What Tax do I Pay in Australia When Living Overseas as an Aussie Expat?

If you're an Australian living and working overseas, you may assume that you’ve left the Australian tax system behind. But that’s not always the case. Depending on your residency status and the type of income you earn, you may still have tax obligations in Australia. So, what tax do I pay in Australia when living overseas? Let’s break down the rules for Aussie expats and explore the tax rates for foreign residents in detail.

Understanding Australian Tax Residency

The first step in answering "what tax do I pay in Australia when living overseas?" is figuring out whether you're an Australian tax resident or a non-resident for tax purposes. The Australian Taxation Office (ATO) doesn’t rely solely on your physical location; your ties to Australia, your intent, and your pattern of stay can also play a role.

If you're deemed a non-resident, which is often the case for Aussie Expats, you'll be taxed differently from residents, where only your Australian-sourced income is considered, and at non-resident (foreign resident) tax rates.

What is Australian-Sourced Income?

Even if you're living abroad, you may still earn income from Australia. This includes:

• Rental income from property located in Australia

• Income from Australian businesses or employment performed in Australia

• Capital gains from taxable Australian property (e.g., real estate or interests in land-rich entities)

• Distributions from Australian trusts (in some cases)

As a non-resident, your employment income from overseas, such as your salary, is generally not considered Australian-sourced income.

Withholding Tax Rules for Interest and Dividends

This is where things get nuanced. If you’re a non-resident, income from Australian interest and dividends is generally not treated as Australian-sourced income for tax return purposes. Instead, it falls under the non-resident withholding tax regime.

Interest Income: Interest earned from Australian bank accounts or financial institutions by a non-resident is subject to withholding tax, typically at a flat rate of 10%, assuming the correct declaration of non-residency is made with your financial institution.

Dividend Income: Dividends paid by Australian companies are classified into two types for non-residents:

• Franked Dividends: These are dividends paid out of profits that have already been taxed at the company level. For non-residents, fully franked dividends are exempt from further withholding tax. You receive the dividend tax-free, but cannot claim franking credits in your tax return as a non-resident.

  
  

• Unfranked Dividends: These are subject to withholding tax, generally at a rate of 30% unless a double tax agreement (DTA) between Australia and your country of residence reduces this rate.

For Interest and Dividends, the withholding tax is final: no need to lodge a return unless you have other taxable income. If you don’t notify the payer of your non-resident status, higher withholding may apply.

Foreign Resident Tax Rates (FY 2025-26)

As a non-resident for tax purposes, you won’t get the benefit of the tax-free threshold. Every dollar of your Australian-sourced income is taxed from the first dollar.

Here are the foreign resident income tax rates for the 2025-26 financial year:

Taxable Income (AUD)	Tax Rate
$0 – $135,000	30%
$135,001 – $190,000	37%
$190,001 and over	45%

Note: These rates exclude the Medicare Levy, which non-residents do not have to pay.

Example:

If you earn $90,000 in rental income from an Australian property and have no tax deductions, while living overseas, your tax payable would be:

$90,000 × 32.5% = $29,250

No tax-free threshold, and no offsets, it's a flat rate from dollar one.

Do I Still Need to Lodge a Tax Return?

You’ll need to lodge an Australian tax return if:

• You earn Australian-sourced income (like rent or business income);

• Realise a capital gain from the sale of Taxable Australian Property;

• You’ve had tax withheld and may be eligible for a refund;

• If you earn interest or fully franked dividends and the correct amount of withholding tax has not been applied, you may still need to lodge.

  
  

Capital Gains Tax for Non-Residents

As a non-resident, you're generally only subject to Capital Gains Tax (CGT) on taxable Australian property, including:

• Real estate in Australia;

• Shares and investments you held before becoming a non-resident, which you did not apply the deemed disposal rules;

• Certain interests in land-rich entities;

• Business assets in Australia.

Important to note: You cannot access the 50% CGT discount for assets acquired after 8 May 2012, where you have been a non-resident for the entire ownership period. A pro rata CGT discount may be available where you were a tax resident for part of the ownership period.

Selling a property may also trigger foreign resident capital gains withholding, where 15% of the sale price is withheld and paid to the ATO, irrespective of the property's sale price.

Key Takeaways for Aussie Expats

• Your tax residency status determines what tax you pay in Australia when living overseas.

• Non-residents are taxed only on Australian-sourced income, but at higher rates starting from the first dollar.

• Passive income, like interest and dividends, may have withholding tax applied.

• You may still need to lodge a tax return depending on your income types and amounts.

Conclusion

Living overseas doesn't necessarily sever your ties with the Australian tax system. Understanding the foreign resident tax rates and knowing what tax you pay in Australia when living overseas is essential for staying compliant and avoiding surprises at tax time.

If you’re unsure about your residency status or need help lodging your return from abroad, it is encouraged to consult a tax professional with experience in expat taxation.

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 below link:

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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.