Foreign Resident Tax Rates, the Tax-Free Threshold and the Medicare Levy

Australian foreign-resident individual tax rates differ from resident rates. A foreign resident generally has no ordinary tax-free threshold, so taxable Australian income can be taxed from the first dollar at the applicable foreign-resident rate.

Foreign residents are generally exempt from the Medicare levy for the period they are foreign residents. The result is not simply a resident calculation with one label changed: the rate schedule, levy treatment, offsets and reporting scope can all differ.

Use the correct year’s rate table

Foreign-resident rate brackets are set for each income year and can change. The correct ATO table should be used for the year being prepared. The rates exclude special schedules that may apply to working holiday makers, minors, trustees or particular superannuation amounts.

Tax withheld by an employer or payer is not conclusive. Payroll systems can continue using resident settings after departure or use a working-holiday schedule that no longer matches the person’s visa and residency position.

Part-year residency

A person who is resident for only part of an income year can have a part-year tax-free threshold and different worldwide-income reporting before and after the change. The Medicare levy can also require period-specific treatment and consideration of exemptions.

The return should identify the correct residency change date. Selecting 1 July or the flight date for convenience can produce an incorrect result where the facts point elsewhere.

Offsets and other liabilities

Some resident-only offsets are unavailable to foreign residents, while other offsets depend on specific conditions. HELP and other study-loan liabilities can be based on repayment income rather than taxable income alone.

Medicare levy exemption does not necessarily settle Medicare levy surcharge or private health reporting for the resident portion of a year. Those items need separate analysis.

Practical takeaway

Confirm residency first, then apply the correct annual schedule and period-specific levy treatment. Do not infer the final assessment from gross income or withholding alone.

Official sources and further reading

• Australian Taxation Office: Tax rates – foreign resident
• Australian Taxation Office: Foreign residents exemption from Medicare levy
• Australian Taxation Office: Foreign and temporary residents
• Australian Taxation Office: Your tax residency

FOREIGN RESIDENTS