An Expat’s Guide to Paying Taxes in Australia

by | May 18, 2021 | Finances for Expats

Introduction to Taxes for Expats Living in Australia

Let's start with a list of dates and the Australian income tax table, then get into more details.

  • The Australian Tax Year is July 1st – June 30th.
  • Your Australian Tax Return is due October 31st.
  • Your employer in Australia will issue you a “Pay As You Go” withholding summary (PAYG statement) by July 14th.

What Percentage of Tax Do You Pay in Australia

Current Australian Resident Tax Rates 2020 – 2021

0 – $18,200

Tax On This Income

Nil

$18,201 – $45,000

Tax On This Income

19 cents for each $1 over $18,200

$45,001 – $120,000

Tax On This Income

$5,092 plus 32.5 cents for each $1 over $45,000

$120,001 – $180,000

Tax On This Income

$29,467 plus 37 cents for each $1 over $120,000

$180,001 and over

Tax On This Income

$51,667 plus 45 cents for each $1 over $180,000

Foreign Australian Resident Tax Rates 2020 – 2021

0 – $120,000

Tax On This Income

32.5 cents for each $1

$120,001 – $180,000

Tax On This Income

$39,000 plus 37 cents for each $1 over $120,000

$180,001 and over

Tax On This Income

$61,200 plus 45 cents for each $1 over $180,000
*These rates apply to individuals who are foreign residents for tax purposes. Residency for taxes in Australia is not dependent on what visa you have. Please be sure to read the section below on filing your tax return in Australia.

  • There is a 2% Medicare Levy that is in addition to income tax for residents. Foreign residents for tax purposes are not required to pay the Medicare levy. You may also be exempt from paying the Medicare Levy if you meet certain medical requirements or are not entitled to Medicare benefits.
  • In addition to the 2% Medicare Levy, there is a Medicare Levy Surcharge (MLS) for all Australian taxpayers that do not have private hospital cover. The MLS is paid by taxpayers who earn a certain income level and qualify for Medicare. Yes, you can offset the surcharge by getting health insurance that covers domestic hospitals in Australia. No, your Overseas Visitors Health Insurance you may have needed for your visa application is not considered adequate to offset the surcharge. Many health insurers have specific policies to offset Medicare Levy Surcharges.

Medicare Levy Surcharge Income Threshold Rates 2014 – 2021

Base Tier

Single

$90,000 or less

Family

$180,000 or less

Medicare Levy Surcharge

0%

Tier 1

Single

$90,001 – $105,000

Family

$180,001 – $210,000

Medicare Levy Surcharge

1%

Tier 2

Single

$105,001 –$140,000

Family

$210,001 – $280,000

Medicare Levy Surcharge

1.25%

Tier 3

Single

$140,001 or more

Family

$280,001 or more

Medicare Levy Surcharge

1.5%
  • Your Tax File Number (TFN) in Australia will take between 10 to 28 days to process.
    You have 28 days from your start date to give your employer your TFN.
  • If you do not give your employer your TFN, they must withhold 49% from any payment to a resident employee and 47% from any payment to a foreign resident employee. I'll go over how to get your TFN in the next section.

Are You an Australian Resident for Tax Purposes?

The way the ATO determines if you are a resident or not is different from how the Department of Immigration and Border Control does. This confuses almost everyone who has a temporary work visa so let's clarify things some before we get into how to file your tax return in Australia.

The primary test the ATO uses to determine residency is the “resides” test. They look at a number of factors:

  • the purpose of your presence in Australia (why you moved)
  • your family and business/employment ties (are you working? for how long?)
  • whether you open bank accounts
  • your social and living arrangements (a six or 12-month lease).

If you have been in Australia for less than six months, you may have to demonstrate your tax residency with bank records, your lease or a letter from your employer.

Chances are this will not happen if you have a TFN linked to your bank account and your PAYG statement. In fact, it would be harder to prove that you are not a resident.

To put it simply, if you come to Australia with the intention to live here then you are a resident for tax reasons from the day you arrive.

Below is a table of common residency and tax situations from the ATO website.

If you:

leave Australia temporarily and do not set up a permanent home in another country

You are generally:

an Australian resident for tax purposes

If you:

are an overseas student enrolled in a course that is more than six months long at an Australian institution

You are generally:

an Australian resident for tax purposes

If you:

are visiting Australia, working and living in the one location and have taken steps to make Australia your home

You are generally:

an Australian resident for tax purposes

If you:

are visiting Australia and for most of that time you are travelling and working in various locations around Australia

You are generally:

a foreign resident for tax purposes

If you:

are either holidaying in Australia or visiting for less than six months

You are generally:

a foreign resident for tax purposes

If you:

migrate to Australia and intend to reside here permanently

You are generally:

an Australian resident for tax purposes

If you:

leave Australia permanently

You are generally:

treated as a foreign resident for tax purposes from the date of your departure

How to Filing Your Australian Tax Return

You will receive your “Pay As You Go” statement (PAYG statement) from your employer by July 14th. Your tax return is due by October 31st, but you can start

The PAYG statement is not the most “official” looking document. It's a simple summary of your yearly earnings with your employer's address on it. It looks nothing like a W2 Form back in the States.

All your tax information from your employer has already been given to the Australian Tax Office (ATO) along with your taxable interest from your bank account and automatically added your tax return via your myTax account with the ATO usually in early August. If you choose to use a registered tax agent for your tax return, they will also be able to access your PAYG statement and taxable interest from your bank via the ATO.

It is relatively easy to file your tax return online and highly recommended, not just because most of the information is auto-filled for you but because you will get your refund sooner, usually within two weeks.

If your taxes are more complicated, then you may want to consult a tax agent for your first year filing taxes in Australia.

The first time you file your taxes in Australia, you will need to set up a MyGov account and link it to your ATO myTax account.

Here are the instructions on how to do that directly from the ATO.

Filing Your Australian Tax Return Online with myTax

The easiest and fastest way to file your tax return is online using myTax.

You'll need a myGov account linked to the ATO.

There are a few steps you need to follow to set up your online account:

  1. Have your tax file number (TFN) handy.
  2. Create a myGov account.
  3. Call the ATO at 13 28 61 and enter your TFN and date of birth when requested. Select 1 at the prompt to get your unique linking code to verify your account from an operator. Each unique code will expire after 24 hours.
  4. Sign in to myGov, go to the Services page, and link to the ATO. Select “I have a linking code” and follow the instructions as prompted.

Note: There is no filing jointly in Australia though you will be asked for information about your spouse or partner's income, especially if you qualify for Medicare as the ATO needs to know your combined income for the Medicare Surcharge.

I am going to keep this simple even though I know you have questions on things like deductions and do you pay tax on the money you transfer to Australia.

Further Reading

I have a guest post from H&R Block in Australia where they answered tax questions from Sydney Moving Guide readers. I have another post about applying for a Medicare Levy Exemption for those that do not qualify for Medicare in Australia and would like the 2% Medicare Levy back.

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Open Your Bank Account

In 5 minutes or less, you can open both a checking and savings account BEFORE you move to Australia. There are only 3 things you need to get started.
1. Your passport and visa details.
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3. Be arriving within the next 3 months.

*This link will take you to Commonwealth Bank of Australia's special accounts for newly arriving expats and migrants. Commonwealth Bank is a sponsoring partner of Sydney Moving Guide.

Hi, I’m Lauren.

Lauren Owner of Sydney Moving GuideAnd I’ve helped thousands of people from all over the world move to Australia since starting my blog back in 2009. You can read more about me here, but Sydney Moving Guide isn’t about me. IT’S ABOUT YOU. So, I have one question for you. How can I help you with your move to Australia? Let me know in the comments below and don’t forget to grab my moving checklist before you go.