Introduction
Australia has a progressive tax system administered by the Australian Taxation Office (ATO). As a newcomer, understanding your tax obligations is essential. This guide covers the Tax File Number (TFN), how to lodge a tax return, the Medicare Levy, and common deductions.
Tax File Number (TFN)
Your TFN is a unique 8 — 9 digit number that links you to the tax system. You need it to:
- Work in Australia (your employer withholds tax based on your TFN)
- Lodge your tax return
- Open a bank account (without a TFN, interest is taxed at 47%)
- Receive welfare payments from Centrelink
Apply online at ato.gov.au. The application is free. You'll receive your TFN by post within 28 days.
Tax Residency
Your tax obligations depend on whether you're an Australian tax resident. You're likely a tax resident if you:
- Live in Australia permanently (permanent visa holders are almost always residents)
- Have been in Australia for more than 183 days in a financial year
- Have your permanent home, family, and economic ties in Australia
Tax residents: Pay tax on worldwide income.
Non-residents: Pay tax only on Australian-sourced income, but at higher rates (no tax-free threshold).
Australian Tax Rates (2025 — 26 Financial Year)
Tax Residents
| Taxable Income | Tax Payable |
|---|---|
| $0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 16% of income over $18,200 |
| $45,001 – $135,000 | $4,288 + 30% of income over $45,000 |
| $135,001 – $190,000 | $31,288 + 37% of income over $135,000 |
| $190,001+ | $51,638 + 45% of income over $190,000 |
Non-Residents
| Taxable Income | Tax Payable |
|---|---|
| $0 – $135,000 | 30% of every dollar |
| $135,001 – $190,000 | $40,500 + 37% of income over $135,000 |
| $190,001+ | $60,850 + 45% of income over $190,000 |
Medicare Levy
Australian tax residents generally pay the Medicare Levy, which funds the public healthcare system:
- Standard levy: 2% of taxable income
- Exemptions: Some temporary visa holders, low-income earners, and people not entitled to Medicare can apply for an exemption.
- Medicare Levy Surcharge: If you earn over $93,000 (single) or $186,000 (family) and don't have appropriate private hospital cover, you pay an extra 1 — 1.5% on top of the standard levy.
How to Lodge a Tax Return
The Australian financial year runs from July 1 to June 30. Tax returns are due by October 31 each year (or later if using a registered tax agent).
Methods
- myGov (online, free): Link your myGov account to the ATO and use myTax to lodge your return. Best for straightforward returns.
- Registered tax agent: Recommended for newcomers: typically costs AUD $100 — $300. They can lodge returns until May of the following year.
- Paper return: Still possible but slow and error-prone.
What You Need
- Your TFN
- Payment summaries or income statements from employers (now auto-filled via Single Touch Payroll)
- Bank interest statements
- Receipts for work-related deductions
- Private health insurance statement
- Details of any foreign income or assets
Common Deductions for Newcomers
You can claim work-related expenses that you paid for and weren't reimbursed:
- Vehicle and travel expenses: If you drive between worksites or for work (not commuting from home to work).
- Uniform and protective clothing: Compulsory uniforms or safety gear.
- Home office expenses: If you work from home (the ATO allows a fixed-rate method of $0.67/hour).
- Self-education: Courses directly related to your current job.
- Tools and equipment: Laptops, software, tools used for work (if over $300, claim over multiple years).
- Professional memberships: Industry body or union fees.
- Income protection insurance: Premiums for policies held outside of super.
Warning: Keep receipts! The ATO audits thousands of tax returns each year and can ask for evidence.
GST and Other Taxes
- GST (Goods and Services Tax): 10% on most goods and services. Included in the price displayed (unlike US sales tax).
- Stamp duty: Tax on property purchases (varies by state, usually 3 — 5% of property value).
- Capital Gains Tax (CGT): Tax on profits from selling assets. Your main home is generally CGT-exempt.
- Land tax: Annual tax on investment properties, not your main home (varies by state).
- FBT (Fringe Benefits Tax): Paid by employers on non-cash benefits provided to employees.
Superannuation
- Your employer must pay 11.5% of your salary into a super fund (as of 2025 — 26).
- Super is preserved until retirement (age 60 — 67 depending on your birth year).
- When you leave Australia permanently, you can claim your super back as the Departing Australia Superannuation Payment (DASP), but you'll pay tax (35% for working holiday makers, 35 — 45% for others).
- Permanent residents should consolidate their super into a low-fee fund (e.g., AustralianSuper, Hostplus, Sunsuper).
Tax Tips for Newcomers
- Apply for your TFN on arrival: don't wait until you need it.
- If you have foreign income (e.g., rental income from a house in your home country), you must declare it as a tax resident.
- Australians have a Double Tax Agreement with many countries, so you won't be taxed twice on the same income.
- Use a registered tax agent for your first return: they'll help you optimise deductions and understand the system.
- Keep a tax diary and scan receipts into a folder throughout the year. Don't wait until June.