Key takeaways
- If you live in Australia and work remotely for a US company, the salary for work physically performed in Australia is Australian-source income, taxable in Australia at resident rates (up to 45% plus the 2% Medicare levy in 2025/26) – even if it is paid into a US bank account.
- US citizens and green-card holders remain taxable in the US on worldwide income; the US–Australia tax treaty and the US foreign tax credit (or the foreign earned income exclusion) prevent double taxation, usually leaving Australia as the main taxing country.
- Your US employer may have Australian payroll (PAYG withholding), superannuation and permanent-establishment obligations; many companies use an Employer of Record or treat the worker as a contractor, each with its own risks.
Last reviewed: October 2026
Working remotely from Sydney or Melbourne for a US company is increasingly common – and widely misunderstood. Being paid in US dollars by a US employer does not make the income "US income" for Australian purposes. This guide explains who taxes what in 2026, for US citizens and for non-US nationals, and what both the worker and the employer must set up.
Key figures (Australian 2025/26 income year)
| Item | Figure |
|---|---|
| Australian income year | 1 July – 30 June |
| Resident tax rates | 0% up to AUD 18,200; 16% to 45,000; 30% to 135,000; 37% to 190,000; 45% above |
| Medicare levy | 2% (plus 1%–1.5% surcharge for some higher earners without private cover) |
| Non-resident rates | 30% up to AUD 135,000; 37% to 190,000; 45% above (no tax-free threshold) |
| Superannuation guarantee | 12% of ordinary-time earnings (since 1 July 2025) |
| US federal tax for citizens abroad | Worldwide income; FEIE or foreign tax credit available |
| US–Australia treaty | Allocates employment income to the country where work is performed |
Are you an Australian tax resident?
You are generally an Australian resident if you reside in Australia in the ordinary sense (home, family, routine), have your domicile in Australia, or are present for more than half the income year (183 days) unless your usual place of abode is overseas. Most people who relocate to Australia to live and work remotely are resident from arrival.
Temporary residents (holders of temporary visas who are not Australian citizens or permanent residents, and whose spouse is not) are exempt on most foreign-source income – but salary for work performed in Australia is not foreign-source, so it remains taxable.
How the salary is taxed
In Australia
- Source rule: employment income is sourced where the work is done. Work done from your desk in Brisbane is Australian-source.
- Rates: resident rates apply (table above), plus the Medicare levy.
- Payment of the tax: if your employer is not registered for PAYG withholding in Australia, you may need to pay through PAYG instalments and lodge an annual tax return by 31 October (or later via a tax agent).
In the US
- US citizens and green-card holders file Form 1040 on worldwide income.
- They usually claim the foreign tax credit (Form 1116) for Australian tax paid, which typically eliminates US tax on the salary because Australian rates are similar or higher; the foreign earned income exclusion (Form 2555) is an alternative.
- State taxes: some US states (e.g. California) may continue to claim residence if you keep ties there.
- Social security: the US–Australia totalization agreement determines which country's social security applies; US payroll FICA may continue for short assignments.
Non-US citizens
If you are not a US citizen or green-card holder and you work entirely from Australia, the US generally has no right to tax the salary; your employer should not withhold US income tax on it.
Example: A US citizen software engineer moves to Melbourne in July 2025 and earns USD 180,000 (about AUD 275,000) from her San Francisco employer for work done in Australia. Australia taxes the full salary at resident rates plus Medicare levy. In the US, she reports the same salary and claims a foreign tax credit for the Australian tax, which usually leaves no US federal tax on it. Her employer must also look at Australian superannuation and payroll registration.
What the US employer needs to consider
- PAYG withholding registration with the ATO if it has employees in Australia.
- Superannuation guarantee contributions on ordinary-time earnings.
- Permanent establishment risk: an employee concluding contracts or performing core functions in Australia can create a taxable presence for the company.
- Fringe benefits tax (FBT) on non-cash benefits.
- Alternatives: an Employer of Record (EOR) handles payroll and super; reclassifying the worker as an independent contractor carries misclassification risk.
Points for location-independent professionals
- Contractors invoicing a US company from Australia are taxed on business income in Australia, need an ABN and may need to register for GST once turnover exceeds AUD 75,000 (exports of services are often GST-free).
- Moving to Australia from the US: before you arrive, review US investments that Australia taxes differently (e.g. US mutual funds, Roth IRAs, 401(k)s).
- Leaving Australia later: Australia applies a deemed disposal (CGT event I1) to many assets when you stop being resident.
Frequently asked questions
Do I pay Australian tax if I work remotely for a US company?
Yes, if you live and work in Australia. Salary for work physically performed in Australia is Australian-source income and taxable in Australia, regardless of where the employer is based or where you are paid.
Do US citizens living in Australia pay US tax too?
They must file US returns on worldwide income, but the foreign tax credit for Australian tax (or the foreign earned income exclusion) generally prevents double taxation on salary. Some US states may also claim tax if you keep ties there.
Does my US employer need to withhold Australian tax?
If it has employees working in Australia it should generally register for PAYG withholding and superannuation. Many employers use an Employer of Record instead of registering directly.
Can a temporary resident avoid Australian tax on a US salary?
No. The temporary resident exemption covers most foreign-source income, but salary for work done in Australia is Australian-source and remains taxable.
What tax rate applies to a remote worker in Australia in 2025/26?
Residents pay 0% up to AUD 18,200, then 16%, 30%, 37% and 45% above AUD 190,000, plus a 2% Medicare levy. Non-residents pay 30% from the first dollar up to AUD 135,000.
Related guides
- Tax residency rules digital nomads need to know
- Saving for retirement as an American digital nomad
- Best zero-tax countries for software engineers
Sources
- PwC Worldwide Tax Summaries – Australia: Taxes on personal income
- Australian Taxation Office – residency tests, PAYG withholding, superannuation guarantee
- US–Australia income tax treaty; IRS Publication 54 (Tax Guide for US Citizens Abroad)
This guide is general information, not personalised tax advice.
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