If you've just moved to Australia, your tax residency decides how much of your income Australia can tax and which rates apply. Residents are taxed on their worldwide income but get the tax-free threshold and resident rates. Foreign residents are taxed only on Australian income, at higher rates from the first dollar. Many newcomers on temporary visas sit in between as temporary residents.
You don't apply to become a tax resident. Your status follows from your circumstances, worked out under the residency tests in the tax law. This guide explains how those tests apply when you're new to Australia, what changes in your first tax return, and the practical steps to take when you arrive.
The four residency tests
The ATO's ruling TR 2023/1 sets out four alternative tests. You're an Australian resident for tax purposes if you meet any one of them:
- Resides test: whether you reside in Australia in the ordinary sense of the word, looking at things like your intention or purpose in being here, where your family and belongings are, your work and your social and living arrangements. This is the main test.
- Domicile test: you're a resident if your domicile (your legal permanent home) is Australia, unless the Commissioner is satisfied your permanent place of abode is outside Australia. It mostly matters for Australians who move overseas.
- 183-day test: you're a resident if you're in Australia for 183 days or more in an income year, unless the Commissioner is satisfied your usual place of abode is overseas and you don't intend to take up residence here.
- Commonwealth superannuation fund test: applies to Australian government employees posted overseas who are members of the PSS or CSS schemes (and their spouses and children under 16). It rarely affects newcomers.
For most people who move here to live, the resides test is the one that counts. If you arrive intending to settle, or to live and work here for a substantial period, you'll usually be a resident from the day you arrive, not from the 183rd day. The 183-day test catches people who stay a long time without otherwise residing here, but it doesn't make an extended holiday-maker a resident if their usual home is overseas.
Some common newcomer situations:
- Permanent migrants: generally residents from the day they arrive.
- Temporary skilled visa holders who come to live and work here: usually residents, and often also temporary residents (see below).
- Overseas students enrolled in a course of more than six months: generally residents.
- Visitors on holiday: generally not residents, even if they stay a while.
- Working holiday makers: may or may not be residents, but are taxed under special working holiday maker rates either way.
For a closer look at each test, see our guide to the Australian tax residency test. The ATO also has an online tool to work out your residency status.
Proposed new residency rules are not law. The 2021–22 Budget announced a simpler test (a primary 183-day bright-line test with secondary tests for shorter stays), and Treasury consulted on it in 2023. It hasn't been legislated, so the four tests above still apply.
Your first year: the part-year tax-free threshold
If you become a resident part way through the income year, you don't get the full $18,200 tax-free threshold. Instead, your threshold is:
$13,464 + ($4,736 × the number of months you were a resident ÷ 12)
The months count includes the month you arrived. For the part of the year before you became a resident, you're taxed as a foreign resident on any Australian income only. Income you earned overseas before you became a resident isn't taxed in Australia.
Example (2025–26): Priya arrives on 15 January 2026 on a permanent skilled visa and starts work in Sydney. She's a resident for six months (January to June), so her tax-free threshold is $13,464 + ($4,736 × 6 ÷ 12) = $15,832. She earns $60,000 in Australia by 30 June 2026. Using the 2025–26 rates, her tax before offsets and the Medicare levy is:
- 16% of the income between $15,832 and $45,000: 16% × $29,168 = $4,666.88
- 30% of the income between $45,000 and $60,000: 30% × $15,000 = $4,500
- Total: $9,166.88, compared with $8,788 for someone who was a resident all year, a difference of $378.88
Example (2026–27): Someone who arrives to live here in October 2026 is a resident for nine months of 2026–27, so their threshold is $13,464 + ($4,736 × 9 ÷ 12) = $17,016. On $70,000 of income, the tax before offsets and the Medicare levy at the 2026–27 rates is 15% × $27,984 = $4,197.60, plus 30% × $25,000 = $7,500, a total of $11,697.60.
Tax rates for residents and foreign residents
Once you're a resident, you pay tax at the same rates as everyone else:
- 2025–26: $0 to $18,200 nil; 16% to $45,000; 30% to $135,000; 37% to $190,000; 45% above $190,000
- 2026–27: the same, except the 16% rate drops to 15% from 1 July 2026
Residents also pay the Medicare levy of 2% (subject to the Medicare entitlement rules below) and can claim resident tax offsets such as the low income tax offset.
If you're not a resident, there's no tax-free threshold and no Medicare levy. Foreign residents pay 30% on Australian taxable income up to $135,000, 37% to $190,000 and 45% above, in both 2025–26 and 2026–27. See our page on non-resident tax rates for more.
Temporary residents: most foreign income isn't taxed
Many people who come here on a temporary visa are residents for tax purposes but are also temporary residents. You're a temporary resident if you hold a temporary visa, you're not an Australian resident under the Social Security Act 1991 (citizens and permanent visa holders are), and your spouse (if you have one) isn't either.
As a temporary resident who is a tax resident, you get resident tax rates and the tax-free threshold, but:
- most of your foreign income isn't taxed in Australia and doesn't go in your tax return. The main exception is income from employment or services performed overseas while you're a temporary resident.
- you only pay capital gains tax on taxable Australian property, such as real estate in Australia. A gain on selling your house or shares back home is generally not taxed here.
- you're generally not entitled to the full 50% CGT discount on Australian property for gains after 8 May 2012.
If you later become a permanent resident or citizen, you stop being a temporary resident. From then on your worldwide income is taxed, and your overseas assets (other than employee share scheme interests) are treated as acquired at their market value on that date, so only later growth is taxed when you sell.
Working holiday makers
If you're on a working holiday visa (subclass 417 or 462), your working holiday income is taxed at 15% on the first $45,000, then at 30% to $135,000, 37% to $190,000 and 45% above. There's no tax-free threshold. These rates apply in 2025–26 and 2026–27, whether or not you're a resident.
Example: a working holiday maker who earns $50,000 pays 15% × $45,000 = $6,750, plus 30% × $5,000 = $1,500, a total of $8,250.
Employers must register with the ATO as an employer of working holiday makers to withhold at 15%. If your employer isn't registered, more tax will be withheld from your pay, and any excess is refunded when you lodge your return. If you're a resident for tax purposes and a national of Chile, Finland, Germany, Israel, Japan, Norway, Turkey or the United Kingdom, a tax treaty (following the High Court's 2021 decision in Addy) means you may be taxed as a resident Australian would be, if that's lower. Our working holiday visa tax return guide covers this in more detail.
Getting set up: TFN, bank accounts and super
- Apply for a tax file number (TFN): if your visa gives you work rights, you can apply online for free through the ATO once you're in Australia. You'll usually get your TFN straight away, but it can take up to 28 days.
- Give your TFN to your employer: complete a TFN declaration and tell your employer whether you're a resident for tax purposes. Without a TFN, your employer must withhold tax at the top rate (47% for residents, 45% for foreign residents).
- Give your TFN to your bank: otherwise tax is withheld from your interest at the top rate. Also tell the bank you're a resident, so it doesn't treat you as a foreign resident and withhold 10% from your interest.
- Super: your employer must pay super for you, at 12% of your ordinary earnings, even if you're on a temporary visa. If you leave Australia for good on a temporary visa, you can claim your super as a departing Australia superannuation payment (DASP), which is generally taxed at 35% on the taxed element (65% if you've held a working holiday visa).
If you've lost track of your TFN, see how to find your lost tax file number.
Medicare and the Medicare levy
Residents generally pay the 2% Medicare levy. Whether you're entitled to Medicare depends on your visa, not your tax residency. Permanent visa holders are generally entitled to Medicare. Some temporary visa holders have limited access under a reciprocal health care agreement with their home country.
If you're a resident for tax purposes but not entitled to Medicare, you can claim an exemption from the Medicare levy for the days you weren't entitled. To claim it, apply to Services Australia for a Medicare Entitlement Statement and wait until you have it before you lodge your tax return. You need a new statement for each year you claim. You can't claim the exemption if a dependant (such as your spouse) was entitled to Medicare. Our guide to the Medicare levy exemption form explains the process.
Foreign income and the foreign income tax offset
Once you're a resident (and not a temporary resident), you must declare your worldwide income from the date you became a resident: overseas salary, interest, dividends, rent, pensions and capital gains. If you've paid foreign tax on that income, you can generally claim a foreign income tax offset (FITO) so the same income isn't taxed twice. You can claim up to $1,000 of foreign tax without working out the offset limit; above that you need to calculate the limit, and any foreign tax above it is lost.
Australia has tax treaties with more than 40 countries. If you're a resident of both Australia and a treaty country under each country's own rules, the treaty's tie-breaker rules decide where you're treated as resident for treaty purposes, generally looking at where your permanent home is, then your personal and economic ties, then your habitual abode and then your nationality. See our guide to double tax agreements.
Capital gains tax when you become a resident
When you become a resident (and aren't a temporary resident), most of your overseas assets, such as shares and property back home, are treated as acquired at their market value on the day you became a resident. Only growth after that date is taxed in Australia when you sell. Australian real estate you already owned keeps its original cost base. Get a valuation or keep records of market values on your arrival date.
The CGT rules are also changing. From 1 July 2027, the 50% CGT discount will be replaced by cost-base indexation and a 30% minimum tax for gains accruing from that date. Our guide to the 2027 negative gearing and CGT changes explains what this means.
Frequently asked questions
Do I need to apply to become an Australian tax resident?
No. There's no application or registration. Your status depends on whether you meet one of the residency tests, and you state it on your TFN declaration and in your tax return. If your situation is unclear, the ATO's residency tool or a tax agent can help you work it out.
Am I a resident from the day I arrive or after 183 days?
If you've come to live here, you'll usually be a resident under the resides test from the day you arrive. The 183-day test is a separate test; you don't have to wait 183 days to become a resident.
Do I declare income I earned overseas before I moved?
No. Overseas income you earned before you became a resident isn't taxed in Australia. From the date you become a resident, you declare your worldwide income, unless you're a temporary resident, in which case most foreign income is exempt.
Can I claim the full $18,200 tax-free threshold in my first year?
Not if you became a resident part way through the year. You get $13,464 plus a share of $4,736 based on the months you were a resident, including the month you arrived.
What if I move overseas again later?
Leaving Australia doesn't automatically end your residency. It depends on your circumstances, such as how long you'll be away and whether you keep a home here. Our guide to tax for expats covers the rules for people moving overseas.
Sources: ATO, Residency tests; ATO, TR 2023/1; ATO, Tax-free threshold for newcomers to Australia; ATO, Foreign and temporary residents; ATO, Working holiday makers; Services Australia, Medicare Entitlement Statement; Treasury, Modernising the individual tax residency rules.
Need help with your first Australian tax return?
Your first year in Australia often involves a part-year threshold, overseas income and a Medicare levy question all at once. Our tax agents can confirm your residency status and prepare your return. Contact AWTS, call 0488 854 200 or book an appointment.
