Income tax in China for Australians: the IIT app

Short answer: your Shanghai employer withholds tax every month, but the annual reconciliation in the IIT app, the allowance choice and your day count are your job, and Australia only steps back if you've genuinely stopped being an Australian tax resident.

The short version

If you spend 183 days or more in mainland China in a calendar year, you're a Chinese tax resident and pay tax at progressive rates from 3% to 45% on annual comprehensive income [1][2].
Residents settle up once a year between 1 March and 30 June through the Individual Income Tax (IIT) app; refunds only go to a Chinese bank account [1][4].
Foreigners can choose either tax-free allowances (housing, school fees, language lessons, home leave and more) or the standard special deductions, not both. The allowance policy runs to 31 December 2027 [1][3].
The six-year rule keeps your overseas income out of Chinese tax until you've lived in China for six straight qualifying years. One trip out of more than 30 days resets the count [2].
The 1988 Australia–China tax agreement decides who taxes your salary if both countries claim you, and Australia gives a credit for Chinese tax paid [5].

Who China taxes, and on what

China doesn't care about your passport. It cares about where you live and how many days you spend there [1].

Resident: someone domiciled in China, or someone without a domicile who spends at least 183 days in mainland China in the calendar year [1].
Non-resident: fewer than 183 days, and no domicile [1].

Most Australians on a work permit in Shanghai are residents without a domicile. "Domicile" means habitually living in China because of household registration, family or economic ties, and buying a flat doesn't create one on its own [1].

For shorter stays, the rules on salary depend on your days in China [1]:

Days in mainland China in the year	What China taxes
90 or fewer	Only pay for China work that is paid or borne by a Chinese employer
91 to 182	All pay for work done in China, wherever it's paid
183 or more, under six years	Pay for China work, plus overseas-work pay unless it's paid and borne offshore
183 or more for six years in a row	Worldwide income

Treaty rules can change these results, which is where the Australia–China agreement comes in (more below).

The rates

Residents are taxed on annual "comprehensive income" (wages, labour fees, author's royalties and royalties together), after a basic deduction of RMB 5,000 a month, or RMB 60,000 a year [4]:

Annual taxable income (RMB)	Rate
0–36,000	3%
36,000–144,000	10%
144,000–300,000	20%
300,000–420,000	25%
420,000–660,000	30%
660,000–960,000	35%
Over 960,000	45%

(Rates from China Briefing's 2025 guide [2].)

There's no Medicare levy on top, but there's also no separate tax-free threshold beyond that basic deduction. On a big expat package, the allowance rules below make more difference than anything else.

Allowances or deductions: the big choice

This is where foreigners in China save real money, or leave it on the table.

Foreign employees who are residents can take eight kinds of benefit tax-free, provided they're reimbursed against real costs and reasonable in amount [1][3]:

housing rent
children's education (international school fees, for example)
language training
meals
laundry
relocation
business travel
home leave, up to two trips a year to your or your spouse's home country (hello, Christmas in Perth)

The catch is paperwork. You need the rental contract and official invoices (fapiao), and the tax bureau can ask for them [3]. In practice the benefit needs to be reimbursed, not just added to your cash salary. Get your HR team to set up your package this way before you sign, not halfway through the year.

The alternative is the special additional deductions available to everyone in China: childcare for under-threes, children's education, continuing education, mortgage interest, rent, supporting elderly parents and serious illness costs [1]. These are fixed amounts and usually much smaller than an expat housing allowance in Shanghai.

You must pick one set for the whole tax year. No mixing, and no switching halfway through [1][3]. Non-residents can't claim the special deductions at all [1].

Both the foreigner allowance exemption and the separate tax treatment for a one-off annual bonus have been extended to 31 December 2027 [3]. What happens after that hasn't been announced, so if you're planning a long stay, build that into any contract that runs past 2027.

The IIT app and annual reconciliation

Every month your employer withholds tax using your passport number and pays it to the tax bureau [1]. Then, between 1 March and 30 June, resident taxpayers square up the previous year [4]. You do it in the Individual Income Tax app (个人所得税), which has an English-language interface for parts of the process.

Register. Use facial recognition with your passport if the app supports your document. If it doesn't, take your passport to a tax service hall and ask for a registration code [1].
Choose "Annual IIT Settlement". Enter the days you spent in China during the year [1].
Check your income. Every employer and payer who withheld tax for you should show up. Query anything you don't recognise.
Check your deductions. If you chose the special deductions, confirm them here. If you took allowances, keep the invoices on file.
Pick the bonus method. You can tax one annual bonus separately or fold it into your comprehensive income [1]. Try both; the app shows the result.
Pay or claim a refund. Refunds go only to a Chinese bank account; a Class I account is recommended [1][4].

Leaving China before the window opens? A foreigner who needs to settle can do it before departure [1]. Ask HR to sort this as part of your exit, because chasing a refund from Melbourne without a Chinese bank account is no fun.

If your plans change mid-year and you end up under 183 days, you need to report it and recalculate as a non-resident, by 15 days after year-end at the latest [1].

The six-year rule

This is the one Aussies who stay a while need to understand.

If you're a resident without a domicile, your overseas income (Australian rent, dividends, interest, capital gains) is exempt from Chinese tax until you've been resident for six consecutive years [2]. From the seventh year, China taxes your worldwide income [1][2].

A year only counts toward the six if you were in mainland China for at least 183 days and never left on a single trip of more than 30 days [2]. So the count resets if, in any calendar year, you:

spend fewer than 183 days in China, or
leave for one trip longer than 30 days [2].

Plenty of long-stayers take one 31-day trip home every few years to break the chain. That's legal, but you need to prove it, so keep boarding passes and track your days [2].

Where Australia comes in

Moving to Shanghai doesn't automatically end your Australian tax obligations. The ATO uses its own residency tests, and many Australians on a fixed-term posting with a home and family back in Australia stay Australian residents.

If you're a foreign resident of Australia, you generally declare only Australian-sourced income (like rent from your flat in Brisbane) and pay no Medicare levy. Your Chinese salary stays out of your Australian return [6].
If you're still an Australian resident, your Chinese salary goes into your Australian return, converted to Australian dollars, and you can usually claim a foreign income tax offset for Chinese tax paid [6].
HELP debt: foreign residents with a HELP debt may still need to report worldwide income [6].

The Australia–China tax agreement

The agreement was signed in Canberra on 17 November 1988 and has since been updated by the multilateral instrument (MLI), with most changes applying from 2023 [5]. The parts that matter for employees:

Dual residence. If both countries treat you as resident, the tie-breaker looks first at where you have a permanent home, then at where your personal and economic ties are closer [5].
Salary. Pay for work done in China can be taxed in China. A short-term visitor stays out of Chinese tax only if they're in China for no more than 183 days in any 12-month period, and the pay isn't paid by a Chinese employer or charged to a Chinese branch [5].
Double tax relief. Where an Australian resident pays Chinese tax on Chinese income, Australia allows it as a credit against Australian tax on that income [5].

Note the treaty's 183 days is measured over any 12 months, not the calendar year. A posting from August to May can trip it even when neither calendar year reaches 183 days.

Mistakes we see Aussies make

Taking allowances as cash. Cash "housing allowance" in your salary is taxed like salary. Reimbursement against fapiao is what's exempt [3].
Forgetting the reconciliation. Missing the 30 June deadline can mean penalties and a black mark when you next deal with the tax bureau.
Assuming the ATO knows you've left. Tell the ATO and your Australian bank you're a foreign resident if that's your situation, so withholding on interest is right.
Leaving without settling. Do the final settlement and keep a copy of your tax records before you go.

For tips on fapiao, HR packages and which tax service hall is least painful, ask in Cooee China, our Facebook group for Australians in China (join here).

Income tax in China for Australians: the IIT app, the six-year rule and the treaty