Australian Tax Resident vs Non-Resident: What's the Difference?
Learn the difference between Australian tax residents and foreign residents, including tax rates, the tax-free threshold, Medicare Levy, deductions and how tax residency affects your Australian tax return.
Australian Tax Resident vs Non-Resident: What's the Difference?
Your Australian tax residency status can have a significant effect on how your income is taxed.
For Australian tax purposes, being a tax resident is not necessarily the same thing as being an Australian citizen or permanent resident.
You can be a foreign citizen and still be an Australian resident for tax purposes. Similarly, having an Australian visa does not automatically make you an Australian tax resident.
Your tax residency can affect:
- The tax rates that apply to your income
- Whether you receive the $18,200 tax-free threshold
- How your Australian income is reported
- Whether the Medicare Levy applies
- How some deductions and tax offsets are treated
At AU Finance Tools, we create free calculators and educational resources to help Australians understand tax and personal finance.
You can use our Tax Return Calculator to estimate your tax refund or tax payable.
What Is an Australian Tax Resident?
An Australian tax resident is someone who meets the relevant Australian tax residency rules.
The Australian Taxation Office (ATO) considers your individual circumstances when determining whether you are a resident for tax purposes.
Factors can include:
- How long you have been in Australia
- Your purpose and intention for being in Australia
- Your living arrangements
- Family and employment connections
- Whether you have established a home in Australia
- Other relevant circumstances
There is no single factor that automatically determines your tax residency.
What Is a Foreign Resident for Tax Purposes?
A person who does not meet the Australian tax residency tests may be treated as a foreign resident for Australian tax purposes.
You may still have Australian tax obligations even if you are a foreign resident.
For example, a foreign resident who earns Australian-sourced income may need to lodge an Australian tax return.
This means that being a foreign resident does not necessarily mean you do not pay Australian tax.
Australian Tax Resident vs Australian Citizen
Australian citizenship and tax residency are different concepts.
You can be:
- An Australian citizen and a foreign resident for tax purposes
- A foreign citizen and an Australian tax resident
- An Australian permanent resident and a foreign resident for tax purposes
- A temporary visa holder who is an Australian tax resident
For tax purposes, your circumstances and residency status matter rather than citizenship alone.
Australian Tax Resident vs Non-Resident Tax Rates
One of the biggest differences between residents and foreign residents is the way income tax rates are applied.
For the 2025–26 financial year, Australian residents generally have a tax-free threshold of:
$18,200
Resident income is then taxed progressively using the applicable resident tax rates.
Foreign residents generally do not receive the same tax-free threshold.
For foreign residents, different tax rates apply to taxable Australian income.
This means that two people earning the same amount in Australia can have different tax outcomes depending on their tax residency status.
Australian Resident Tax Rates 2025–26
For Australian residents for tax purposes, the 2025–26 income tax rates are:
| Taxable Income | Resident Tax Rate |
|---|---|
| $0 – $18,200 | Nil |
| $18,201 – $45,000 | 16% |
| $45,001 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
These rates are marginal tax rates.
They apply to different portions of your taxable income rather than your entire income being taxed at the highest rate.
Read our detailed guide:
Australian Tax Rates 2025–26: Income Tax Brackets Explained
Foreign Resident Tax Rates 2025–26
Foreign residents generally have different tax rates.
For the 2025–26 financial year, foreign residents are generally taxed at:
| Taxable Income | Foreign Resident Tax Rate |
|---|---|
| $0 – $135,000 | 30% |
| $135,001 – $190,000 | 37% |
| Over $190,000 | 45% |
Foreign residents generally do not receive the $18,200 tax-free threshold.
The tax treatment can be different for certain taxpayers, including Working Holiday Makers.
Example: Resident vs Foreign Resident
Suppose two people each have $60,000 of taxable Australian income.
One is an Australian tax resident and the other is a foreign resident.
Australian tax resident
The resident receives the benefit of the tax-free threshold and progressive tax rates.
The simplified income tax calculation is:
$26,800 × 16% = $4,288
$15,000 × 30% = $4,500
Total:
$8,788
Foreign resident
A foreign resident generally does not receive the $18,200 tax-free threshold.
At a 30% rate:
$60,000 × 30% = $18,000
This illustrates why determining your tax residency correctly is important.
These are simplified examples and do not include Medicare Levy, tax offsets, deductions or other adjustments.
How Does the ATO Determine Tax Residency?
Tax residency is determined based on your individual circumstances.
The ATO considers several factors when assessing whether you are an Australian resident for tax purposes.
These can include:
The Resides Test
The first question is generally whether you reside in Australia according to ordinary concepts.
Factors that may be relevant include:
- Your physical presence in Australia
- How long you have been here
- Your intention or purpose
- Your family and employment connections
- Your living arrangements
- The continuity of your presence
There is no simple rule that says spending a particular number of days in Australia automatically makes you a tax resident in every situation.
The Domicile Test
If you are not considered a resident under the ordinary concepts test, the domicile test may also be relevant.
Under this test, your domicile and whether your permanent place of abode is outside Australia can be considered.
Your domicile can be affected by factors such as your permanent home and legal circumstances.
The 183-Day Test
The 183-day test may apply to individuals who are in Australia for more than half of the income year.
However, spending more than 183 days in Australia does not automatically make everyone an Australian tax resident.
Other circumstances are considered when applying the test.
The Commonwealth Superannuation Test
A separate test can apply to certain Australian Government employees and their eligible spouses or children.
This test is generally relevant to specific Commonwealth superannuation circumstances rather than most taxpayers.
Why Visa Status Does Not Automatically Determine Tax Residency
Your visa and your tax residency are related to different legal concepts.
For example, holding a temporary visa does not automatically mean you are a foreign resident for tax purposes.
Likewise, being an Australian citizen does not automatically mean you are an Australian tax resident.
Your actual circumstances need to be considered.
What Happens to the Tax-Free Threshold?
This is one of the biggest practical differences between residents and foreign residents.
Australian tax residents
Most Australian residents can generally access the $18,200 tax-free threshold.
Foreign residents
Foreign residents generally do not receive the tax-free threshold.
This can result in a substantially different tax calculation.
What Happens to the Medicare Levy?
Tax residency can also affect the Medicare Levy.
Australian residents who meet the relevant requirements may generally be liable for the Medicare Levy.
The standard Medicare Levy is generally:
2% of taxable income
However, lower-income taxpayers may qualify for a reduction or exemption.
Foreign residents are generally not liable for the Medicare Levy.
There can be exceptions and special circumstances, so your Medicare Levy position should be considered separately from your income tax residency status.
Read more:
Medicare Levy 2% in Australia 2025–26: Who Pays It and How It’s Calculated
What About the Medicare Levy Surcharge?
The Medicare Levy Surcharge (MLS) is different from the Medicare Levy.
The MLS can apply to certain Australian taxpayers who:
- Have income above the relevant threshold
- Do not have an appropriate level of private hospital insurance
Tax residency can therefore affect how Medicare-related rules apply to you.
The Medicare Levy and Medicare Levy Surcharge should not be treated as the same charge.
Read our comparison:
Medicare Levy vs Medicare Levy Surcharge: What's the Difference?
What About Tax Deductions?
Australian tax residents and foreign residents may both have deductions available, but the rules can differ depending on the type of income and expense involved.
Foreign residents generally calculate their Australian tax position based on their Australian taxable income.
The tax treatment of income earned outside Australia can also depend on your residency status.
Read our guide:
Tax Deductions in Australia: What Can You Claim on Your Tax Return?
Australian Residents and Overseas Income
Australian tax residents generally need to declare their worldwide income on their Australian tax return.
This can include income earned from sources outside Australia.
Depending on the circumstances, foreign income tax offsets or other rules may apply where tax has already been paid overseas.
If you become or cease to be an Australian tax resident during the financial year, special rules can apply.
Foreign Residents and Australian Income
Foreign residents generally need to declare Australian-sourced income.
Examples can include:
- Australian employment income
- Australian rental income
- Certain investment income
- Other Australian-sourced income
The tax treatment depends on the type of income and your circumstances.
Foreign residents generally do not declare their worldwide income in the same way as Australian tax residents.
What Happens If You Become an Australian Tax Resident During the Year?
Your tax residency status can change during a financial year.
For example, you may arrive in Australia and initially be a foreign resident before becoming an Australian tax resident later.
In this situation, your tax return may need to account for the period before and after your residency status changed.
The rules can become complicated, particularly where you have foreign income, investments or assets.
What Happens If You Leave Australia?
Leaving Australia does not automatically mean you stop being an Australian tax resident on the day you depart.
Your circumstances need to be considered when determining whether you have ceased Australian tax residency.
Factors can include:
- Your intention to leave Australia
- Your new living arrangements
- Your family connections
- Your employment
- Whether you have established a permanent home overseas
- The strength of your ongoing connections with Australia
Working Holiday Makers
Working Holiday Makers can have special tax rules.
If you are in Australia on a Working Holiday Maker visa, you should not automatically assume that the standard Australian resident tax rates apply.
Working Holiday Makers may be taxed under special rules depending on their visa and circumstances.
This is one reason visa holders should check their specific tax treatment rather than relying solely on the standard resident versus foreign resident comparison.
Temporary Residents
Being a temporary resident does not automatically determine whether you are an Australian tax resident.
A person on a temporary visa can potentially be an Australian tax resident if they meet the relevant residency requirements.
Similarly, not every person living temporarily in Australia will necessarily be a tax resident.
Your actual circumstances matter.
Common Tax Residency Mistakes
Assuming Citizenship Determines Tax Residency
Australian citizenship does not automatically make you an Australian tax resident.
Tax residency is assessed separately.
Assuming Your Visa Determines Your Tax Residency
Your visa status can be relevant, but it does not by itself determine your tax residency.
Assuming 183 Days Automatically Makes You a Resident
The 183-day test is one of several residency tests.
The full circumstances need to be considered.
Assuming You Stop Being a Resident When You Leave Australia
Leaving Australia does not automatically end your tax residency.
Your circumstances after leaving Australia are also relevant.
Using the Wrong Tax Rates
Using resident tax rates when you are a foreign resident, or vice versa, can result in an incorrect tax calculation.
Frequently Asked Questions
Am I an Australian tax resident if I am not an Australian citizen?
Yes, it is possible.
Tax residency is separate from citizenship. A foreign citizen can be an Australian tax resident if they meet the relevant residency requirements.
Can an Australian citizen be a foreign resident for tax purposes?
Yes.
An Australian citizen who lives overseas and meets the relevant conditions may be treated as a foreign resident for Australian tax purposes.
Do foreign residents get the $18,200 tax-free threshold?
Generally, no.
Foreign residents generally do not receive the $18,200 tax-free threshold that applies to Australian residents.
Do foreign residents pay the Medicare Levy?
Foreign residents are generally not liable for the Medicare Levy, although individual circumstances can affect the outcome.
Does living in Australia for 183 days make me a tax resident?
Not necessarily.
The 183-day test is one of several tests used to determine Australian tax residency.
Do temporary visa holders pay Australian tax?
They may.
Your visa type and tax residency status can affect how your Australian income is taxed.
Working Holiday Makers can also be subject to special tax rules.
Do Australian tax residents have to declare overseas income?
Generally, yes.
Australian tax residents generally need to declare their worldwide income, although foreign income tax offsets and other rules may apply.
What happens if my tax residency changes during the year?
You may need to account for the period you were an Australian resident and the period you were a foreign resident separately.
Your tax return may require additional calculations depending on your circumstances.
Check Your Tax Position
Tax residency can have a significant impact on your Australian tax return.
Before calculating your tax, consider:
- Your residency status
- Your income
- Your deductions
- Your tax withheld
- Medicare Levy
- Medicare Levy Surcharge
- HECS-HELP or other study loan repayments
- Private health insurance
- Foreign income
- Other applicable circumstances
Use our Tax Return Calculator to estimate your tax refund or tax payable.
You can also read:
Australian Tax Rates 2025–26: Income Tax Brackets Explained
Tax Deductions in Australia: What Can You Claim on Your Tax Return?
Medicare Levy 2% in Australia 2025–26: Who Pays It and How It’s Calculated
Key Takeaways
- Australian tax residency is different from citizenship or visa status.
- Tax residents and foreign residents can be taxed differently.
- Australian residents generally receive the $18,200 tax-free threshold.
- Foreign residents generally do not receive the tax-free threshold.
- Foreign residents generally have different tax rates.
- Tax residency can affect your Medicare Levy position.
- Australian tax residents generally need to declare worldwide income.
- Foreign residents generally declare Australian-sourced income.
- Working Holiday Makers can be subject to special tax rules.
- Spending 183 days in Australia does not automatically determine tax residency in every situation.
- If your residency changes during the year, special rules may apply.
Information Sources
This guide is based primarily on publicly available information from the Australian Taxation Office (ATO) about Australian tax residency, resident and foreign resident tax rates, Medicare Levy and income tax obligations.
Tax residency depends on individual circumstances and the applicable rules can change over time. Always check the latest ATO guidance when preparing your tax return.
Disclaimer
This article provides general information only and should not be considered financial, tax, legal or professional advice.
Australian tax residency can be complex and depends on your individual circumstances. The examples in this article are simplified and may not reflect your actual tax position.
Always refer to the Australian Taxation Office (ATO) or a qualified tax professional if you need advice about your specific circumstances.