Foreign resident tax rates for Australians who retire overseas (2025-26)

What are the foreign resident tax rates for 2025-26?

30% from the first dollar up to A$135,000, then 37% and 45%. These are the ATO’s rates for people who were foreign residents for tax for the whole 2025-26 year.

Taxable income, 2025-26	Tax on this income
A$0 to A$135,000	30c for each A$1
A$135,001 to A$190,000	A$40,500 plus 37c for each A$1 over A$135,000
A$190,001 and over	A$60,850 plus 45c for each A$1 over A$190,000

The rates were the same in 2024-25. Whether you are a foreign resident at all is a separate question, and our guide to tax residency when you retire overseas goes through the tests. Only a registered tax agent, or the ATO, can tell you which you are.

Is there a tax-free threshold for foreign residents?

No. Australian residents pay no tax on the first A$18,200 of taxable income, while a foreign resident pays 30% on those dollars like all the rest.

The year you leave is a halfway house. The ATO says you are taxed at resident rates for that year, with a part-year tax-free threshold for the months you were a resident.

Do foreign residents pay the Medicare levy?

No. The ATO says foreign residents do not have to pay the Medicare levy, where residents generally pay 2% on top of their income tax. Whether Medicare covers you is a separate matter: see Medicare overseas.

What about 2026-27?

When we checked, the ATO’s foreign resident page only went up to 2025-26. Its resident page shows one change for 2026-27, the 16% rate becoming 15%, and that is a resident bracket. So we’d expect 30% from the first dollar to carry on for foreign residents, but we haven’t seen the ATO confirm it. Check the ATO page before you rely on it.

How does that compare with resident rates?

The gap is widest at lower incomes, because of the tax-free threshold. These figures are tax on taxable income for 2025-26, before any tax offsets and before the Medicare levy for residents.

Taxable income	Australian resident	Foreign resident
A$20,000	A$288	A$6,000
A$40,000	A$3,488	A$12,000
A$80,000	A$14,788	A$24,000

Tax offsets can lower a resident’s tax further, so the real gap can be bigger than the table shows.

Which income does this apply to?

Mainly income from Australia, such as rent from a house you keep here. (Our guide to whether to keep, rent or sell the family home covers the pension side of renting.) From the date you stop being a resident, the ATO says you no longer include foreign income in your Australian return.

Australian interest and dividends work another way. Once you are a foreign resident, the ATO says withholding tax is taken from them as a final tax, and they stay out of your tax return.

What happens to capital gains tax on my home?

If you are a foreign resident when you sell, the ATO says there is no main residence exemption, not even a partial one, for sales after 30 June 2020.

The exceptions are narrow life events, while you have been a foreign resident for 6 years or less: a terminal medical condition for you, your spouse or a child under 18; the death of your spouse or a child under 18; or a sale under a formal agreement after a marriage or relationship breakdown.

The 6-year rule only helps residents. If you rent out your former home, the ATO lets you keep treating it as your main residence for up to 6 years each time you are away. You have to be an Australian resident for tax on the day you sell to get the benefit.

An example, not real people

Sandra is 64 and has moved to the Algarve. She rents out her house in Australia, and after expenses her taxable rent is A$30,000 for 2025-26. She has no other Australian income.

	If Sandra is a foreign resident	If Sandra is an Australian resident
Tax-free threshold	None	A$18,200
Tax on A$30,000	A$9,000 (30% from the first dollar)	A$1,888, before offsets and the Medicare levy
Medicare levy	None	Generally 2%

That’s a gap of A$7,112 before offsets, and Portugal may tax the same income too. Working out her actual position would take a registered tax agent here and a tax adviser in Portugal. If you are still a few years from the Age Pension, our guide to retiring overseas before 67 covers the other gap-year questions, and our page on retiring overseas self-funded brings the tax and super questions together.

What this means for you depends on

• Whether you are a resident or a foreign resident for tax, which depends on your whole situation.
• What income you have from Australia: rent, interest, dividends, or a pension.
• When in the tax year your status changes.
• Selling your home, and your residency on the day you sell.
• The tax rules in the country you move to, and any tax agreement it has with Australia.
• Changes to the rates after 2025-26, which the ATO publishes each year.