Australia taxes residents on worldwide income at progressive rates from 16% to 45%, plus a 2% Medicare levy. The 2024-25 Stage 3 tax cuts restructured the brackets significantly. Temporary residents — on certain visa classes — pay tax only on Australian-sourced income, not worldwide. Non-residents pay 32.5% on the first $135,000 of Australian income with no tax-free threshold. Working Holiday Makers pay 15% on the first $45,000.
At a glance
Key Facts
Resident Top Rate
45% on income above $190,000 AUD + 2% Medicare levy
Tax-Free Threshold
$18,200 AUD (residents only; non-residents get none)
Non-Resident Rate
32.5% from first dollar to $135,000 AUD
Working Holiday Maker
15% on first $45,000 AUD; then non-resident rates
Medicare Levy
2% of taxable income (residents only)
Tax Year
July 1 to June 30 (Australian financial year)
Official Authority
Australian Taxation Office (ATO)
Introduction
Australia's tax system for expats is more nuanced than the headline rates suggest. Your status — tax resident, temporary resident, or non-resident — determines what income is taxed, at what rates, and with what concessions. The Australian Taxation Office (ATO) uses multiple tests to determine residency, and getting this wrong can be costly.
This guide explains Australia's three residency categories for expats, the restructured 2025-26 income tax rates following the Stage 3 cuts, the Medicare levy and private health insurance implications, Working Holiday Maker rates, and what US citizens in Australia must file.
Section 01
The Three Residency Categories and Why They Matter
According to the Australian Taxation Office (ATO), your tax treatment in Australia depends fundamentally on which of three residency categories you fall into:
1. Australian Tax Resident
Taxed on worldwide income. Entitled to the tax-free threshold ($18,200). Pays Medicare levy. Progressive rates apply from 16% to 45%.
2. Temporary Resident
A specific ATO category for holders of temporary visas (excluding permanent partners). Taxed only on Australian-sourced income — foreign income is generally exempt. Foreign capital gains are also generally exempt. This is a significant benefit for expats on temporary working visas maintaining foreign income streams.
3. Non-Resident
Taxed only on Australian-sourced income at non-resident rates: 32.5% from the first dollar to $135,000, 37% from $135,001–$190,000, 45% above $190,000. No tax-free threshold. No Medicare levy.
Residency Tests
The ATO uses four tests to determine resident status:
Resides test: Do you actually reside in Australia? (The primary test — facts-based)
Domicile test: Australia is your domicile (place of origin) unless your permanent place of abode is established overseas
183-day test: Present in Australia for more than half of the income year unless domicile is elsewhere and usual place of abode is not in Australia
Superannuation fund test: For government employees only
Section 02
2025-26 Income Tax Rates: Post Stage 3
Australia's income tax rates were significantly restructured by the Stage 3 tax cuts, which took effect from July 1, 2024. The 2025-26 rates for Australian residents are:
Taxable Income (AUD)
Tax Rate
$0–$18,200
Nil (tax-free threshold)
$18,201–$45,000
16%
$45,001–$135,000
30%
$135,001–$190,000
37%
Above $190,000
45%
Plus the 2% Medicare levy on all taxable income (subject to low-income exemption below ~$26,000).
The Stage 3 cuts notably reduced the rate on the $45,001–$135,000 band from 32.5% to 30%, and raised the threshold for the 37% rate. Middle-income earners saw the largest benefit.
Non-Resident Tax Rates
Taxable Income (AUD)
Tax Rate
$0–$135,000
32.5%
$135,001–$190,000
37%
Above $190,000
45%
Section 03
Working Holiday Makers: The 15% Rate
Holders of a Working Holiday visa (417) or Work and Holiday visa (462) are taxed as Working Holiday Makers (WHM), not as regular residents or non-residents. The WHM rates are:
Taxable Income (AUD)
WHM Rate
$0–$45,000
15%
Above $45,000
Standard non-resident rates apply
WHMs do not receive the tax-free threshold and do not pay the Medicare levy. The 15% rate applies from dollar one — it is a flat rate, not a marginal rate.
WHMs can claim tax back on superannuation contributions (DASP — Departing Australia Superannuation Payment) when they leave Australia permanently — but at a 65% withholding rate, significantly reducing what is returned. See the Australia Working Holiday Tax guide for the full picture.
Section 04
Medicare Levy and Private Health Insurance
Australian tax residents pay a 2% Medicare levy on all taxable income. This funds the Medicare public health system. The levy applies above ~$26,000 income (low-income exemption available).
Medicare Levy Surcharge (MLS)
If your income exceeds $93,000 (singles) or $186,000 (families) and you do not hold appropriate private hospital insurance, an additional Medicare Levy Surcharge of 1%–1.5% applies. Taking out a private hospital policy (typically $1,000–$2,500/year) avoids this surcharge and is cost-effective above the threshold.
Lifetime Health Cover Loading
If you take out private hospital cover after your 31st birthday, a 2% loading is added for each year after 30, up to a maximum of 70%. Expats arriving in Australia for the first time are exempt for 12 months — sign up promptly to lock in a clean rate.
Section 05
Superannuation: Australia's Mandatory Pension System
All Australian employees are entitled to Superannuation (super) — mandatory employer retirement contributions. The 2025-26 Superannuation Guarantee rate is 12% of ordinary time earnings (effective 1 July 2025). This is an employer-paid contribution on top of your salary, deposited into your choice of super fund.
Key points for expats:
Super contributions are made on your behalf and generally locked in until age 60 (preservation age)
When you permanently leave Australia on a temporary visa, you can claim your super back via DASP (Departing Australia Superannuation Payment) — but 65% tax is withheld on the payment
If you are a genuine permanent resident or citizen, super is a significant long-term wealth accumulation tool
Contributions from your own income (concessional contributions) are taxed at 15% within the fund — far lower than your marginal rate for high earners
Section 06
US Citizens in Australia
US citizens in Australia must file US federal tax returns annually. Australia's tax rates are generally similar to or higher than US rates, meaning the Foreign Tax Credit often eliminates most US tax on Australian employment income — but filing remains mandatory.
Form 1040: Required annually for all US citizens regardless of Australian residency
Foreign Tax Credit: Australian income taxes typically generate sufficient FTC to offset US liability
Temporary resident exemption: If you qualify as an Australian temporary resident (foreign income exempt in Australia), you may owe US tax on that foreign income without FTC to offset it — FEIE may be more appropriate
FBAR: Required if Australian bank accounts exceed $10,000 aggregate at any point
Australia-US Tax Treaty: Prevents most double taxation; super funds are addressed in the treaty's pension provisions
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What is the difference between a tax resident and temporary resident in Australia?
An Australian tax resident is taxed on worldwide income. An Australian temporary resident (certain visa holders) is taxed only on Australian-sourced income — foreign income and most foreign capital gains are exempt. Non-residents are also taxed only on Australian-sourced income but at higher flat rates (32.5% from dollar one) with no tax-free threshold. Your visa type significantly affects which category you fall into.
Q
What are the Australian income tax rates for 2025-26?
Post Stage 3 cuts: 0% on $0–$18,200 (tax-free threshold), 16% on $18,201–$45,000, 30% on $45,001–$135,000, 37% on $135,001–$190,000, and 45% above $190,000. Add the 2% Medicare levy for residents. Non-residents pay 32.5% from dollar one to $135,000 (no tax-free threshold).
Q
How much tax do Working Holiday Makers pay in Australia?
Working Holiday Makers (visa 417 or 462) pay 15% on the first $45,000 of Australian income, then non-resident rates above that. There is no tax-free threshold. When leaving Australia permanently, WHMs can claim back their employer's superannuation contributions via DASP, but 65% is withheld as tax on that payment.
Q
What is the Medicare levy and does it apply to expats?
The Medicare levy is 2% of taxable income, funding Australia's public healthcare system. It applies to Australian tax residents (not non-residents or temporary residents). An additional Medicare Levy Surcharge (1%–1.5%) applies to residents earning above $93,000 who don't hold private hospital insurance. Taking out a basic private hospital policy is typically more cost-effective than paying the surcharge.
Q
Can I claim my Australian superannuation when I leave?
Yes, if you held a temporary visa and are leaving Australia permanently. You can claim your superannuation via the Departing Australia Superannuation Payment (DASP) after your visa expires or you depart. However, 65% tax is withheld on WHM-related super payments and 35% on other temporary residents. Permanent residents and citizens cannot access super until age 60 under preservation rules.
Q
When is the Australian tax return due?
Australia's financial year runs July 1 to June 30. Tax returns are due October 31. If you use a registered tax agent, the deadline is extended to May 15 of the following year. PAYG (Pay As You Go) withholding by employers means most salaried employees have tax roughly withheld during the year — the return reconciles the final amount owed or refundable.
Q
Do US citizens in Australia still file US taxes?
Yes. US citizens file annual US federal tax returns regardless of Australian residency. The Australia-US tax treaty and Foreign Tax Credit generally prevent double taxation on employment income. If you are an Australian temporary resident with foreign income that is exempt from Australian tax, that same income may be subject to US tax without FTC protection — FEIE may be more appropriate. Consult a US expat specialist.
Disclaimer:This guide provides general information about Australian taxation for expats for educational purposes only. Tax rules change frequently and individual circumstances vary significantly. Always verify current rates with the Australian Taxation Office (ATO) or a qualified Australian tax adviser. This is not tax advice.