Two things define it. Australia taxes you on Australian-source income only, and it does so from the first dollar. A third, less known, is that a whole category of your Australian income never appears in a return at all.
Section 6-5(3) of the ITAA 1997 includes in a foreign resident's assessable income the ordinary income derived "from all Australian sources", plus anything a specific provision brings in on some other basis. Your salary abroad, your rent abroad, your overseas interest — none of it is Australia's business. Compare s 6-5(2), which puts a resident's worldwide income in scope.
| Taxable income | Rate | Tax at top of bracket |
|---|---|---|
| $0 – $135,000 | 30% | $40,500 |
| $135,001 – $190,000 | 37% | $60,850 |
| Over $190,000 | 45% | — |
A quirk worth knowing: Schedule 7 Part II of the Income Tax Rates Act 1986 does not state 30% and 37% as numbers. It says the first bracket is taxed at "the second resident personal tax rate" and the second at the third. The foreign resident table is pinned to the resident one.
That is why the resident cuts of recent years passed foreign residents by — they changed the first resident bracket, which foreign residents never touch. It also means that if a future budget moves the second resident rate, the foreign resident entry rate moves with it automatically.
There is no for a foreign resident: you are a prescribed person while you are not a resident, so the 2% is reduced away by days.
Australian interest, unfranked dividends and royalties are taxed at source. The payer deducts the tax and sends it to the ATO, and s 128D of the ITAA 1936 then makes that income not assessable and not exempt.
| Payment | Withholding tax |
|---|---|
| Interest | 10% |
| Unfranked dividends | 30% |
| Royalties | 30% |
Rates from the Income Tax (Dividends, Interest and Royalties Withholding Tax) Act 1974 s 7. A tax treaty with your country may reduce them. Franked dividends are generally not taxed again.
Three practical consequences people get wrong:
Beyond the rates, two rules hit foreign resident sellers hard: the main residence exemption is unavailable for disposals after 30 June 2020, even for a home you genuinely lived in, and the buyer must send 15% of the price to the ATO at . What counts as caught property widened on 1 October 2026.
How the 15% withholding works →
Leaving or arriving mid-year does not make you a foreign resident for the whole year. You are a resident for part of it, with an apportioned tax-free threshold, and a foreign resident for the rest.
How part-year apportionment works → · Run the residency checker →
Generally no. Interest is taxed at source at 10% and s 128D keeps it out of the assessable income system. Lodging would not recover any of it.
Yes. Rent is Australian-source ordinary income, assessable net of deductions, and taxed from the first dollar at 30%.
Your home country usually gives a credit for Australian tax paid, and a tax treaty allocates the taxing rights. Where both countries claim you as a resident, the treaty tie-breaker decides.
They changed the first resident bracket. The foreign resident table starts at the second resident rate, so cuts to the lowest bracket pass you by entirely.