Expat Tax in Australia—Rules and Tax Implications for Returning Expats

In this guide, we’ll provide all the information about expat tax in Australia to simplify repatriation. We’ll outline the taxes you must pay, the rules you must follow, and the tax advice you can use to reduce taxes and preserve wealth.

Do Australian Expats Have To Pay Tax?

The short answer is yes—Australian expats must pay taxes in Australia, but the amount you pay depends on your residency status. Typically, expats considered Australian tax residents pay taxes on worldwide income and gains. Meanwhile, tax non-residents only pay taxes on Australian-sourced income and gains.

Australian Taxation Office (ATO) uses four tests to determine whether you’re an Australian resident for tax purposes:

1. Resides test.
2. Domicile test.
3. 183-day test.
4. The Commonwealth Superannuation test.

Resides Test

The resides test considers your overall behaviour in Australia. You may be considered an AU resident if your everyday activities are similar to your behaviour before arriving in Australia. The test specifically takes the following factors into account:

1. Physical presence in Australia: Generally, if you’re present in Australia for over six months, you may be considered an AU resident. However, since the test considers your behaviour in AU, like routine and a degree of continuity while residing in AU, you can become a resident in less or more than six months.
2. Social and living arrangements: This part of the test looks at your ordinary course of life, which includes playing sports in a local competition, redirecting mail to AU, or being a member of a local community club. If you do all this in AU, you may be an AU resident.
3. Maintenance and location of your assets: If AU is the country where you organise your financial affairs and keep assets like a house or motor vehicles, you could be an AU tax resident.
4. Family and business/employment ties: If your family resides in AU, or you are employed or have a business in AU, you may be considered an AU resident.

Still, neither one of these factors can determine your residency on its own. Instead, your residency will be determined by considering and interrelating all the relevant factors.

Domicile Test

The domicile test considers whether Australia is your domicile—your permanent home by choice, by operation of law, or by origin.

While you can be a resident of more than one country, your domicile can only be in one country. Generally, if you have always lived in AU, you’ll be an AU-domiciled expat unless you decide to migrate abroad permanently.

If you’ve lived overseas for a long time and that country became your permanent place of abode, you may lose your AU domicile status. While there are no strict rules which determine your permanent place of abode, some factors Australian authorities consider include:

• The intention, length, and continuity of your stay abroad.
• The existence of a home abroad and a residence in AU while abroad.
• Financial and family ties with AU.

If the permanent place of abode test proves you don’t have a permanent home outside of AU, and you’ve previously been AU-domiciled, you’ll keep your domicile status.

183-Day Test

The 183-day test determines your tax residency by considering the number of days you spend in AU. If the test shows you’ve been in Australia for over half of the income year, intermittently or continuously, you’ll be an Australian tax resident. However, this doesn’t apply if you don’t intend to take up residence in AU and your usual place of abode is outside AU.

Your usual place of abode isn’t the same as your permanent place of abode. Rather, it’s a place you commonly use when physically present in the country. It has attributes of a place of residence but doesn’t have to be fixed.

Every day you spend in AU during an income year—from July 1 to June 30 of the following year—counts for the purposes of the 183-day test, including the day you arrive and leave AU.

The Commonwealth Superannuation Test

According to the Commonwealth Superannuation test, you’re considered an Australian tax resident if you or your spouse are contributing members of the Public Sector Superannuation Scheme (PSS) or the Commonwealth Superannuation Scheme (CSS).

If this applies to you, your spouse and children under 16 will also be AU residents for income tax purposes. Your spouse is either a person you have a registered relationship with under prescribed state or territory law or someone you’re not legally married to but live with on a genuine domestic basis.

If you don’t satisfy any of these tests, you’re not a tax resident in Australia.

Expats Returning to Australia—Tax Implications

Once you return to Australia, you’ll likely become a tax resident if you stay there for over half of the tax year. In this case, you must report your worldwide income and earnings from overseas investments. Here’s how expat tax obligations differ depending on your residency status:

To ensure you determine your residency status and tax obligations correctly, tax experts at Titan Wealth International offer repatriation and tax planning services. Getting professional tax advice will help you avoid potential tax penalties upon your return and maximise wealth growth as you establish yourself in Australia.

What Is Income Tax in Australia for Expats?

As an expat considered a tax resident in Australia, you have to pay income tax on global income, including wages, salaries, investment income, and rental income. However, your tax rates are lower than tax non-residents’ rates, and you benefit from a tax-free threshold of AUD18,200.

The taxes you must pay as an AU tax resident based on your income in the tax year 2024–2025, according to the new expat tax rules in Australia, include:

If you’re considered a non-resident for tax purposes, the tax amount you must pay in the tax year 2024–2025 on AU-sourced income is:

1. 30% for taxable income of 0–AUD135,000
2. 37% for taxable income of AUD135,001–AUD190,000
3. 45% for taxable income of over AUD190,000

Unlike tax residents, non-residents have no tax-free threshold of AUD18,200.

What Is Capital Gains Tax for Expats in Australia?

AU tax residents are liable for CGT on the worldwide gains realised upon selling capital assets acquired after September 20 1985, including:

• Real estate like investment property and land.
• Business assets like equipment and premises.
• Shares and investments like stocks and managed funds.
• Intellectual property like copyrights and trademarks.
• Collectables like art and antiques.
• Foreign assets if you’re an AU tax resident.

When you sell an asset, the capital gain is added to your income and taxed at your marginal income rate. However, if you hold an asset in Australia for a minimum of 12 months before disposing of it, only 50% of your capital gain is subject to tax.

Your main place of residence is exempt from tax if it has been you and your family’s primary dwelling place while you owned the property. Likewise, any assets in AU acquired before September 19, 1985, are typically exempt from CGT.

Non-residents and temporary residents are only taxed on gains made after disposing of taxable AU property (TAP). Some assets considered TAP include:

• AU real property.
• A business asset permanently established in AU.
• An indirect interest in AU real property.

The 50% CGT discount used to apply to non-residents and temporary residents until May 8, 2012. If any temporary or non-residents derived capital gains on or after that date, they may have a reduced ability to claim the discount.

What Is the Medicare Levy Tax for Expats in Australia?

If you’re an AU tax resident, you’ll have to pay Medicare Levy, which is 2% of your taxable income.

High-income expat residents without private health insurance have to pay an additional 1–1.5% Medicare Levy surcharge. The supercharge is also applicable if you’re a high-income expat whose hospital insurance has an excess payment of:

1. Over AUD750 for single expats.
2. Over AUD1,500 for couples or families.

If you’re a low-income earner according to ATO rules, you may be eligible for Medicare Levy relief.

Australian Tax Rules for Expats—Tax Planning Strategies For Returning Expats

Besides tax-paying responsibilities, expats returning to Australia may have certain tax reliefs and pension planning opportunities, but these come with strict rules. To minimise tax liabilities and help you save more money for the future and retirement, you should consider the rules regarding:

1. Tax treaties and offsets.
2. Superannuation pensions.
3. Consolidating assets into an insurance policy.

Tax Treaties and Offsets

If you return to Australia but still earn foreign income, a Double Taxation Agreement (DTA) ensures you’re not taxed on the same income twice. Australia has a tax treaty with over 40 countries, including the UK, the US, Canada, and Singapore.

According to the DTA, you typically pay taxes in a country where you’re considered a tax resident. If you’re a dual citizen, a “tie-breaker” test determines where you pay taxes by deciding in which of the two jurisdictions you’re a tax resident.

Aside from a DTA, you may also qualify for a Foreign Income Tax Offset (FITO). You can claim a FITO against foreign tax paid abroad if:

1. You’ve actually paid an amount of foreign income tax.
2. You’ve included that amount in your assessable income or your non-assessable non-exempt (NANE) income.

Superannuation Pensions

When you return to Australia, make sure you report any foreign pension funds you have accumulated while living abroad. To improve tax planning, you may also consider transferring your pension from an overseas pension scheme (if you had one) to the Australian super fund.

Here’s how this superannuation system works:

• It requires employers to contribute a current rate of 11.5% of their employees’ income to the super fund on the employees’ behalf.
• This is compulsory under the superannuation guarantee system, and contributions made to the super fund in this way are exempt from marginal income tax.
• The contributions are only subject to a 15% contribution tax or higher for high-income earners.

Since superannuation contributions aren’t subject to income tax, you can use this pension scheme as a tax-efficient planning tool. Any earnings made within the super fund are taxed at a concessional rate of 15% for income and 10% for capital gains. You can access your pension tax-free up to a certain amount once you turn 60.

Consolidating Assets into an Insurance Policy for Tax Efficiency

One effective tax planning strategy for returning Australian expats is consolidating assets into an insurance bond, which falls under Australia’s 10-year rule. This approach can provide significant tax advantages, including:

1. Tax-free withdrawals after 10 years – Earnings within the bond are taxed at a maximum of 30% internally, but after 10 years, all withdrawals are completely tax-free, with no additional income tax liability.
2. No Capital Gains Tax – Unlike direct investments, where selling assets triggers CGT, an insurance bond allows for tax-efficient growth without triggering taxable capital gains.
3. Income tax-free status – After the 10-year period, withdrawals do not count as assessable income, ensuring tax efficiency and minimising the impact on other tax obligations or government entitlements.

For expats planning to return to Australia, structuring investments into an insurance bond before moving back can create a tax-efficient vehicle for long-term wealth preservation.

Titan Wealth International can assist in setting up an insurance bond strategy tailored to your financial goals, helping you optimise tax efficiency once you return to Australia.

Plan Your Return to Australia, Tax-Efficiently

Repatriating to Australia comes with complex tax implications. Without careful planning, you could face unexpected tax liabilities on your global income, assets, and investments. Titan Wealth international’s tax specialists help Australian expats navigate these challenges, setting you up for a stree-free return home.

We’re here to provide expert guidance on:

• Residency & tax status assessment: Know your tax obligations before you move back to avoid surprises.
• Wealth & asset structuring: Minimise capital gains tax and protect your investments for the long term.
• Superannuation & pension planning: Optimise contributions and transfers to maximise tax efficiency.
• Double tax treaty & offset review: Ensure you avoid unnecessary double taxation on foreign income.
• Insurance bond strategies: Take advantage of Australia’s 10-year rule for tax-free investment growth.