with its own scale. For 2025–26:²

$0 to $45,000: 15 cents for each dollar
$45,001 to $135,000: $6,750 plus 30 cents for each dollar over $45,000
$135,001 to $190,000: $33,750 plus 37 cents for each dollar over $135,000
$190,001 and above: $54,100 plus 45 cents for each dollar over $190,000

The 15 percent flat rate on the first $45,000 is the number most backpackers care about. On a typical working holiday earning $30,000 over six months, that comes to $4,500 in tax. One catch: your employer must be registered with the ATO as a working holiday maker employer for the correct rate to apply. If they are not registered, tax gets withheld at the standard foreign resident rate of 30 percent, which is a much bigger chunk out of each pay.⁶

Foreign Income Exemption for Temporary Residents

Temporary residents get a significant break: most foreign-sourced income is not taxed in Australia. If you hold a temporary visa, are an Australian resident for tax purposes, and are not an Australian or New Zealand citizen or permanent resident, your investment income earned outside Australia (foreign bank interest, overseas rental income, offshore share dividends) is generally exempt.⁷

The exception is foreign employment income. If you perform work overseas while holding temporary resident status, that income may still be taxable in Australia depending on the facts and any applicable tax treaty. The exemption also does not cover capital gains on assets that are not “taxable Australian property.” For most temporary workers on skilled, student, or partner visas, the practical effect is that only the money you earn here matters.

Withholding Tax on Australian Dividends, Interest, and Royalties

If you are a foreign resident earning passive income from Australian sources, the payer withholds tax before you receive the money. The rates depend on whether Australia has a tax treaty with your home country:⁸

Interest: 10 percent without a treaty; some treaties reduce or eliminate this
Unfranked dividends: 30 percent without a treaty; most treaties reduce this to 15 percent
Royalties: 30 percent without a treaty; most treaties reduce this to 10 percent

Franked dividends, where the company has already paid Australian corporate tax, are generally not subject to additional withholding. If you do not provide your current overseas address to the Australian payer, they may withhold at the top rate of 47 percent. Keeping your contact details current with any Australian investment platform or bank is worth the effort.⁸

Australia has tax treaties with dozens of countries. If Australian tax is withheld on your investment income, you can usually claim a credit or offset in your home country when you file there. The specifics depend on the treaty between Australia and your country of residence.

Capital Gains Tax on Australian Property

Foreign residents pay capital gains tax on “taxable Australian property,” which primarily means real estate, mining rights, and certain business interests connected to Australian land. Gains or losses on other Australian assets are generally disregarded for foreign residents.

Since 1 January 2025, buyers of Australian property must withhold 15 percent of the market value at settlement when the seller is a foreign resident. This applies to all real property regardless of value: homes, vacant land, commercial buildings, and leases over real property. The withholding goes directly to the ATO.⁹

The 15 percent withheld is not your final tax. It is a prepayment. Your actual liability may be higher or lower depending on how long you held the property and your total taxable income. Foreign residents do not receive the 50 percent capital gains discount that Australian residents get for assets held longer than 12 months. You settle the final amount when you lodge your return, and if the withholding exceeds your actual liability, the difference comes back as a refund.

Getting a Tax File Number

A Tax File Number is the identifier the ATO uses to track your obligations. You need one before starting any paid work. If you do not give your employer a TFN, they must withhold at the top marginal rate of 47 percent, far more than the standard foreign resident or working holiday maker rates.

The application process for foreign passport holders is straightforward. If you hold a valid visa linked to your passport, you can apply online through the ATO’s Individual Auto Registration system, which verifies your identity against immigration records without requiring documents.¹⁰

Processing usually takes about four weeks. If you start work before receiving your TFN, you have 28 days from starting employment to provide it. Once you supply it within that window, your employer adjusts your withholding to the correct rate. Apply as soon as you arrive rather than waiting until you have a job lined up.

Superannuation and Claiming It Back When You Leave

Australian employers must contribute 12 percent of your ordinary earnings into a superannuation fund on top of your wages for the 2025–26 financial year.¹¹ This applies to most temporary workers and working holiday makers, not just permanent residents. The money goes into a fund chosen by your employer, or one you nominate, and accumulates while you work.

When you leave Australia permanently and your visa has expired or been cancelled, you can claim this money back through a Departing Australia Superannuation Payment. To be eligible, all of the following must be true:¹²

You accumulated super while working on a temporary resident visa
Your visa has expired or been cancelled
You have left Australia and do not hold any other active Australian visa
You are not an Australian or New Zealand citizen or permanent resident

The catch is the tax rate on DASP withdrawals. For most temporary residents, the taxed element is hit at 35 percent. Working holiday makers pay 65 percent on the taxable component.¹³ That 65 percent rate stings, but the money is still yours. If you do not claim it, your super fund transfers it to the ATO as unclaimed money six months after you leave. The ATO’s free online DASP application is the easiest way to claim. Gather your super fund details before you leave the country, even though you can only submit the application after departing.

Lodging Your Australian Tax Return

The Australian financial year runs from 1 July to 30 June. If you earned Australian income during that period, you lodge a return through the myTax system by linking your identity to a myGov account. The platform pulls in data from your employer’s payroll reports, so most numbers are pre-filled.

Your employer provides an income statement through the Single Touch Payroll system, which you can view in your myGov account once they finalise their reporting after 30 June.¹⁴

The deadline for self-lodgers is 31 October. If you miss it, the ATO charges a failure-to-lodge penalty of one penalty unit for every 28 days (or part thereof) the return is overdue, up to a maximum of five penalty units. Since 7 November 2024, each penalty unit is $330, so the maximum late penalty is $1,650.¹⁵¹⁶ Using a registered tax agent extends your lodgment deadline well into the following year, as late as May or June for most individuals.

Most electronic returns are processed within two weeks, with refunds deposited into the Australian bank account you nominate.¹⁷ Some returns get flagged for manual review, which can stretch processing to 30 days or more.

Leaving Australia Before June 30

If you are leaving permanently before the end of the financial year and will no longer earn Australian-sourced income (other than interest, dividends, or royalties), you can lodge an early departure return rather than waiting for the normal July–October window. This must be done on a paper tax return form; myTax does not accept early lodgments. Processing takes about 50 business days, and the notice of assessment is mailed to whatever postal address you provide.¹⁸

You cannot lodge early if you have a HELP, AASL, or VET Student Loan debt, or if you will continue to receive Australian income after departure. In those cases, you lodge during the normal period from overseas.

Medicare Levy Exemption and the Surcharge Trap

Everyone earning income in Australia is technically liable for the 2 percent Medicare levy, which funds the public health system.¹⁹ Most foreign nationals are not entitled to Medicare benefits, so they can claim an exemption. You apply for a Medicare Entitlement Statement through Services Australia, which confirms the period during which you were not covered.²⁰

Applications open each year on 1 July and should be completed before you lodge your return. On the return itself, you enter the exemption category and the ATO works out whether you qualify. Having a statement does not automatically guarantee the exemption. If your spouse or dependants are entitled to Medicare benefits, it may not apply to you.²¹

Separately, high earners without private hospital cover face the Medicare Levy Surcharge on top of the standard levy. For 2025–26, the surcharge kicks in at $101,000 for singles and $202,000 for families, plus $1,500 for each dependent child after the first.²² The surcharge rate ranges from 1 to 1.5 percent depending on your income tier. One trap for overseas visitors: standard Overseas Visitor Health Cover and Overseas Student Health Cover do not count as complying private hospital cover for surcharge purposes. You need an Australian-registered policy that specifically qualifies, or you need to claim the Medicare levy exemption to avoid the surcharge entirely.²³

1
Australian Taxation Office. Tax Rates – Foreign Resident
2
Australian Taxation Office. Tax Rates – Working Holiday Maker
3
Australian Taxation Office. Residency – The Resides Test
4
OECD. Information on Residency for Tax Purposes
5
Australian Taxation Office. Tax Rates – Australian Resident
6
Australian Taxation Office. Working Holiday Makers
7
Australian Taxation Office. Foreign and Temporary Resident Income
8
Australian Taxation Office. Interest, Unfranked Dividends and Royalties
9
Australian Taxation Office. Foreign Resident Capital Gains Withholding Overview
10
Australian Taxation Office. Permanent Migrants and Temporary Visitors – TFN Application
11
Australian Taxation Office. Super Guarantee
12
Australian Taxation Office. Departing Australia Superannuation Payment (DASP)
13
Australian Taxation Office. Payments From Super
14
Australian Taxation Office. Access Your Income Statement
15
Australian Taxation Office. Failure to Lodge on Time Penalty
16
Australian Taxation Office. Penalty Units
17
Australian Taxation Office. Status of Your Tax Return
18
Australian Taxation Office. Lodge Your Tax Return Before Leaving Australia
19
Australian Taxation Office. What Is the Medicare Levy
20
Services Australia. Medicare Entitlement Statement
21
Australian Taxation Office. Not Entitled to Medicare Benefits
22
Australian Taxation Office. Medicare Levy Surcharge Income, Thresholds and Rates
23
Australian Taxation Office. Overseas Visitors – Private Health Insurance on Your Tax Return