How Much Foreign Income Is Tax-Free in Australia? All You Need to Know

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Australian tax residents may be obliged to declare and pay tax to the Australian Taxation Office (ATO) on income from around the world. That might mean paying ATO taxes if you’re an expat living in Australia, and earning rental income from abroad, or if you’re an Aussie freelancer working with overseas clients for example.

If you have earnings of any type from abroad, it’s important to understand the rules about foreign income tax in Australia, to stay on the right side of the law. Let’s take a closer look at how much foreign income is tax-free in Australia, and what happens if you have to pay tax on income in another country while residing in Australia. We'll also introduce to you Wise account which lets you send, spend, and receive money in different currencies.

This guide is for information only. Tax can be complex, particularly when working across borders. Seek professional advice if you’re unsure what income you need to declare to the ATO, and where you must pay taxes.

What Is Foreign and Worldwide Income?

If you're an Australian tax resident you must declare foreign and worldwide income to the ATO in your normal annual Australian tax return¹.

Whether or not you’re considered an Australian tax resident can hinge on several factors including how long you’ve spent in Australia during the tax year, and your usual domicile. Your tax residency is not necessarily the same as your visa status or nationality - if you’re not sure whether or not you’re an Australian tax resident you’ll need to get professional advice to help you assess your residency based on ATO rules.

Foreign and worldwide income can then break down into several key categories - overseas annuities or pensions, business and employment income, assets or investments and capital gains.

Supers and Annuities

If you have a super pension, or an annuity which is paying you an income from abroad, you may need to declare this to the ATO. If you receive a lump sum from a managed fund as part of a pension payout you’d also need to declare this.

Overseas Business Activities or Employment

If you’re employed by an overseas business, or earn income as a self employed person or freelancer from foreign clients you need to declare this as though it was earned in Australia. You’ll also need to declare other business income, directors fees and consultancy earnings made abroad.

Foreign Assets and Investments

Income from assets and investments held overseas, including offshore bank accounts, must be declared to the ATO. This can include a broad range of income types such as interest, dividends, royalties, and rent.

Capital Gains on Overseas Assets

If you sell an asset you hold overseas you may need to pay Capital Gains Tax (CGT) in Australia. The calculations for this type of tax can depend on when you acquired the asset - before or after becoming an Australian tax resident. Get professional advice if you’re unsure as this can be a complex area of tax accounting.

Does Australia Tax Foreign Income?

The way the ATO treats foreign income depends on a number of factors including your tax residency, the amount earned abroad and the country in which the income originated².

In some cases tax may be owed in more than one country on the same income - where this happens you may be entitled to a foreign income tax offset in Australia to reduce your overall costs.

Here’s a summary of the tax treatment in a few common situations.

Australian Tax Residents

Australian tax residents will generally need to declare all foreign and worldwide income to the ATO, including business income, passive income, pensions and capital gains. If you have already paid tax on income from overseas you may be eligible for an offset which prevents you from paying tax twice on the same income.

Foreign Residents

Foreign residents in Australia must usually declare all Australia-sourced income including employment income, rental and capital gains to the ATO. You don’t usually need to declare foreign income unless you are the beneficiary of certain government supported loans.

Generally if you earn interest or dividends in Australia, tax is withheld by the bank or company and so you do not need to pay any further taxes on the amounts you receive.

Temporary Residents

Temporary residents are often not taxed on foreign income. However, this depends on the exact source of the income and whether the country you’re being paid from has a tax treaty with Australia already in effect. If you pay tax on foreign income overseas, you may be entitled to a tax offset in Australia to ensure you don’t pay tax twice on the same income.

How Much Foreign Income Is Tax-Free in Australia?

If you’re an Australian tax resident you’ll usually have to include foreign earned income in your normal annual tax return to the ATO. The amount of tax you then pay depends on your overall earnings from all sources.

Australian tax rates are progressive, with a tax free amount offered to all tax residents - here are the 2025/6 rates as a reference³:

*Details correct at time of research - 18th May 2026

Tax Exemptions

The ATO lists out some tax exemptions for international employment income including:

• Some income from foreign service
• Income from approved overseas projects
• Income from work done in Australia for some international organisations
• Overseas employment with an Australian Defence Force
• Income from a joint Australia-US space or defense project

As the tax rules when working across countries can be complicated you may benefit from professional advice if you’re not sure whether or not an ATO exemption applies to you.

What Is the Foreign Income Tax Offset (FITO)?

If you earn abroad you may be obliged to pay tax on your income in the country it originated in, as well as being required to declare your earnings to the ATO. In some cases, a Foreign Income Tax Offset (FITO)⁴ can apply to prevent you from needing to pay tax on the income twice - in the foreign country and then again in Australia.

Exactly how the rules work here will depend on both the type of income, and where it was sourced. Where income comes from countries that have a double taxation treaty with Australia there are protections to reduce the chance of you needing to pay additional tax on income sourced abroad.

Understanding the Foreign Income Tax Offset Limit

If you’re claiming an offset of taxation paid abroad you can simply record the actual amount of tax paid in your ATO tax return, if it is under 1,000 AUD in value. If you’re claiming a higher amount of offset, you’ll need to calculate the offset limit which will apply.

The foreign income tax offset limit is calculated by working out your full taxable income, and then calculating your taxable income without foreign sourced income and deductions. You can then subtract one from the other to get the offset limit which will apply. Get help from the ATO to ensure you’ve calculated your FIFO tax offset limit correctly.

Tips for Managing Your Foreign Income

• Get professional help if you’re unsure when to declare or what tax should be paid to the ATO or overseas - penalties apply if you fail to properly report your income.
• Before you complete your ATO tax return you’ll need to convert your foreign sourced income to AUD, using the ATO Foreign Income Conversion Calculator⁵.
• If you’re getting paid from overseas, using a multi-currency account from Wise can help you receive income in foreign currencies with low or no fees.

Summary

Foreign earned income may be taxable in Australia if you’re an Australian tax resident. If you also pay tax overseas on foreign sourced income you might be able to apply for an offset from the ATO to lessen your overall tax burden in Australia.

Tax laws are relatively complex and so getting professional advice about the tax on foreign income for Australian residents can help you navigate your duties both in Australia and the country you’re earning foreign income from. Managing international earnings also means handling different currencies, tracking exchange rate fluctuations, and finding a secure way to move your money internationally.

Manage Your Foreign Earnings and AUD With Wise

If you are earning an income from overseas, you will need a cost-effective way to repatriate your funds back home to Australia. Wise is a simple way to receive money fast and conveniently. Open a Wise account for free; get paid however you like, wherever you are. You will get 8+ domestic account details in global currencies like USD, GBP, and more to receive money like a local.

Easily manage transfers through the Wise app by sharing your account details, requesting with the Wise tag or syncing your contacts. After getting your funds, you can hold and exchange 40+ currencies in your Wise account. For all your currency exchanges, you can get the mid-market rate and low, transparent fees, which usually gives the best value for your money. Wise also lets you send money to 140+ countries or get a linked Wise debit card to spend internationally, all at the same great mid-market rate. Plus, you can activate Wise Interest to earn returns* on your eligible balances while keeping your money available to spend.

When it comes to international transfers, Wise makes things easier and cheaper.

📥 Receive money with Wise

1. ATO - Foreign and worldwide income
2. ATO - foreign and temporary residents
3. ATO tax rates
4. ATO - Foreign income tax offset
5. ATO Foreign Income Conversion Calculator