Australian income tax 2026-27: resident rates, foreign residents and the half-year test

Australian income tax turns on one word that the law does not reduce to a number: "resides". Section 6(1) of the Income Tax Assessment Act 1936 treats as resident a person who resides in Australia, then adds three extensions. The first catches someone whose domicile is in Australia, unless the Commissioner is satisfied that their permanent place of abode is outside it. The second catches someone actually in Australia, continuously or intermittently, for more than one half of the year of income, unless the Commissioner is satisfied that their usual place of abode is abroad and that they do not intend to take up residence. The third covers members of two Commonwealth superannuation schemes, with spouses and children under 16. A person can therefore be resident with few days, or stay non-resident with many. The status then decides everything else: which rate table applies, whether the first $18,200 is free, and whether income from abroad is in the base at all.

The 2026-27 rate table for residents

These figures come from Schedule 7 of the Income Tax Rates Act 1986, in the compilation dated 1 July 2026, not from a summary.

The Medicare Levy Act 1986 adds a levy of 2% on a person's taxable income, in its compilation of 1 July 2026. That Act also reduces the levy in some situations that we did not go through here, so treat 2% as the headline and not as your exact bill. The Budget papers say the 15% band falls again to 14% from 1 July 2027, and announce an annual offset of up to $250, the Working Australians Tax Offset, from the 2027-28 income year. Neither changes 2026-27.

Foreign residents start at 30% on the first dollar

Part II of the same Schedule has no tax-free band. That single difference is often worth more than the rest of the residency question.

The base moves too. Under section 6-5 of the Income Tax Assessment Act 1997, an Australian resident's assessable income includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia. A foreign resident's includes ordinary income from Australian sources, plus other ordinary income that a provision brings in on some other basis. So residency changes both the rate and what the rate applies to. Whether the Medicare levy reaches a foreign resident depends on a provision of the 1936 Act that we did not read, and we leave that open.

Three limbs of the residency definition, read one by one

"Resides": the ordinary meaning comes first

The extensions only matter if you do not already reside in Australia. The statute gives no list of factors for this first limb. The ATO sets out its reading in ruling TR 2023/1, but ato.gov.au refused our reads at every address we tried, so we do not paraphrase it here. Anything you see about family, assets or the purpose of a stay is the ATO's or a court's gloss, and should be checked there.

Domicile: leaving does not end it by itself

This limb starts from domicile in Australia and looks at whether a permanent place of abode lies outside it. The Act we read does not define that phrase. For someone who moves abroad, it is the limb that keeps the question open after the days have stopped, since a low day count answers nothing here.

More than half the year: the only number in the definition

"More than one-half of the year of income" is not the same phrase as 183 days. On plain arithmetic, half of a 365-day year is 182.5, so 183 days crosses it; in a 366-day income year, half is exactly 183, so 183 would not be more than half. That is our reading of the wording, not an ATO statement. The days may be continuous or intermittent, and the two conditions that switch the rule off are for the Commissioner to be satisfied of: usual home abroad, and no intention to settle. Note the "and".

Why a calendar total misleads you here

Section 4-10 says income tax is worked out on taxable income for the income year, which is the financial year, and the 2026-27 rates start on 1 July 2026. Take the default trips above: 15 July to 30 November 2026, then 1 February to 20 March 2027. The calendar years read 139 days in 2026 and 48 in 2027, neither of them alarming. Both trips sit inside one income year, for a total of 187, which is more than half of it. The counter shows that 187 for 2026-27.

Questions the sources we read leave open

We did not find how part days count, because the Act says only "actually been in Australia" and the ATO's guidance would not open. Likewise the treatment of temporary residents, the tie-breakers in Australian tax treaties and the capital gains rules on leaving are outside this page until read. If your situation turns on any of them, the ATO's own pages and a registered tax agent are where to take it; the law cited here is the start of that conversation.

Your former country is a separate test. Arriving in Australia does not stop the UK Statutory Residence Test or the US rules, and a dual residency is settled by the treaty, if there is one. Compare thresholds elsewhere in the country table. To keep a dated log of arrivals and departures across each year, the Taxlag app does it from your trips; the comparison above stays free.