Do Foreign Companies Pay Tax in Australia? Income Tax, GST and the Difference (2026)
Part of the guide: Do I need to register?
Yes — and no, depending on which tax you mean. A foreign company is taxed in Australia on income with an Australian source, but if it’s from one of the 40-plus countries with a tax treaty, its business profits are taxable here only through a permanent establishment. GST is decided on a completely different test, and a company can owe nothing on one and be fully registered for the other.
That last point is the one worth reading this article for. The ATO’s own guidance says it in a sentence: “Even if you don’t have Australian income tax obligations, you may have other tax obligations relating to GST.” Most foreign sellers into Australia are in exactly that position — and most of the muddled answers to “do foreign companies pay tax in Australia” come from treating the two as one question.
| Income tax | GST | |
|---|---|---|
| The question it asks | Residency, source, treaty, permanent establishment | Enterprise, sales connected with Australia, A$75,000 |
| Treaty-country company, no PE | Business profits “generally not taxable in Australia” | Irrelevant — the PE isn’t part of the test |
| The rate | 30%, or 25% for a base rate entity | 1/11 of connected sales |
| Stock in an Australian warehouse, no office | Usually A$0 | Usually registered, on an ABN |
| Sell FOB to an Australian importer | “May not have Australian tax obligations” | The importer’s problem |
| What to lodge | A return, if there’s Australian-source income not covered by withholding | A BAS, if registered |
(General information for FY 2026–27, not tax advice for your circumstances. Checked on 2 October 2026 against ato.gov.au — the foreign residents doing business in Australia pages, company tax rates, how Australian GST works for non-resident businesses, and working out your residency. The published company rate table is 2025–26. Treaty positions are fact-specific.)
1. Do foreign companies pay tax in Australia?
On Australian-source income, yes. The ATO states the principle plainly: “Foreign resident entities are generally taxed in Australia on any income that has an Australian source. Australian resident entities are generally taxed on their worldwide income.” But for a company from a treaty country, the treaty narrows “Australian source” to profits attributable to a permanent establishment — and that one word decides most cases.
The rule for treaty-country companies, in the ATO’s words:
As a resident of a country that has a tax treaty with Australia, your income from business carried on through a permanent establishment in Australia is generally subject to tax in Australia. Any other business income is generally not taxable in Australia.
Australia has treaties with more than 40 countries, “including all our major trade and investment partners” — the US, the UK, China, Japan, Germany, Singapore, New Zealand, Canada and India among them. For a company from any of those, the income tax question collapses to “do I have a permanent establishment here”, which section 3 takes apart.
The two rails
GST is not a function of that answer. The GST registration test — section 4 — asks whether you carry on an enterprise and whether your sales connected with Australia reach A$75,000. It does not mention a permanent establishment, residency or a treaty, and the treaties themselves cover income tax only. So the same company can sit at A$0 on one rail and be fully registered on the other.
| Scenario | Australian income tax | Australian GST |
|---|---|---|
| Treaty-country company, stock in a Sydney 3PL, no office or agent | A$0 — no PE | Registered — goods in Australia when sold, over A$75,000 |
| Same company, plus a Melbourne office with staff who sign contracts | Taxed on the profit attributable to that PE | Registered — unchanged |
| Same company, selling FOB to an Australian wholesaler who imports | Likely none | None — the wholesaler is the importer |
The first row is where most foreign sellers live, and “no income tax” is the sentence that stops them registering for GST.
2. What is the foreign company tax rate in Australia?
The ordinary company rate: 30%, or 25% for a base rate entity. There is no separate rate for foreign companies — a foreign company taxed on Australian income uses the same table as a local one.
The ATO’s 2025–26 table is two lines: “Base rate entities 25; Otherwise 30.” A base rate entity is one whose aggregated turnover in the previous year was under A$50 million and whose base rate entity passive income is no more than 80% of assessable income. The aggregation is the part foreign groups miss: it counts connected and affiliated entities worldwide, so a modest Australian operation inside a large group is at 30%. Treat 25% as a qualification to test, not a rate to assume.
Passive income is taxed differently
Business profits go through the rate above. Interest, dividends and royalties paid to a foreign company are instead subject to withholding at source — 10% on interest, 30% on unfranked dividends and royalties — which is generally a final tax, and which a treaty typically reduces (both the US and UK treaties take royalties to 5%). Our article on non-resident tax rates has the full tables.
The residency trap
“Foreign company” is a residency label, not an incorporation label. The ATO’s test:
A company is a resident of Australia if it is either: incorporated in Australia, or not incorporated in Australia but carries on business in Australia, and has either its central management and control in Australia, or voting power controlled by shareholders who are residents of Australia.
A company incorporated in Delaware or Hong Kong but run by a founder sitting in Melbourne — making the real decisions here — can be an Australian resident, taxed on worldwide income at 30%, not a foreign company taxed on Australian-source income. The Commissioner’s view on where central management and control sits is in TR 2018/5 and PCG 2018/9. A Budget announcement to change the test “remains unenacted”, so the current law applies.
One line for completeness: multinational groups in scope of the Global Minimum Tax face a 15% top-up; that regime has its own thresholds and is outside this article.
3. When does Australian income tax actually apply to a foreign company?
For a treaty-country company: when it carries on business here through a permanent establishment. For a non-treaty company: when its income has an Australian source. The permanent establishment is the line that matters for almost every seller.
What a permanent establishment is
The ATO’s description:
A permanent establishment includes a fixed place of business through which an enterprise either wholly or partially carries on its business. It also includes: sales outlets; branches; places of management; factories; workshops; offices; the place of business of dependent agents who have authority to conclude contracts on behalf of the enterprise and habitually exercise that authority.
And one exclusion the ATO states directly: “Generally, a website that is hosted by an independent internet service provider is not regarded in itself as constituting a permanent establishment in Australia.”
The warehouse question — the one that matters for anyone using a 3PL or marketplace fulfilment — is answered in the treaties themselves. The US treaty says an enterprise has no PE “solely as a result of” using facilities for “storage, display or delivery of goods or merchandise belonging to the enterprise”, or holding stock for those purposes. The UK treaty says the same with the word “solely” in every limb, and since 2019 subject to an anti-fragmentation rule where a related Australian entity runs complementary functions. Stock in a third-party warehouse is not, by itself, a permanent establishment.
What does create one, in practice, is a person: an employee or dependent agent in Australia who negotiates and habitually concludes contracts on your behalf. An office with a sales team is the classic case. Under the UK treaty, a contract manufacturer processing goods on your behalf is another. Our FBA and permanent establishment article works through the fulfilment pattern in detail.
Non-treaty countries
Without a treaty, the question is source. The ATO lists income from “business operations in Australia; Australian contracts, such as export contracts made in Australia; services performed in Australia; personal activities exercised in Australia” — and adds, candidly, “You may need professional advice to work out whether the income you earn from an international transaction has an Australian source.” That is the honest position: source is a fact-heavy question, and a non-treaty company’s exposure can be wider than a treaty company’s.
The cleanest “no” in the guidance
For an exporter, the ATO gives one pattern that may carry no Australian obligations at all:
If you are exporting goods to Australia by selling to an Australian resident entity on a free on board (FOB) basis, this may be considered an importation by the Australian entity. This means you may not have Australian tax obligations, but your Australian customer will have tax obligations relating to the importation.
Sell to an Australian business that imports the goods, and the border GST, the duty and the registration are theirs. The moment you hold stock in Australia or sell to consumers directly, you move onto the GST rail.
4. Why is GST a separate question — and when does it apply?
Because the GST test has nothing in it about permanent establishments, residency or treaties. It asks two things: are you carrying on an enterprise, and do your sales connected with Australia reach A$75,000?
The ATO’s statement for non-resident businesses:
You must register for GST in Australia if both of the following apply: You are carrying on a business or enterprise. Your GST turnover from sales connected with Australia from your enterprise is equal to, or greater than the registration turnover threshold of A$75,000.
“Connected with Australia” includes digital products and imported services sold to Australian consumers, low value imported goods (customs value of A$1,000 or less) sold to consumers, “other imported goods made available for sale in Australia” — which is goods sitting in an Australian warehouse when they sell — and real property here.
Three things sharpen the test:
- Turnover is gross. It’s “your total business income from Australian sales, (not your profit)”, measured on a current basis (this month plus the previous eleven) and a projected basis (this month plus the next eleven). Either triggers registration.
- Marketplaces can absorb it. “If all of these sales are made through an online marketplace or electronic distribution platform you may not need to register for GST” — the platform may be the responsible supplier on those sales. Your own store never is.
- Where the stock sits decides the registration type. Non-residents can choose simplified registration (no ABN, an ARN instead, no GST credits, no tax invoices) or standard registration (on an ABN, with credits). But the ATO is specific: “Simplified GST registration is not available if you are a non-resident business that imports goods and warehouses them in Australia before selling them online… You will have a GST obligation for the goods sold because the goods are located in Australia.” Warehoused stock means standard registration — and you cannot hold an ABN and an ARN at the same time.
Put the two rails side by side on the worked example. A treaty-country company sells A$400,000 a year to Australian consumers from a Sydney 3PL with no office, staff or agent here. Income tax: no permanent establishment, so the treaty leaves the trading profit taxable at home — A$0, and nothing to lodge. GST: the goods are in Australia when sold, A$400,000 is over A$75,000, the warehouse rules out simplified registration — standard registration on an ABN, A$36,364 remitted (one-eleventh), with credits on the import GST paid at the border and on Australian costs. Same company, same sales, two answers — and both are correct.
5. What does a foreign company have to register and lodge?
Depending on which rails you’re on: a TFN, an ABN, a GST registration, and possibly an income tax return — or, on the FOB pattern, none of them.
| Registration | Who needs it | Source |
|---|---|---|
| ABN | A non-resident “carrying on an enterprise or business in Australia” or making “sales connected with Australia in the course of carrying on an enterprise” — and “Your enterprise doesn’t have to be located in Australia” | ATO |
| GST | Enterprise + A$75,000 of connected sales; standard registration needs an ABN | ATO |
| TFN | To lodge a return. “Companies, partnerships and trusts have their own TFN. You can apply for a business TFN when you register for an ABN.” | ATO |
| Income tax return | A foreign entity “that earns income with an Australian source” must lodge — unless its only Australian income is withholding-taxed interest, unfranked dividends or royalties, or fully franked dividends | ATO |
Two practical notes. First, the ABN isn’t only a GST key: “If you don’t quote an ABN when you sell goods or services to an Australian business, they may have to withhold tax from their payment to you at the rate of 47%.” A foreign company wholesaling to Australian businesses wants one for that reason alone — see no-ABN withholding. Second, the application for a non-resident turns on certified identity evidence, not the online form — our article on ABN registration for foreign companies covers the three routes.
Run the worked example through the table. The 3PL seller needs an ABN (connected sales), a standard GST registration, and a TFN that comes with the ABN — but no income tax return, because its only Australian-source business income is treaty-protected. Add the Melbourne office and a return becomes required. Switch to FOB sales to an Australian importer and the list may empty out entirely.
Where it’s worth getting help
If you’re a treaty-country company with stock in a third-party warehouse and nobody acting for you in Australia, the shape is simple: standard GST registration on an ABN, a BAS cycle, and no Australian income tax. Many sellers set that up themselves once they know the two rails are separate.
The judgment calls are the ones that move you between rows of the table:
- Is anyone in Australia a permanent establishment? A contractor who signs, a country manager, a related entity running complementary functions (the UK treaty’s anti-fragmentation rule) — people create PEs; warehouses generally don’t.
- Where is the company actually run from? A foreign-incorporated company with its central management and control in Australia is an Australian resident on worldwide income, which is a different article altogether.
- Non-treaty country? Source is the question, and the ATO itself says it can need advice.
- Which GST registration? Simplified is cheaper and forfeits every credit; warehoused stock removes the choice; and you can’t hold both.
- Do you have to lodge? Withholding-taxed passive income alone doesn’t require a return; treaty-protected business profits don’t either; a PE does.
That’s the difference between doing it and doing it right the first time: the seller who was told “foreign companies don’t pay tax in Australia”, believed it, and discovered three years of GST registration should have started at A$75,000 of warehouse sales.
If you’d like that looked at properly, our initial assessment form scopes it in about twelve questions — where the company is run from, who acts for it here, and where the stock sits — without needing a meeting.
FY 2026–27. General information, not tax advice for your circumstances. The published company tax rate table is for 2025–26; the base rate entity test applies at group level. Treaty, permanent establishment and residency positions are fact-specific. Rules quoted are the published ATO settings as at 2 October 2026; the A$75,000 GST registration turnover threshold is not indexed — confirm the current figure.
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