Non-Resident Income Tax in Australia

If you are a non-resident of Australia, you may still be liable to pay income tax on your Australian-sourced income. The amount of tax you owe will depend on your residency status, the type of income you earn, and your country of residence.

Understanding the rules and regulations surrounding non-resident income tax is crucial to ensure compliance with Australian tax laws.

In this guide, we will provide you with valuable insights and information to help you navigate non-resident income tax in Australia effectively and meet your tax obligations.

How is Non-Resident Income Tax Determined in Australia?

Non-resident income tax in Australia is determined based on several factors. Here’s an overview of how it is determined:

Residency Status

The first step in determining non-resident income tax is establishing your residency status. The Australian Taxation Office (ATO) uses specific criteria to determine residency, taking into account factors such as the duration of your stay in Australia, your intentions, and your ties to the country.

Non-residents are generally individuals who do not meet the criteria to be considered Australian residents for tax purposes.

Australian-Sourced Income

As a non-resident, you are generally taxed on your Australian-sourced income. This includes income earned from employment or business conducted in Australia, rental income from Australian properties, interest and dividends derived from Australian sources, and capital gains on certain Australian assets.

Tax Rates and Thresholds

Non-resident individuals are subject to different tax rates and thresholds compared to Australian residents. The tax rates for non-residents are generally higher, and they do not have access to certain tax offsets and benefits available to residents.

It is important to consult the ATO or a tax professional to determine the applicable tax rates and thresholds based on your specific circumstances.

Double Taxation Treaties

Australia has entered into double taxation agreements (DTAs) with many countries to avoid double taxation for non-residents. These agreements generally aim to allocate taxing rights between Australia and the country of residence, providing relief or exemptions in certain cases.

It is essential to consider any applicable tax treaties and seek professional advice to ensure you are not subject to double taxation.

Reporting and Lodgment

Non-residents are required to report their Australian-sourced income and lodge an Australian tax return, specifically the Non-Resident Tax Return (NAT 2). It is important to accurately report your income and comply with lodgment requirements within the specified deadlines.

Deductions and Concessions for Non-Residents

While non-residents in Australia have different tax obligations compared to residents, they may still be eligible for certain deductions and concessions. Here are some common deductions and concessions that non-residents may be entitled to:

Foreign Income Tax Offset: Non-residents who pay tax on their foreign-sourced income in another country may be eligible for a Foreign Income Tax Offset (FITO). This offset helps avoid double taxation by reducing the Australian tax payable on the same income.
Medicare Levy Surcharge: Non-residents are generally not liable to pay the Medicare Levy, which helps fund Australia’s healthcare system. However, if you are a non-resident and have Australian-sourced income above a certain threshold, you may be subject to the Medicare Levy Surcharge.
Low Income Tax Offset: The Low Income Tax Offset (LITO) is a tax offset that reduces the amount of tax payable for low-income earners. Non-residents who meet the eligibility criteria may be able to claim the LITO, subject to certain income thresholds and residency requirements.
Tax Offset for Low and Middle-Income Earners: Non-residents who fall within the low and middle-income brackets may be eligible for the Tax Offset for Low and Middle-Income Earners. This offset provides additional tax relief for individuals with taxable incomes within a specified range.

Filing Requirements as a Non-Resident

Non-residents who earn Australian-sourced income are indeed required to file an income tax return with the Australian Taxation Office (ATO). Here are the filing requirements for non-residents in Australia:

Lodging an Income Tax Return: Non-residents with Australian-sourced income must lodge an income tax return with the ATO. This includes reporting income from employment, business activities, rental properties, interest, dividends, and capital gains derived from Australian sources.
Tax Return Deadline: The deadline for lodging your tax return as a non-resident is typically 31 October each year. It is important to meet this deadline to ensure timely compliance with your tax obligations.
Tax File Number (TFN): Non-residents are generally required to obtain a Tax File Number (TFN) before lodging their tax return. The TFN uniquely identifies you for taxation purposes in Australia. If you don’t have a TFN, you can apply for one through the ATO.
Online Lodgment: The ATO encourages non-residents to lodge their tax returns online using the myTax or e-tax platforms. These online services simplify the lodgment process, provide pre-filled data (if applicable), and offer a secure platform for submission.
Engaging with a Registered Tax Agent: While it is possible to lodge your own tax return as a non-resident, you may also consider engaging a registered tax agent or accountant experienced in non-resident taxation. They can provide expert advice, assist with completing your tax return accurately, and help maximise any eligible deductions or offsets.

Getting Help

If you find yourself unsure about your tax obligations as a non-resident, seeking professional advice from an experienced accountant or tax advisor is highly recommended. They can provide personalised guidance, help you understand your specific tax situation, optimise your tax position, and ensure that you meet your tax obligations accurately and efficiently.

Speak with our expat tax experts at Odin Tax today! With our expertise, you can navigate the intricacies of non-resident income tax in Australia with confidence and peace of mind.

Frequently Asked Questions

What is the difference between a resident and a non-resident for tax purposes?

The ATO uses a number of factors to determine your residency status, including the number of days you spend in Australia each year, your intention to live in Australia permanently, and your business or professional interests in Australia. If you are considered a resident of Australia, you will be liable to pay tax on all of your income, regardless of where it is earned.

However, if you are considered a non-resident, you will only be liable to pay tax on your Australian-sourced income.

What is Australian-sourced income?

Australian-sourced income includes income that is derived from sources within Australia, such as wages, salaries, pensions, business profits, rental income, and interest income. Income that is derived from sources outside of Australia, such as dividends, capital gains, and foreign-sourced interest income, is not considered Australian-sourced income.

What are the tax rates for non-residents?

The tax rates for non-residents are the same as the tax rates for residents. However, non-residents may be eligible for a number of deductions and concessions, such as the foreign income tax offset.