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 2019 – 2020
|Tax Income||Tax on Income|
|$18,201- $37,000||19 cents for each $1 over $18,200|
|$37,001 – $90,000||$3,572 plus 32.5 cents for each dollar over $37,000|
|$90,001 – $180,000||$20,797 plus 37 cents for each $1 over $90,000|
|$180,001 and over||$54,097 plus 45 cents for each $1 over $180,000|
Foreign Australian Resident Tax Rates 2019 – 2020
|Tax Income||Tax on Income|
|0 – $90,000||32.5 cents for each $1|
|$90,001 – $180,000||$29,250 plus 37 cents for each $1 over $90,000|
|$180,001 and over||$62,550 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
|Base Tier||Tier 1||Tier 2||Tier 3|
|Single||$90,000 or less||$90,001 – $105,000||$105,001 –$140,000||$140,001 or more|
|Family||$180,000 or less||$180,001 – $210,000||$210,001 – $280,000||$280,001 or more|
|Medicare Levy Surcharge||0%||1%||1.25%||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 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:||you are generally:|
|leave Australia temporarily and do not set up a permanent home in another country||an Australian resident for tax purposes|
|are an overseas student enrolled in a course that is more than six months long at an Australian institution||an Australian resident for tax purposes|
|are visiting Australia, working and living in the one location and have taken steps to make Australia your home||an Australian resident for tax purposes|
|are visiting Australia and for most of that time you are travelling and working in various locations around Australia||a foreign resident for tax purposes|
|are either holidaying in Australia or visiting for less than six months||a foreign resident for tax purposes|
|migrate to Australia and intend to reside here permanently||an Australian resident for tax purposes|
|leave Australia permanently||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 autofilled 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 you online account:
- Have your tax file number (TFN) handy.
- Create a myGov account.
- 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.
- 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 money you transfer to Australia.
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.