Non-Resident Tax Rates in Australia: What changes when you move abroad

Moving overseas is one of the most financially significant decisions an Australian can make. Alongside the excitement of a new country, new culture and new opportunities comes an important question that many Australians overlook until tax time: what happens to my Australian tax obligations when I leave Australia?

Understanding the non-resident tax rates in Australia is one of the most important areas of planning for Australian Expats. The difference between being taxed as a resident versus a non-resident can be substantial, and getting it wrong can lead to unexpected tax bills or missed planning opportunities.

This blog outlines the key differences between resident and non-resident tax rates in Australia and explains how your tax situation changes when you move abroad.

What is Tax Residency and why does it matter?

Before looking at the numbers, it is important to understand that Australian tax residency is separate from visa status or citizenship. You can be an Australian citizen living overseas and still be classified as an Australian tax resident, or you may have already ceased to be one.

Your tax residency status determines:

• Whether you are taxed on your worldwide income or only your Australian-sourced income;

• Which tax rates apply to your income;

• Whether you are entitled to the tax-free threshold; and

• Whether you are liable for the Medicare Levy.

The ATO uses a number of tests to determine tax residency, including the resides test, the domicile test, and the 183-day test. In practice, the question of residency can be complex, particularly in the year you depart Australia, and specialist advice from a tax accountant is often required to determine your status correctly.

Australian Resident Tax Rates (2025–26)

If you are classified as an Australian resident for tax purposes, the following income tax rates apply for the 2025–26 financial year:

Taxable Income	Tax Rate
$0 – $18,200	Nil (tax-free threshold)
$18,201 – $45,000	16%
$45,001 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and above	45%

In addition, most Australian residents are required to pay the Medicare Levy of 2% on top of their income tax. High-income earners without adequate private hospital cover may also face a Medicare Levy Surcharge of between 1% and 1.5%.

Australian residents are also taxed on their worldwide income, meaning income earned in any country, including salary, investment income, and rental income from overseas properties, must generally be declared in their Australian tax return.

Australian tax residents also benefit from a tax-free threshold of $18,200, meaning the first $18,200 of income is not subject to income tax.

Non-Resident Tax Rates in Australia (2025–26)

Once you are classified as a non-resident (also known as a foreign resident) for Australian tax purposes, a very different set of rules applies. Non-resident tax rates in Australia for the 2025–26 financial year are as follows:

Taxable Income	Tax Rate
$0 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and above	45%

There are several critical differences compared to the resident rates above:

• No tax-free threshold - Non-residents are taxed from the very first dollar of Australian-sourced income at 30%. There is no $18,200 tax-free threshold available to non-residents.

• No Medicare Levy - Non-residents are not liable for the Medicare Levy or Medicare Levy Surcharge.

• Australian-sourced income only - Non-residents are only taxed on income derived from Australian sources, not on their worldwide income. This can be a significant advantage for Expats earning income exclusively overseas.

A Practical Illustration

To put this into perspective, consider an Australian Expat living overseas who owns an Australian rental property generating $50,000 of net rental income per year.

As a non-resident, the $50,000 of rental income (after deducting eligible operating expenses) is taxed at the non-resident rate of 30%, resulting in $15,000 in income tax, with no Medicare Levy applicable and no tax-free threshold available.

If the same individual were an Australian tax resident, the first $18,200 would be tax-free, and the remaining $31,800 would be taxed at 16%, resulting in approximately $5,088 in income tax plus the 2% Medicare Levy. The difference in tax on rental income alone is substantial, and it underscores why understanding your residency status and the applicable non-resident tax rates in Australia is so important. 

What income is Taxable for Non-Residents?

Non-residents are generally only assessed on Australian-sourced income. This typically includes:

• Rental income from Australian investment properties;

• Interest income from Australian bank accounts (note: withholding tax of 10% may apply);

• Dividends from Australian shares (subject to dividend withholding tax);

• Business income earned in Australia;

• Capital gains on Taxable Australian Property (TAP), which broadly includes Australian real estate.

It is important to note that non-residents are generally not subject to Australian capital gains tax (CGT) on assets that are classified as Non-Taxable Australian Property. This means shares, managed funds, and ETFs held by a non-resident are typically outside the Australian CGT regime, which can be a meaningful planning advantage for Australian Expats building investment portfolios.

However, Australian real estate remains subject to CGT for non-residents, and the 50% CGT discount that normally applies to assets held for more than 12 months is generally not available to non-residents on property acquired after 8 May 2012.

How can Australian Expats reduce their Australian Tax Liability?

Australian expats can often reduce their Australian tax liability through proactive tax planning and strategic structuring of their finances. While non-resident tax rates can be high, there are several legitimate strategies available to help minimise tax payable and improve overall financial outcomes.

• Tax-deductible super contributions – Eligible personal superannuation contributions may be used to offset Australian-sourced income such as rental income or capital gains, while benefiting from concessional tax treatment inside super.

• Rental property deductions – Expats can claim eligible property expenses, including interest, insurance, rates, management fees and maintenance costs, with rental losses potentially carried forward to offset future income or gains.

• Structuring asset ownership effectively – Holding assets in the name of the lower-income spouse may help reduce the overall household tax burden by taking advantage of lower marginal tax rates.

• Using capital losses to offset gains – Existing capital losses from other investments can be applied against capital gains to reduce tax payable through tax-loss harvesting strategies.

  
  

Because Australian non-resident tax rules are complex and regularly changing, tailored advice from a specialist tax accountant and expat Financial Adviser can help ensure strategies are implemented effectively and aligned with your broader financial goals.

The Year of Departure: A Critical Planning Window

The financial year in which you leave Australia is often the most complex from a tax perspective. In the year of departure, you may be treated as a resident for part of the year and a non-resident for the remainder, depending on the date your residency status changes.

This means:

• You may be entitled to a partial tax-free threshold for the period you were a resident;

• Different tax rates may apply to different portions of your income;

• Assets held at the date you cease to be a resident may be subject to a CGT deemed disposal event under certain circumstances.

Seeking professional advice for the year of departure can make a significant difference to your overall tax outcomes.

What about Withholding Tax?

For non-residents with Australian investment income, withholding tax is often the mechanism through which Australian tax obligations are met at the source. Key withholding tax rates include:

• Interest income: 10% withholding tax generally applies to interest paid to non-residents by Australian financial institutions;

• Unfranked dividends: 30% withholding tax applies (reduced to 15% for residents of countries with which Australia has a tax treaty);

• Fully franked dividends: Generally, no additional withholding tax applies, as the franking credits have already accounted for company-level tax.

Where Australia has a Double Tax Agreement (DTA) with your country of residence, reduced withholding tax rates may apply. Australia has DTAs with a wide range of countries, including the United States, the United Kingdom, Canada, Singapore, Japan, the UAE and many others.

Can you choose your Tax Residency Status?

Tax residency status is not a choice. It is determined by the facts and circumstances of your situation as assessed against the ATO's residency tests. Simply telling the ATO you are a non-resident does not make you a non-resident for tax purposes.

If you genuinely cease to be an Australian tax resident, it is important to ensure this is properly documented and that your tax returns are lodged correctly for the year of departure and subsequent years.

Key Takeaways

Understanding non-resident tax rates in Australia is fundamental for any Australian living overseas. The key points to keep in mind are:

• Non-residents are taxed at a flat rate starting at 30% with no tax-free threshold;

• Non-residents are only taxed on Australian-sourced income, not worldwide income;

• No Medicare Levy applies to non-residents;

• The 50% CGT discount is generally unavailable to non-residents on Australian property;

• Withholding tax rules apply to interest and dividend income earned in Australia;

• Your residency status is determined by facts and circumstances;

• The year of departure is a critical planning period that requires careful attention.

Conclusion

Understanding how non-resident tax rates in Australia apply when you move overseas is essential for protecting your wealth and avoiding costly tax mistakes. While becoming a non-resident can provide significant advantages, particularly by limiting Australian tax to Australian-sourced income only, it also comes with important trade-offs such as losing access to the tax-free threshold and certain capital gains tax concessions.

Because tax residency rules are complex and highly dependent on your individual circumstances, proactive planning before and after leaving Australia is critical. With the right advice and structuring strategies, Australian Expats can often reduce their tax liability, improve long-term outcomes and ensure they remain compliant with both Australian and international tax obligations.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

If you would like to speak to one of our Expat Financial Advisers about this blog or if you have other queries, we would be more than happy to speak with you. Feel free to send us an enquiry through the 'Contact Us' tab provided in the link below:

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.