Income tax in Ontario: your first Canadian tax return as an Australian

In Australia, the financial year ends on 30 June and your return is due on 31 October. In Canada, the tax year is the calendar year and the deadline is 30 April. That's the first of several surprises.

The short version

• You pay two layers of income tax in Toronto: federal and Ontario. For 2026 the federal rates run from 14% to 33%, and Ontario's from 5.05% to 13.16% [1].
• Your payslip also takes Canada Pension Plan (CPP) and Employment Insurance (EI) contributions, of 5.95% and 1.63% for most employees in 2026 [2][3].
• If you arrived in 2026, file your first return by 30 April 2027. Self-employed people get until 15 June, but any tax owing is still due on 30 April [4].
• From the day you become a Canadian resident, Canada taxes your world income. The Australia–Canada tax treaty and foreign tax credits stop you paying tax twice on the same dollar [5][6].
• The Canada–Australia social security agreement lets time in one country count towards pension eligibility in the other [7].

How the two layers work

Canada doesn't have a single tax scale like the ATO's. You pay federal tax to Ottawa and provincial tax to the province you live in on 31 December. The Canada Revenue Agency (CRA) collects both on one return for Ontario residents.

2026 brackets

Rates are marginal, so each rate applies only to the slice of income in that band [1]. The lowest federal rate fell from 15% to 14% from 1 July 2025, which gave a blended 14.5% for 2025 and 14% for 2026 [4][1].

Ontario also has a surtax on higher provincial tax and an Ontario Health Premium deducted through payroll. Both show up on your return, and neither has a direct match back home. The Health Premium is the closest thing to the Medicare levy, though it's calculated differently.

There's no tax-free threshold like Australia's A$18,200 [6]. Instead, Canada gives everyone a basic personal amount as a non-refundable credit, which has a similar effect.

What comes off your payslip

Your employer withholds three things each pay: income tax, CPP and EI. Your T4 slip at the end of the year shows the totals.

A worked example

Say you earn CA$70,000 in Toronto in 2026, as a full-year employee:

• CPP: (70,000 − 3,500) × 5.95% = CA$3,956.75 [2]
• EI: you hit the CA$68,900 ceiling, so CA$1,123.07 [3]

That's about CA$5,080 before a cent of income tax. Your employer matches your CPP contribution [2], a bit like the super guarantee except it goes to the government plan, not a fund you choose.

Where's my super?

Canadian employers don't pay into Australian super. Your Australian fund sits where it is. Check it isn't eating fees, and read super while living overseas before you consolidate or stop contributions.

Your first return: the newcomer rules

The year you arrive is a split year. CRA treats you as a non-resident before your arrival date and a resident after it [5].

• After you arrive: report your world income, including Australian interest, rent and dividends, converted to Canadian dollars [5].
• Before you arrive: report only certain Canadian-source income [5]. Your Australian salary from January to the day you landed isn't taxed in Canada.
• Credits are prorated. Most non-refundable credits, including the basic personal amount, are cut down by the number of days you were resident out of 365 [5].
• Treaty-exempt income still has to be reported, then deducted [5].
• Foreign property over CA$100,000 (for example, Australian shares or a bank balance) may trigger the foreign income verification statement [4]. Check this carefully if you've kept savings at home.

Filing step by step

1. Get your SIN. You can't file online without one. If the deadline is close and your SIN hasn't arrived, you can file on paper with a note [5].
2. Collect your slips. Your T4 from each employer arrives by the end of February. Banks send T5 slips for interest.
3. Gather Australian income records for your resident period, plus proof of any Australian tax paid on it.
4. Pick a method. Use NETFILE-certified software, a paper T1 package for Ontario, or a paid preparer [4]. Free tax clinics run by community groups help people with modest incomes and simple returns [4].
5. File by 30 April. Late filing brings penalties and interest on any balance owing [4].
6. Set up direct deposit. Refunds can arrive in about eight business days when you file online with direct deposit [4].
7. Open a CRA My Account so you can see your notices and RRSP limit.

File even if you earned very little. CRA uses your return to work out the Canada Groceries and Essentials Benefit (formerly the GST/HST credit) and other payments [4].

RRSP and TFSA basics

Canada has two main tax-advantaged accounts. Both are worth understanding, but both have Australian traps.

For most short-stay Australians on IEC, the RRSP doesn't help in year one. You build room from your Canadian earned income, then use it later. If you're on a two-year working holiday and plan to go home, get advice before locking money away in either account.

Double tax: the treaty and the ATO

Are you still an Australian resident?

The ATO uses four tests: resides, domicile, 183 days and the Commonwealth super test [6]. If you've moved to Toronto for a long stint and set up a home here, you may well stop being an Australian tax resident. Going overseas temporarily without setting up a permanent home elsewhere points the other way [6].

If both countries treat you as resident, the treaty's tie-breaker applies. You're treated as resident only where you have a permanent home available. If you have one in both places or neither, it's where your personal and economic ties are closer [9]. For the full picture, see Australian tax residency after moving.

How the treaty stops double tax

The Australia–Canada tax convention dates from 1980, updated in 2002 and by the multilateral instrument [9].

• Salary: taxed where you live, unless you work in the other country, which can then tax it too [9].
• Credits both ways: Canada credits Australian tax paid on Australian-source income, and Australia credits Canadian tax on Canadian income for its residents [9].
• Foreign tax credit: where the treaty doesn't remove the double tax, claim the federal foreign tax credit on Form T2209 [5]. If you're still an Australian resident, the ATO's foreign income tax offset does the job at home [6].

Social security agreement

Australia and Canada have had a social security agreement since 1 September 1989 [7]. It covers CPP and Old Age Security in Canada, and Australian old age, disability and survivor benefits [7]. If you don't qualify for a benefit on your own, each country can count time in the other towards eligibility, then pays a share reflecting its own periods [7]. So your CPP years aren't wasted if you go home.

When to get help

A simple T4 return is very manageable on your own. Get a cross-border accountant if you have Australian rental property, shares, a business or a part-year return in both countries. Ask in Cooee Canada, our Facebook group for Australians in Canada, how other members handled their first return.

Sources

1. Tax rates and income brackets for individuals, current year – Canada Revenue Agency
2. CPP contribution rates, maximums and exemptions – Canada Revenue Agency
3. EI premium rates and maximums – Canada Revenue Agency
4. Tax tip: Taxes made simple for newcomers to Canada – Canada Revenue Agency and What you need to know for the 2026 tax-filing season
5. Completing your return for newcomers – Canada Revenue Agency
6. Australian resident for tax purposes – Australian Taxation Office
7. Australia: pensions and benefits agreement – Government of Canada
8. MP, DB, RRSP, DPSP, ALDA, TFSA limits and YMPE – Canada Revenue Agency
9. Synthesised text of the MLI and the Australia–Canada Convention – Australian Taxation Office

Keep reading

• Banking in Canada: building credit from zero in Toronto
• Job hunting in Toronto: making Australian experience count
• Your SIN and first-week admin in Toronto
• Are you still an Australian tax resident once you move?